Margin Call

Introduction

Margin Call is a 2011 American financial thriller film written and directed by J.C.
Chandor. The film follows the unfolding of a financial crisis within a fictional investment bank
during the 2008 global financial meltdown. The film explores the intense pressure, ethical
dilemmas, and tough choices faced by individuals in the financial industry during times of crisis.

That casts in the movie include Stanley Tucci as Eric Dale, Paul Bettany as Will Emerson,
Zachary Quinto as Peter Sullivan, Penn Badgley as Seth Bregman, Kevin Spacey as Sam Rogers,
Demi Moore as Sarah Robertson, Simon Baker as Jared Cohen, and Jeremy Irons as John Tuld.
The film is premiered at the Sundance Film Festival in January 2011 and had a limited theatrical
release in the United States on October 21, 2011. It earned an Academy Award nomination for
Best Original Screenplay. It also won the Independent Spirit Award for Best First Feature.

Summary of the story

The film commences by presenting an investment bank facing financial decline, leading
to the layoff of some of its workforce. Eric Dale, the director of the risk management team, is
among of those laid off, secretly working on a project which eventually unveils to be a critical
projection of the firm’s status. While being escorted for his immediate departure, Eric endorsed a
flash drive to his junior financial analyst, Peter Sullivan, instructing him to take a look at the data
carefully. Peter is intrigued to complete the model overnight and uncovers information that could
potentially bankrupt the entire firm. The model reveals the firm's over-leverage, surpassing
historical volatility patterns of its MBS (Mortgage-backed securities) products against the firm’s
VaR (Value at Risk) model, suggesting that the firm’s present risk profile has been faulty for
recent weeks.

Alarmed by the projection, Peter calls his colleague Seth Bregman to return and consults with the
head of credit trading, Will Emerson. After analyzing Peter's findings, Will summoned his boss,
Sam Rogers. After desperate attempt to find Eric, an immediate discussion is then held with the
division head, Jared Cohen, and the chief risk management officer, Sarah Robertson. As they
realized the intensity of the scenario, an emergency meeting is arranged in the middle of the
night attended by the senior executive committee, including the CEO, John Tuld. Peter explained
the situation to the CEO. He further projects that a 25% drop in the market value of the firm's
risky assets would result in heavy losses exceeding the entire market capitalization of the firm.
The firm's exposure is far greater than anyone had anticipated, and the impending crisis threatens
to not only ruin the firm but also have a widespread impact on the entire financial system. A
series of urgent and high-stakes decisions follow as they grapple with the moral and ethical
consequences of their actions, they try to salvage what they can and minimize the damage, and
therefore would save the firm. Upon reviewing the numbers and finding no better alternative,
Tuld orders an immediate fire sale of all the problematic financial assets held by the firm before
the market reacts.

Despite opposition for the negative impact on the firm's relationships and the broader financial
system, the CEO's decision is unwillingly accepted. By the opening of the financial market in the
morning, Sam, initially hesitant, instructs traders to unwind firm’s positions in cash deals,
offering generous bonuses and commissions upon meeting set targets. The revelation of the
company's wrongdoing leads to selling at significant discounts. After achieving the target sales
and clearing all assets, another round of layoffs occurs, with employees receiving substantial
compensation. Sarah Robertson, the chief of risk management, becomes a scapegoat for the
firm's over-leveraged position and is dismissed. Discouraged, Sam confesses his desire to leave
the firm to Tuld, who reminds him of the cyclic nature of crises. Despite the ethical dilemma,
Sam decides to continue with the firm for two more years.

Analysis of the plot elements

The story is set over a 24-hour period in an unnamed investment bank and revolves
around the discovery of critical information related to the firm's exposure to risky assets.
Everything seems to be an ordinary scenario for a firm’s environment of a 2008 scene such as
sudden layoff of employees and some casual chats about colleagues’ earnings. Situation started
to intensifies as they unfold a model of the firm’s risky assets particularly its mortgage-backed
securities that sooner would be deemed worthless in market value due to certain economic crisis
that is yet to be discovered outside the plot’s settings. Forming the climax of the movie is the
scene where the main characters is in an emergency meeting with the higher-ups and senior
executives of the firm including the CEO. The discussion builds tension of the necessary actions
and what decision should be undertaken for the possible bankruptcy as they argue moral and
ethical dilemma of its implication. The CEO stresses that his desire to avoid the firm's
bankruptcy is worth that risk and the cost and stood with his argument to transfer the potential
heavy loss to its investors that would probably damage the firm’s reputation in the market. The
decision is concluded with an immediate solution that favored the firms’ survival while disposing
the risky financial assets at discount to uninformed buyers.

The story explores the consequences of risk-taking and the moral dilemmas faced by the
characters as they contend with the awaiting financial crisis. The film clearly depicts themes of
corporate ethics, accountability, and the human cost of financial decisions. It sheds light on the
complexities and challenges within the financial industry during times of economic disorder.

Opinion/Reaction

“Sometimes in an acute situation, often, what is right can take on multiple

interpretations.” This line is from Jared Cohen which depicts a moral dilemma of what decision
should be the right thing in cases whether it is the firm or the innocent buyers who would suffer.
Of course, it is the executive members’ priority decision is to make profit and, in the case of its
financial distress, to survive the firm. The question is, how can we justify what is the right
decision to do when given circumstances reveals us only critical options as basis for a a discreet
judgement? One might interpret in the film that decision undertaken to transfer the heavy risks to
uninformed buyers is an unethical practice but the reality is, these people are already aware of
the risks in this business beforehand. Jared Cohen’s plan to fire sale the problematic assets
convey a wise decision to save the firm in the finance’s perspective. Sam Rogers disagrees and
pointing out that the sale will damage the firm's relationships and reputation with the buyers and
will cause major financial instability in the markets, however, the CEO John Tuld favored
Cohen. Acceptable, as Tuld explains to Rogers the recurring cycle of financial crisis and stressed
that it is just money and people in this industry is buying the risk itself. Moreover, the decision is
somehow acceptable in the point that there is still no guarantee during that time about the
occurrence of the crisis, it could still be interpