Real Wall Street Expert and Instructor Reviews Margin Call - Financial Edge

[@fXBorgmeister]

Board meeting scenes are masterpieces. "explain this to me as you would a small child, or a golden retriever, it wasn't brains that got me here, I can assure you of that" - class.

[@EricAtienza]

Also in that scene how the CEO fidgets with the report when saying the line you mention, or when he says "Should have been address WEEKS ago... but that's spilled milk under the bridge" just let's you know how agitated he is about the situation but he's trying to keep it under control so the folks in the room can find the best way to address the problem as clear-headedly as possible.

[@Restil]

@@EricAtienza Everyone in that room knew what was coming. There were several hints throughout the movie that this was a looming issue that had been addressed in the past. Nobody is surprised it's happening. If anything, it's just the timing that caught everyone off guard. The CEO might claim to not be smart, but he knows exactly what's in the memo without reading it. Instead, he's using the opportunity to interview the upcoming talent in the room to see if Peter really knows and understands the situation. The whole thing reads like a job interview. Earlier in the movie, they're asking for his resume. At the end, Peter's getting promoted while everyone else is getting laid off.

[@chartreusecircle1546]

It’s a slightly terrifying admission. It wasn’t brains that got him to his position. It was ruthlessness and gut instinct.

[@kristinb5121]

One of the best lines was Tuld saying “spilt milk, under the bridge”. CYA at it’s finest. In other words, no finger pointing or you’re not a team player. Finger pointing would inevitably lead to management. Plus, he gave them the talking point to be used from that point forward.

[@johnjameshardy]

@@chartreusecircle1546 He admitted nothing. The man is a genius. He is just being modest to put Peter at ease, because he knows that to him, it is like being addressed by God.

[@AmolMY]

This movie is getting recognition so many years after it's release. No doubt it was ahead of it's time. An absolute masterpiece.

[@Hdianvciadpei]

Not ahead of it’s time. It happened 3-4 years after the FGR. If you knew what to look for, you saw it as it came out.

[@greaterbayareahero1401]

Jeremy Irons is probably one of the best actors we have seen in this film. He was exactly how my IB boss was in my golden days.

[@Walterwaltraud]

As much as I love his performance, and yes he stands out a bit, Bettany, Spacey and virtually all the others hit it out of the park with very subtle, nuanced gestures. What an ensemble cast.

[@greaterbayareahero1401]

Yes the whole cast was well placed in the set up. Everyone had a part. Irons was a complete b’stard hence the reason for me quitting my job.

[@indianajones3315]

Sounds like you worked for Quattrone too.

[@alexos8741]

​@@greaterbayareahero1401irons was your boss?

[@greaterbayareahero1401]

Yes, the whole cast was impeccable. Sometimes saying nothing and giving a certain look says it all.

[@DonWan47]

I can’t speak to the authenticity but from a dramatic and acting point of view this movie is remarkable. Watching it on reflection you realise that there’s no soundtrack, the director let’s the actors do the heavy lifting, brilliant.

[@mecca777]

💯💯💯💯💯

[@kimrasmussen7188]

there actually is a soundtrack, but it is very subtle. the scene where they are in the cab .

[@TheArrowedKnee]

There is a soundtrack, but it's not present the vast majority of the movie.

[@rkw2917]

This is why most wealthy people only invest with banks that do not trade on their own account. I worked my entire career in such a bank. Our risk team was dedicated to the protection of our clients. Losses in 2007 and 2008 were minimal.

[@glennwatson3313]

What bank was that?

[@thatguynexus5935]

which bank?

[@artful1967]

no such bank exists

[@lakeguy65616]

I think you've misinterpreted. I think the firm buys mortgages to create mortgage-backed bonds. They hold the mortgages on their books while the bonds are created and before they are sold. If the default rate on the mortgages rises suddenly (more than anticipated), the value of the bonds is far less than the actual value. If they have to mark to market their bond portfolio, they will suffer losses far larger than the anticipated risk. It's not proprietary trading but inventory exposure. (they refer to volatility bands which means interest rate risk but the movie is about the 2008 mortgage market collapse. The writer has used a little editorial license...)

[@Mazeboxx]

That's complete bull...the VAST majority of wealth is (and was at the time) managed by the likes of CS, UBS, JP just to name a few - ALL who had huge prop trading desks at the time. Risk Management's job is not to protect client's upside and losses/gains depend on the quality of the portfolio and whether it is hedged or not. Has absolutely NOTHING to do with prop trading or risk management.

[@BillyLapTop]

This is one of my most favorite movies. The exposition is spot on and explains the difficult concepts surrounding the problem they were experiencing. I felt like a fly on the wall during this movie.

[@jjsifo1]

same here

[@georgeoshea9961]

It’s one of the best films ever made - it’s one of those films that went under the radar - but when you compare it to ‘Wolf of Wallstreet’ and the ‘Big Short’ it’s a vastly superior movie - they’re amazing, but pound for pound, this is the best movie about the financial crisis ever made. Jeremy Irons put in one of the best performances in history.

[@CBeard849]

I love how the brightest minds in the financial world.....EG Eric Dale....couldn't put all the pieces together and then in walks the literal rocket scientist whoring his talents out in order to make more $$$ .....he solves the problem and kills the markets!!

[@BillyLapTop]

Eric wanted to solve the problem but was fired and told by Will Emerson to forget about it. So he handed it off to the rocket scientist, who by the way, gave Eric the credit for discovering the issue in the first place at the big meeting with John Tuld.

[@finncullen]

@@CBeard849He didn't kill the market it was already dead, although still twitching. He just smelled the decomposition and drew attention to it.

[@SeanCarter]

Although I never worked in Investment Banking, I was referred to this movie by a friend who did. At the time, I was getting into trading and learning about finance overall. He recommended this movie to me by saying that from his experience in Investment Banking, this movie was the most accurate portrayal of the industry, even down to the CEO who knew nothing about the technical details.

[@lissakaye610]

Such an under appreciated movie! Absolutely love sooo much in it. The lines, the weight of the dialogue and using subtle things that make this pure gold. They don’t make movies like this anymore 😢

[@mysocalledknife07]

This whole film was a masterclass on acting. And I couldn't figure out for the life of me, during the film, why Will Emerson was head of trading ..... until that fire sale day. Then it all made sense (even though his shark-like tendencies were hinted at throughout the movie) Great job on this one.

[@1439315]

i am hanging up now

[@billc6762]

I heard they made this movie in less than 2 weeks. All the actors only took cab fare to make this movie.

[@daviddressler1666]

Jermey Irons reminds me so much of someone I used to work for. Especially in the board room scene. Hair clothes expressions posture everything. So well done.

[@Lunadyne]

Ah yes, VaR, or Value at Risk. I remember this being introduced back in the 90s when I was an analyst at BNP. I pointed out to my bosses that for the model to make sense it needs to incorporate data from at least one full economic cycle, or about 8 years or so, though ideally the full trading history of the item should be considered in determining the market risk. When I polled the folks at the investment banks about the size of the data sets being used it worked out to about 3 years. In the generally rising markets of the 90s. So yeah, didn’t put a whole lot of faith in the model ‘s ability to accurately gauge the value at risk. Then or now. And the real villain in the 2008 GFC wasn’t MBSes per se, it was all of the derivatives spawned therefrom. That’s where the liquidity crunch arose.

[@newsieboys1171]

I agree. The demand in the derivatives mkt after 2000 really launched the secondary mortgage mkt to a point of madness. With the modeling that was there, the fundamentals were seriously flawed. How can so many MBSs be so valued by depending on so many people who couldn't simply pay their home mortgages? It was a matter time when rates would rise that would put a coup de grace on an already very overvalued housing-related market.

[@HIK_48]

We used HSIM and Monte Carlo*. Neither helped predict 2008. Securitised debt (eg mortgages) doesn't cause a risk problem if you model correctly, but a combination of laziness, rule-breaking and pure greed meant it was easier to not. * and "stress" scenarios of known previous shocks (eg Black Wednesday, Asia Crisis)

[@artmosley3337]

The problem was MIXED POOLS OF MBS… people-investors didn’t understand they were buying Sub Prime mortgages mixed in with super premium mortgages.. Shacks and mansions in the same pool.. this had never been sold before.. B, C D grade mortgages don’t have the same characteristics as A paper.. completely different demographics, and psychographics … Bar tenders and construction workers home loans in the same investment portfolio as Doctors, Lawyers and Bankers… this was done in order to boost interest rate of the pool over all.. (B&C mortgages at 9-10% and A paper at 6%… the B&C loans were designed to be refinanced in a short period of time,2-3 years or less, they all had prepayment penalties too in states that allowed the fees.. But things changed fast… When the short term BC loans were to be refinanced, they changed the rules basically and the people had no loans to refinance into, they adjusted (all were variable interest rates,ARM’s) the payments went up 30-50%… so people just walked away from their homes… then , A paper borrowers had their homes compared to these foreclosures.. distressed sales, this had never been allowed in the appraisal market … so they couldn’t refinance or buy/sell at the current market value… it all came tumbling down… if only the FHA had stepped in and did automatic rate /term refinancing all of this could have be adverted …

[@artmosley3337]

In addition, there are 2 parts to a MBS, the loan and then the servicing of the loan (collection of payments from borrowers, payments of taxes and insurance (or checking for payments) and then sending the money to the investors… but these pools were cut up, sliced and diced into so many different pieces.. and sold so many times.. they lost track of who owned what and where the paperwork was 😂😂😂😂.. who had the actual loans? The original loan signed by the borrowers… borrowers didn’t know who to send their payments to.. it was a complete collapse… the conspiracy theory is… The head of the Federal Reserve, did it as revenge (super low interest rates to spur a feeding frenzy in Realestate) because of antisemitism, he received in college and business as a young man.. Allen Greenspan.. who was married by Ruth Bader Ginsburg to Andrea Mitchell…

[@artmosley3337]

The government didn’t bail out the borrowers with new FHA loans for the subprime mortgages.. they let the market crash and bailed out the banks Wall Street that started it all..

[@davidblakeslee8190]

I enjoyed the movie after having been an MBS/CMO structurer for 14 years. I was at a bond insurer at the time and we saw the danger early in California and southwest mortgage payments were above 50% of yearly homeowners earnings. I agree that the movie got the morning traders meeting down

[@CBeard849]

An excellent video! Margin Call and The Big Short are required watching for understanding what happened.

[@andresolivera7787]

I've just come across your video. I learned a lot with this movie and I learned even more with your explanation. I think I have seen this movie like 10 times, from beginning to end. The level of tension that rises all the way to the end is mind blowing. The meeting scene with Simon Baker, Demi Moore, Paul Bettany and the others is where they show that everybody knew what was going to happen, but the one who raised the flag of the imminent bubble burst was fired.

[@Athens8677]

Thanks for this video! I actually lived through this. I still remember 2008 when we got the email on our sales floor that 'All subprime products are discontinued'

[@bobbyprasaddas7694]

Paul as Will Emerson should have been given Oscar for that role, he just hit it out out of the park.

[@bellavia5]

He was my favorite,

[@Hdianvciadpei]

He was good, but not Jeremy Irons good.

[@MathGPT]

The rate at which people defaulted on their loans turned out to be 400X that of estimates, and with the leverage those firms were allowed to put onto these consolidated debt packages (because they were classified as safe assets quite arbitraily, or perhaps unaware of how loose rules for mortgage approvals were), it could very well equal more than the market cap of a JP Morgan or, more fittingly, Lehman Brothers

[@artmosley3337]

The banks/Wall Street changed the rules.. Never before had there been Mixed Pools of mortgages.. ya either had A paper, GenyMa’s(FHA-Va Government insured mortgages) or Subprime, ACD loans.. Sooo investors didn’t understand they were buying shacks mixed in with mansions… High risk with Super A loans.. it only takes 2-3% of loans to default for an A paper pool to be wiped out…

[@rcslyman8929]

@@artmosley3337 The problem wasn't the shacks mixed in with mansions. The problem was that mansions were sold to credit lines that could only afford shacks, and the reliance on refinancing as market valuation went up. Once it plateaued and refinancing was no longer an option, those mansions couldn't be paid on a shack's salary, and massive numbers of foreclosures ensued.

[@michaeldominick4646]

Incredibly knowledgeable, professional, understandable explanations of complicated subjects!

[@financialedgetraining]

Thanks Michael!

[@mark.lawrence]

nothing complicated here... greedy unregulated idiots selling loans to people that couldn't afford to pay them back... then betting on the rail between themselves on whether they would be paid back or not... thank you to the following fools for playing key parts in ALLOWING this to happen:- • ronald reagan • margaret thatcher • alan greenspan • hank paulson • credit rating agencies • mortgage brokers bored now...

[@antoniekotze1]

This movie should be included as standard study material for all FRM, PRM, and all students studying risk in banking. It is an excellent movie.

[@adelinod.5568]

What is amazing for me is that for such a low budget movie they were able to gather such a talented pool of actors.

[@crush3095]

I love this movie so much because just like a real office, everyone is a protagonist everyone is a strategist and they all think they have a leg up on their coworker.. until the CEO walks in like Steve Jobs and blows everyone's mind

[@reggierico]

You, M'am, were lovely! Great explanations about what the different scenes were about and their direction. I've been an amateur investor in the market for less than five years and have learned so much! Some things, I've learned the hard way. When I watched this movie it brought me back to a round of golf with my uncle, who's a retired Chicago lawyer. I think the market was in its 2nd or third day of 800 point drops. My uncle just smiled and said, 'It will eventually come back.' Also, the comments from guys who were involved in this crisis were excellent and informative. Thanks again. Cheers!

[@mbank3832]

I had a professor with a degree in electrical engineering, teaching a finance class. She was HARDCORE !

[@edwardmartinez2186]

Deborah Taylor's comments are succinct and on target. Well done.

[@financialedgetraining]

Thanks Edward!

[@jkgeroso6057]

At long last. Absolutely adore Margin Call. Really subtle theme of questionable ethics. Took me a couple of re-watches to pick up on the fact upper management knew that one day the, so-called, music would stop playing. Dale knew, Emmerson knew, Robertson knew, Tolda knew, Jared knew. They knew. It was just too profitable to not dance. Really liked your key roles segment, covering Risk, Compliance, Sales & Trading. Strange, though, that Peter and Seth were the only people left in the risk department and were portrayed as being tied to Emmerson(Trading) and sat opposite Robertson(head of Risk). Why do they refer to Emmerson as the boss of Dale and thus the boss of Peter's boss??? What?! Risk reports to and is under the thumb of Trading now? Please tell me if I've missed something.

[@mrkrimpet58]

maybe each floor has their own risk people? Peter & Seth reported to Eric Dale who seemingly reported to both Emerson and Robertson. Or maybe Emerson spoke for them since he's the only one in the room who knew who they were and had daily contact with them. It is puzzling that Robertson would not know them.

[@friendlyinternetman5271]

You nailed one of the very subtle but IMO key elements of the movie. That when peter and will bring the analysis to Tuld of how much risk the firm is exposed to - and the impending collapse that could follow - Tuld gets it and believes it immediately and demands immediate action. “THIS. IS. IT!” This, plus the subtle but repeated mentions of this risk problem being brought up before, tells me that Tuld knew this was a possibility and had definitely thought about this before.

[@jaynichols7932]

@@friendlyinternetman5271 I agree - he seemed to have an inkling or foreboding something big was in the offing.

[@teodelfuego]

Don’t forget that the movie starts the day of massive layoffs. This was hours before Sullivan was given the data that Eric Dale was working on. So, clearly something was afoot that everyone knew about.

[@roseymalino9855]

Yes, JK, the movie is confusing on the whole Sara character, She seemed responsible for Eric Dale's being let go and Will apologies for being unable to protect him. When the troubles become known, each character immediately ejaculates, where's Eric Dale, not where's Sara. Sara supposedly related 'something' to upper echelon earlier but we don't know exactly what. Since Eric hadn't entirely fleshed out the problem, and Sara provided no furtherance in guiding Eric to a resolution, Sara couldn't have provided much worthwhile insight to upper management. Additionally, Sara's act of firing Eric certainly must add to upper management wrongly thinking Eric is irrelevant.

[@MartinLopez-up8ym]

I love this movie. This is the best analysis yet. My congratulations.

[@financialedgetraining]

We agree, great movie! Thank you.

[@libertyvilleguy2903]

Solid explanation, thank you. Great acting in this movie. So much of the communication was non-verbal.

[@trendlinetracker3147]

No mention of the reason losses were exponentially worse than could have happened just a few years earlier: the destruction of Glass-Steagall in 1999. This Securities Act from the 1930s kept investment banking and commercial banking legally separated, which meant that speculation was confined to investment banking and the stock market. Commercial banking - the debt market - is 10 times larger! Such a massive increase in available 'collateral' too often turned speculators into gamblers, ergo the Great Financial Crisis. Much of that debt was once considered 'the peoples money' and many were left holding the bag, one way or another.

[@charlesd4572]

I loved this video. There is even a little moment of comedy - "banking is a regulated industry". Priceless.

[@MrGhosthacked]

Solid - excellent and simple for the retail audience. Great work.

[@Dkspardan]

7.07 I think this is purely for the person taking the notes of the meeting identifying who is present and role they have in the company but do enjoy the detailed view of all of this

[@babelbabel2419]

One of the best movies about that financial crisis, together with the Big Short. The script and the cast are amazing. It show how powerful a theatre play can be. In that regard, it reminded me 12 Angry Men.

[@goodlack9093]

Only discovered your channel , plan on keep watching it

[@creepycrespi8180]

Bothers me that it took a Vulcan to figure things out.

[@Angela-tt5ik]

Hilarious

[@prepaidcustomer7611]

Great explanation!!! More content like this please.

[@kschneyer]

Highly instructive! I’m glad to know how much of this film was well researched & accurate.

[@financialedgetraining]

Glad you enjoyed it!

[@billc6762]

8:32 I agree with that. I met a couple of people who used to make nuclear weapon for Soviet and they end up trading options for a Wall Street firm.

[@CheckThisOut77]

The introductions at the first meeting: 1. Done for the viewers’ benefit. Most of them would already know each other. 2. It also points out the isolation/breakdown in communication in that they do not ALL know each other.

[@ronnieriveros6067]

loved it.. regards from oslo i experienced it live.. as i was working as a freight trader in nyc. as in real time.

[@Contollership]

This happened recently at First Republic Bank

[@meg41322]

My CJJ sensei was working as a derivatives risk manager and compliance officer for one of the largest trust companies in the world when this occurred. He had been a commodity broker for Goldman when he was starting out in finance. He said that this movie depicted the events at Goldman really well.

[@WilliamHudson-q8j]

Excellent analysis and explination😎🖖🏼 I have ZERO knowledge of the Finance World.

[@Belegthevarno]

1- At 2008 Lehman Brothers had 680 billion assets, 22.5 € firm capital. During their bakrupcy filing they said 768 billion bank & bond debt so i don't understand why it is a problem when movie says potential losses could be greater then firms market cap. 2- While introducing Sarah, Jared said as you know this is head of risk. So Sarah and Sam already know each other and there is another scene where Sam says to Sarah we talked about this.

[@JamieTransNyc]

yes, the op makes too much out of this. It is common for the head of the table to either introduce everyone or ask them to introduce themselves, because often there are guests or junior members who might not know everyone in the room.

[@Cotictimmy]

A very earnest, nuts & bolts account. This is one of my favourite films, full of dark humour & irony as the results of previous reckless decisions land successively like hammer blows. My favourite joke is where it emerges in the initial meeting that the quant Peter was an actual bona-fide 'rocket scientist' before coming to investment banking.

[@edwardhudgins3286]

A really fine film and fine explanation! The film was so well written and acted! I also saw the documentary "Inside Job" but it left our a crucial fact.The Community Reinvestment Act in 1977 meant to help poorer Americans buy houses, the push in the late 1990s by Rep Barney Frank to have banks make more of such risky home loans, Federal regulators evaluating banks on how many such loans they made, the Fed's guidelines that "Lack of credit history should not be seen as a negative factor," and the two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, also backing such loans with the implicit understanding the the Federal gov would bail them out in case of problems. So local Savings and Loans would get rid of their risky or sub-prime loans as soon as possible, which went into the MBSs. That seems to have been the fuel for the banking meltdown.

[@roc7880]

the problem was that those loans were packed as securities as swaps. not poor people created the crisis

[@gourami7]

Loans with super low teaser rstes given out to people with no credit checks were a large part of the problem..

[@newsieboys1171]

The 1977 CRA was modified so much in the 1990s that made it easier as well as loosening of financial regulations in 1999-2000. That's why there wasn't a crisis until 30 years later. The 1977 act was really no more responsible for what happened than the Federal Reserve Act of 1913 was for anything else. If anything, Lewis Ranieri of Solomon Brothers who is considered the father of MBSs at the same period as the CRA and much more so, the Tax Reform Act of 1986 that were more of the culprits.

[@edwardhudgins3286]

@@roc7880 If the loans had been solid, packing them won't have mattered that much. But the high-risk and sub-prime loans with variable rates were the fuel that burned when investment banks got too leveraged up without anticipating housing market and investment changes.

[@ianmarsden8568]

Thank you, never seen the film, was just thrown a part of it on YT and it was very compelling. I the penny dropped about the effect of what they were doing then KS said 'Sell it to you Grandmother if she is buying". Thanks for the breakdown.

[@EmilyAllan]

Great breakdown! I really appreciate this. I've been studying Finance as a hobby for a few years, and this helped make sense of a lot of banking insider information that you can't find elsewhere. Thank you.

[@financialedgetraining]

Hi Emily, it's great you're studying finance as a hobby. We're glad we could help in some way!

[@ramaswamyvn5030]

Nicely explained, thanks for that. Wondering who's that guy Carmello who is being tasked by the CEO to get Eric Dale back into office? Is there such huntsman inside board rooms 😅

[@yuckyool]

Love this. BUT as far as the film (there's a flaw) . . . In my experience at non-financial companies, the Demi Moore / Robertson character would NEVER dump Eric Dale without knowing who his subordinates were. In fact (probably), it would be her knowledge of their good work and ability, not to mention their names and work-styles, that would make it feasible for her to let their boss (her subordinate) be expendable.

[@meikow]

True, if it was an important activity they would ask the question who can take over or can we live without it.

[@danielarrate669]

Great movie really. Thanks for such clear, deep and enjoyable analysis. Much appreciated. Be well

[@skhan2605]

Great breakdown of your explanations, Ms Taylor.

[@financialedgetraining]

Glad you enjoyed it!

[@jaynichols7932]

Great review of an excellent movie. I am just learning about Wall Street Investment Banking... Your video is very helpful.

[@douglasrowley2641]

Thanks for the valuable first-hand insights. Of course Hollywood has to lecture us on the evils of corporate America, which we find delivered most succinctly toward the end with John's preachment to Sam in the executive dining room overlooking the unwashed city below. But aside from that, I feel this movie does a great job of capturing a slice of life in the Investment Banking business, and of the weighty problem its wizards are facing. We are shown, very effectively, that real lives are involved in the midst of such a fog of wealth and power. I think the most poignant scene of the movie is when Jared and Sarah get on the elevator and position themselves on either side of the cleaning lady. Not even acknowledging the latter's presence, they continue the verbal battle they are having with the hierarchy and each other. The irony, is that their jobs are in jeopardy and the cleaning lady's is not (at least at that moment). Their lives are complicated, hers, apparently, is not. We see that the two and the one are in completely different worlds, but all three are human! The second most poignant moment, for me, was the final scene where Sam, after dealing for 24 hours with the ambitions and posturings of exalted men and women (him included), the vast sums of money at stake, the reputations of the company and its employees, and other attendant problems; there is Sam, alone at night, digging a grave for his beloved dog in the back yard of the mansion that no longer belongs to him, but to his ex-wife; and that, tied-in with the fact revealed earlier that he, Sam, would stay on for another 24 months 'because he needs the money,' really puts a lot of things in perspective. Continuing with the sounds of shoveling as the screen darkens and credits roll is a final brilliant touch.

[@financialedgetraining]

Thanks Douglas, great insight!

[@2egenjerry]

That reveal at the end was brilliant. Everything Sam was going through outside of work but remaining professional and emotionally sound during that stretch.

[@paulle7414]

Yes , I love this movie . And the digging scene is great , couple that with Sam’s line to Roger about “digging ” is that “at least , we have a hole in the ground to show for it “… it goes to show the fleeting nature of Wall Street wealth!

[@duanevp]

And of course, what he's digging is A GRAVE. The symbolism of that can't be ignored. All he wanted was to get out of the business altogether, to quit; but because he needs the money he succumbs to pressure to stay in the business. So when he leaves work, he goes to a home HE no longer owns or has any rights to - and digs a grave. I would even say that his dog is meant to be representative of what is left of his heart and soul. He states earlier that he has spent THOUSANDS of dollars on what he knew was a futile effort to keep it alive, only to realize that he must let it die, and now at the end he has to bury it. Also, the scenes where characters have to make introductions of people that they SHOULD otherwise know, or explain aspects of the business that everyone would already understand are strictly for the audience who doesn't necessarily know or understand any of these relationships - they have to be SHOWN who the characters are and what it is that they do, and the meaning behind the otherwise normal things they would be doing ONLY so that it can then be explained why everything that's happening is coming apart.

[@OluOni]

Powerful metaphor at the end. The literal sound of the futility of "digging yourself out of a hole" - a hole we the audience also know is a grave (literally, and metaphorically; if we accept the nods to LEH - Tuld/Fuld).

[@Thornspyre81]

I'm glad this was recommended, wonderful video!

[@financialedgetraining]

Glad you enjoyed it!

[@susymay7831]

Excellent and accurate video! 💎

[@BunsenHoneydew-eg3tz]

One of the truly amazing elements of this movie is that it was the director's (J.C. Chandor) first film. It should be used to teach a master class on subtlety and framing. The film, in my opinion, wastes no space. The dialog is crisp and eminently-quotable. Everyone has their focus and it moves on to the next group and so on. It's hard to believe that this movie and The Big Short are two films about subjects I know next to nothing about (real estate banking) but are endlessly rewatchable.

[@enolastraight577]

Like somebody with a car note or a mortgage which, for any reason, causes the value of the asset to be worth less than what you owe on it: the firm is underwater. The volatile assets on the books may be worth $80 one day, $20 the next...so they must sell whatever they can, while the assets are still worth something.

[@UltimateBargains]

In his explanation to John Tuld, Peter Sullivan mentioned "leverage". Were they buying the assets on margin (i.e., short-term borrowing), hence the movie title, "Margin Call"? When the true asset value was discovered by everyone on Wall Street, they would have to sell to satisfy margin calls? There wasn't enough tradeable value in those assets, so the company would be bankrupted?

[@terry7907]

Yes, but the critical point was they were buying mortgages. Since mortgages are theoretically low risk, they could have far greater exposure than if they were buying something else. And since they were combining the mortgages into new securities of different tranches that reflected different risk-and hence different rate of return-they had to leave those mortgages on their books for longer than they would like to enable them to administratively create the new securities. The whole danger to the firm was if the market crashed before they could create them, and left the firm holding them.

[@roc7880]

that is the idea. a drop in value below a small percentage would have collapse the whole firm.

[@jimchilton99]

I wonder what happens if Eric does not give the thumb drive to Peter. If we consider that “what Eric Dale was working on” needed a Ph.D. from MIT to solve. Eventually, we are left with a question about how likely someone else would have figured it out and how long we would expect that to take. Moreover, with Peter’s work, was the Bank’s response the best possible outcome? Could it have been better if Eric had kept his mouth shut and his thumb drive in his pocket? Suppose we assume from your analysis that it is common to have a Ph.D. from many different disciplines within a firm, and we assume the industry conducts self-examination about strategy. In that case, the realization of Peter, which solved the equation, should be anticipated elsewhere at some point. We don’t know how long it would take, however. When told Peter had “solved it,” Eric was not surprised. Eric was shown in the same scene to be intelligent, given his story of the bridge and a Civil Engineer. Are we to assume that Eric is genuinely impressed with Peter or was unsure that if given more time, he would have solved it himself? Given that it was solved, we should assume the minds to solve the problem are present elsewhere in the industry and that they would be working at it somehow (by the argument above). Further, we should expect that there is a more than zero percent chance that it has been discovered elsewhere. Additionally, given Peter’s response, “the work was based on Eric’s model,” noting, “he only worked with a few of the variables.” Then the Bank, given Eric and Peter’s work, should assume this information could be available beyond the Bank’s walls. Moreover, we do not know if Eric and Peter were first, only that no one else has acted. So, what should John do? Has the music stopped? Adam Smith, the father of modern economics, would have said to act first. As John says, “to survive!” But is that the correct answer? John Nash suggests that the best result of any competition is for your actions to serve your and the group’s interests. Clearly, the actions of the Bank, “sell it all today,” will shock the market. And that is Sam’s point. Sam knew that these actions would kill the market, and blood and feathers would be everywhere. Sarah, and Seth, are the “sacrificial” lambs to be given as offerings for the Bank’s mistake. But was dumping the right solution? The prisoner’s Dilemma. At which point do you act? At the end of each trading day, the margin call comes. They are betting on which side of the break-even line they are on. From Peter and Eric’s work, their expectations of potential “variance” are significantly more extreme than Sarah, and the Bank anticipated initially. Further, although we are given information that what they were trading was in some way mortgage-related securities, we have no idea if they are CDOs, sub-prime “crap” (to quote the Big Short), or some other instrument. We are told that 65% value (by noon) should be anticipated. Being first lets you ride the wave down rather than accumulate more bad assets and recover at the best possible price slope. In the aftermath, John says, “this is the way it has always been,” and lists the significant market crashes for the past 100 years. From John’s point of view (Adam Smith), it is about survival in the jungle and that the jungle will always be there. The widget does not matter; there will always be a market. But what of the blood and feathers, “at what cost, John?” asked Sam. Standing outside the building, Peter asks Sam if he has told his son about the impending financial apocalypse. Seth talking with Will driving back from Eric’s house, said that he would most likely lose his job. It is a fair question to ask, was this the best solution? So, is the best action to kill a broken market, or is it to stand, mum? If cheating is out. “I don’t cheat!” exclaimed John. Then it is down to first or smartest. John says, “there are a lot of smart guys in this room.” But his point is every other Bank has a Peter, so from John’s point of view, the only answer is to be first if you are going to survive in the jungle. The best solution is one that fixes the market that minimizes bad outcomes. Could John have gone to the SEC, who could have frozen the market until a solution was found that was equitable across the entire market, or he could have played more of a long game and slowly forced bad assets off the books and abandoned the market? John’s musical chair analogy here does not fit anymore. It is not a question of chairs as a whole unit. If there are 20 butts and 15 chairs, every butt gets 75% of the chair. The market is a division of shares and their book value, not whole units like cars. You don’t need a seat; it is how much of the seat you get. Moreover, it is not just the number of butts but how big those butts are. The bigger the butt, the greater the perceived loss in the total space you need on the chair. 75% of a chair for one butt may be survivable, whereas some butts are just too big, and anything less than 100% will cause them to collapse. This is the math. Assuming a standard histogram distribution, 15% of the population has a butt that only needs 75% to survive no matter what (their portion is so small that if it went to zero, the Bank would be ok), 50% of the population can take the loss because it is within the standard variation (over the company v. this sector), 85% can make it work without turning off the lights, and the top 15% will fail under. Assuming a free-for-all, the top 15% of banks would collapse no matter what they do (unless they act first). Assuming a linear distribution from the most minor “levered up” position to the most, the 15% who can survive will because they hold the smallest relative volume of market shares. In comparison, the 15% collapsing banks carry the most significant burden. Let’s assume the top 15% holds 30% of the market. This is where the chair analogy fails. You don’t get to put your entire butt on the chair. You have to share. Company A cannot sell its entire position instantaneously; this is the point of being first. Set the price for the market to follow. Once the price slope is set, people start placing portions of their butts on the chairs. The 15% ok in any position, getting out first because they have the least to sell, and the top 15% dealing with the SEC at the door. We don’t know enough about John’s position in the market other than it is significant to John if it goes “the wrong way really fast!” If John does nothing, then at some point, the market is going to fail at the margin call. Therefore, if John dumps, he causes failure. But it is not a failure in the market. It is a correction from one price to another. Its value should be X, not X + Y. While a random “bad day” kills the market for everyone because it is instantaneous. Everyone is stuck with the same value of debt simultaneously, decapitating all banks that cannot take the hit. Leading to a landslide of associated losses across adjacent markets through the banking universe. John cannot stand mum. A zero days level hit to the market would cause cascading ramifications across all sectors. But, how he chooses to act first, rather than smartest, is fascinating. Continued in Next Post

[@bellavia5]

Quite the analysis. The movie does'nt work for me because if a guy like Eric Dale, who worked for a company for many years, got kicked to the curb like he did, his attitude is going to be "Fuck this place " instead of -"Here -I was working on this -maybe you can finish it". Further -he's going to take that information to another firm and use it as leverage to get another job. "Look at this - what I'm working on has SERIOUS implications for the entire financial system ".

[@jimchilton99]

@@bellavia5 As I read your comment, I ask, is Eric a whistleblower of sorts. If I had to guess as to what motivates him, I would start with professional integrity. He clearly sees the bigger picture, the bridge as the best example. He knew the king had no clothes. He just could not prove it. But to meet your assessment, maybe it was a "fuck you" to the Bank. I buy that, at least as a motivation someone would feel after being let go. Also, Eric acts as a catalyst for the entire set of events. No thumb drive, no movie. Or at least it is a different movie. Don't know if I prefer this or the Big Short. In a way, they are both telling the same story from either side of the argument. But for me, Margin Call is more a question of Smith v. Nash and what to do, when you know the world ends tomorrow.

[@bellavia5]

@@jimchilton99 1/ Eric -a whistleblower-I see your point there. 2/ How does his story about building the bridge point to integrity? If he had integrity he would have stayed with bridge building instead of selling out. As for providing for a movie plot they could have had Mr. Sullivan come upon Eric's work by accident after Eric had left. As far as Nash vs Smith (if I recall right they were economists?) I take it that you don't mean the world ending in the actual sense but if the bottom is falling out . At this point in my life -if there is a situation that arises which I can use to my advantage (Like Dr, Burry) i'm going to take it. The well being of others will come secondary.

[@jimchilton99]

@@bellavia5 Maybe integrity is not the right word, more that he can see both the trees and forest. He was able to quantify the value of his work. His issue was to deliverables, the meaning of his work. This I see as integrity. That he not just put the drive in his pocket. He realized there was more than himself. Actually, this goes to Smith v Nash. Yes, they are economists. (A Beautiful Mind is about Nash). From a Nash perspective, Eric is doing what is best for the group and the market by making what he knows public. This is the Nash side of the argument. A selfish man would say damn the market; they fired me. Nash would say it is such for me, but it is not in my interest to let the greater market fail. The argument is Eric still needs a job. If the market is crushed without his input, the market and a potential job go away. So even though he loses, he still keeps the market available for everyone else. And by default himself.

[@bellavia5]

@@jimchilton99 Again I see your point. I tend to demonize corporate types and so I cut Eric very little slack. Also -I see your point about acting selflessly vs acting selfishly . In this case, though, there was nothing that Eric could have done to prevent a market failure -but , yes , perhaps by giving Mr. Sullivan the drive he was acting selflessly because he was'nt aware of the full implications of his discovery. This discussion brings out an underlying , essential question . Can the world survive with so many people acting in their own self interest?

[@thomaswilliamson298]

An excellent look at the film. Thanks for the technical explanation.

[@JamesBrewerDJ]

This is magnificent film that takes a highly complex issue and makes it accessible to the lay-man! The Big Short, To Big to Fail and Inside Job (a documentary narrated by Matt Damon) all cover this subject matter brilliantly. Inside Job is the one that really breaks it down and shows you the corruption through the financial system...and that corruption still exists today worryingly.

[@covercalls88]

A great video, laying out what happens in the backroom. In the 80's and 90's I was involved in the banking industry, but as a senior computer systems manager. So some of terms and even more mentioned here came up in our meetings and conversations. Much of financial skills like leverage, options, float, risk management, etc. I learned while working there stayed with me as I continue to trade in the market. 2022 has been a rough road for many, but the skills I learned has kept my trading accounts up by well over 20% with very limited risks..

[@kevindenelsbeck7444]

It's interesting how this film and "The Big Short" do some twisty things to get us to like characters who have a sort of underdog maverickness to them. But in both films, these plucky seers all suffer from the moral problem: they used their insights not to help the general public or fix the markets but to make the most $$$ they could from a preventable catastrophe.

[@financialedgetraining]

Very interesting perspective Kevin!

[@ShorlanTanzo]

I would highly recommend that you watch 'Too Big to Fail' next. Super interesting movie on the resulting fallout and government response.

[@kevindenelsbeck7444]

@@ShorlanTanzo I've seen it. I think the problem we have in general is that our money has become ungrounded from reality for those who have the most of it.

[@mixerD1-]

In The Big Short, the characters are portrayed as making money on the backs of other people's misfortune, while at the same time warning the "watchdogs" about what's going to happen and being ignored at the gate. I don't believe any single person in their position would have done things any differently. There is first and foremost a duty within their position to make money, for themselves AND their clients, but also to immediately report any type of perceived professional wrongdoings within their profession. I've read highly detailed books on what caused the 2008 crash and the common thread is, people trading at that time had no idea how incredibly damaging and volatile MBS's, CDO's and swaps would turn out to be. In most cases traders and even their superiors genuinely couldn't understand what MBS's actually were and why they sold. The ones who did didn't even try to look forward to how they might affect the international market in the future, and bear in mind, they sold like hot cakes all over the world.

[@gourami7]

The people are first and foremost there to make money for their company or clients. I'm not what preventable actions they could take other than go to the media who seemed unwilling to criticise in the Big Short

[@BobJones-gn2tr]

@6:58 yes that was quite odd that they didn't know each other...

[@homersajoniaii264]

I believe they do know each other but for the benefit of the juniors, everyone is introduced.

[@timberry4709]

It's called "exposition", it's there to introduce these characters to the audience, not each other.

[@BobJones-gn2tr]

@@timberry4709 Oh, okay, thanks!

[@vernefits1953]

brilliant review

[@oceandark3044]

I understand the point offered at 7:00 but the introductions would be necessary if anyone didn't recognize anyone else. As they said at that meeting, Sarah, Jared, and Sam had "talked about this." However, there's no reason that Seth, Peter, and Ramesh should have met, so they would need introductions.

[@caveymoley]

9:00 I always thought "earned" meant they were talking about how much they GENERATED for the company not what they TOOK HOME.

[@MGS87273]

I love this movie, the key scense are so rewatchable. Thanks for breaking down from a professionals perspective. Can i ask do people love this movie in your industry ?

[@markwitzel6101]

Great job on your review Deborah. And great movie, really enjoyed it, while also being in shock and awe that this sort of thing occurs.

[@tophertmg]

Best analysis if this movie I’ve seen. Thank you.

[@financialedgetraining]

We're glad you like it!

[@walkingstick6655]

Along with The Big Short, two great, instructive, disturbing, tight and well-acted bookends to the 2008 debacle.

[@roymeynell9198]

Yes it was a really great movie and very well acted by all and the significance of what this critical situation brought up on us as its significance to day what it many time it’s originality make a very great movie which I have watched many times ,as well as the big short but marginal call was really great .

[@pongesz2000]

i'm just an insurance actuary and a mathematician by training, i'm not well versed in the asset pricing and evaluatin, so sorry, if it's a dumb question, but as far as i understood, if you want to calculate the VAR numbers based on hystoric patterns, then you assume, that the filtration of the stochastic process describing the prices if countinous from the left side, isn't that true?

[@andrewbent8473]

Could you review the Bird and Fortune Subprime sketch? It explains the crisis in a few minutes and was made before the events portrayed in Margin Call occured.

[@vantagepointmoon]

7:16 - it's not just because IB welcomes variety of the backgrounds. Frankly, it takes a former rocket scientist to say it's just numbers to add up as applied to stochastic financial mathematics. Truth of the matter is, with a background in STEM and corresponding heavier mathematical apparatus one is accustomed with, it's much easier to transition to pushing numbers in IB than even with economics statistics degree to modelling propulsion and fluid dynamics under reduced gravitanional loads. Well, that, and the fact that the money is considerably more attractive there

[@plugnickle]

Great analysis.

[@financialedgetraining]

Thank you!

[@timhowell6929]

Great movie and great analysis.

[@5bags]

This was absolutely fantastic!!!! Thank you so much! 18:11 was this a portrayal of Lehman Bothers Richard Fuld (because the man standing behind Kevin Spacey looks like him) .....or is it CEO of Merrill Lynch John Thain?

[@Mrs_Vanderbilt]

First time and Loved It! Very well explained. This is why scientist are running the banks. They do not focus on what they think, or feel, or hope for, or believe - to a scientist it is "What do you know?"

[@erseya]

Amazing movie... and review. Thank you.

[@financialedgetraining]

Thank you, we're glad you enjoyed it!

[@hoplite7644]

Excellent video, really liked it accurate and informative. At 10:20 that is not true however, under the National Labor Relations Act employees are free to discuss their salaries with no recourse from the employer with very few exceptions and banks are not one of them.

[@Fudmottin]

I only recently watched "Margin Call". I enjoyed it quite a bit, but I was getting lost in some of the terms of art. Mostly the acronyms. Thanks for explaining that stuff.

[@xygdra]

Oh boy, you will love "The Big Short" which complements this film when watched together

[@Fudmottin]

@@xygdra Thanks for the recommendation.

[@Fudmottin]

@@xygdra OK. I watched "The Big Short" and you're right. I loved it! Thanks again for the recommendation.

[@KevisaVivose]

You should watch "Rogue Trader". A different perspective but still enjoyable.

[@Fudmottin]

@@KevisaVivose Sounds like the name of a punk band, but I'll look it up.

[@ericmares8036]

Thank you for the insightful explanation.

[@chaseroberts3111]

this movie was better than any horror movie, kept me on the edge of my seat

[@vp1690]

I thought you would explain about what he is talking about keeping it on the books and leverages and allowed to do 12:50

[@pvhari40]

Loved the English Accent (If I correctly judged). Nice video ! My favourite movie..

[@alanebright7483]

The end where Irons just rattles off all the bubbles in the last 200 years is just awesome. Then he tells Spacey to strap in for huge $ to be made out the other side. Just the way it works. Fear and greed and people have short memories.

[@AndrewReevesArt]

That shook me too and explains his willingness to sell and lose it all - he knew they could profit off of the latest bubble.

[@WOTArtyNoobs]

The script is online if you look for it. It fleshes out some of the pieces they edited out of the movie.

[@enargins]

Excellent video! Thanks for sharing. I learned a lot, and it helped me to understand the film (which I love) better. The only thing I'd say is it would be better to put your notes right by the camera lens. Its was very distracting to watch your eyes dart back and forth between the camera and your notes. Other than that, loved the video!

[@devez7]

Excellent video🙌

[@bixby9797]

Great breakdown and is Jeremy Irons a stud actor or what?

[@lukemorley3899]

Love love LOVE this film ❤ fantastic acting

[@osimarmedeiros]

When you mention that it's unusual for the head of sales not to have met the head of risk, I'm assuming you didn't watch the entire movie. In this very scene, as Jared (the boss of them all here) exits the room, Sam (head of sales) and Sarah (head of risk) whisper to each other that they have had this conversation already, a year ago. That was Sam warning them that this would blow up eventually (which got Eric, not present here, to get fired at the beginning of the movie, because he also warned Sarah a year ago about the trash assets they had). So of course everyone there (the bosses) already knew this was a time bomb. But to your point, they had definitely met several other times before (Sam and Sarah and Ramesh). So when Sam says "nice to meet you all", he's not meeting them for the first time. He's just acknowledging them for the newcomers and moving on quickly to the issue at hand.

[@davidlea-smith4747]

Nice commentary on a great film. Do you mind answering a couple of questions? I noticed that people were prepared to call the next up on the management scale quickly when they realised that a possible crisis was brewing, all the way up to the CEO, and that the response from senior people was rapid, even if the times were inconvenient. Is the management structure in most investment banks this impressive or is this a major exaggeration? Also, I heard a rumour that this film was based on events in the London office of Goldman Sachs. Do you know if this is correct?

[@gourami7]

Isn't it the dying days of Lehman Brothers ?

[@davidlea-smith4747]

@@gourami7 No, they are likely the losers buying the junk the company profiled in the film are offering in their fire sale.

[@KevisaVivose]

​@@gourami7 supposedly.

[@ArthurGreen-bw3sb]

It's neither Goldman or Lehman. In fact, the events of this movie didn't happen. Bear Stearns and later Lehman failed because the credit markets lost confidence in them due to their potential exposure to losses, and they were unable to maintain their normal level of debt to fund their operations. Meanwhile Goldman was quietly and steadily unloading and hedging their exposure over months (according to the book "House of Cards"). On the other hand, what's shown could have happened. As everyone else says, this shows the kinds of environment and people in the industry better than anything else ever has

[@daraghmorrissey]

I really enjoyed this video. Thanks for the look behind the scenes. Are we just before a bubble now with AI? would love to hear what your thoughts are.

[@marclederman6206]

One of my favorite movies on the financial crisis (kevin spacey aside), and I thoroughly enjoyed your explanations of what is going on. Great work. Thanks! Keep it up!

[@financialedgetraining]

Thank you Marc!

[@IamBHM]

An excellent movie. And Kevin Spacey is great in it.

[@robcat2075]

Now that he's been acquitted, you can watch Kevin Spacey movies again.

[@TENNSUMITSUMA]

11:30 ...The choices were: be first, be smarter, cheat! You just said from what you've seen it's not about being first or smarter! 😏...Thanks for saying the truth via all that fluff talk, without saying the truth!

[@edrodven]

Excellent explanation of the movie and operations within an IB

[@financialedgetraining]

Thank you!

[@lakeguy65616]

One of my all-time favorite movies!

[@chazm3]

Very good job of explaining this thank you very much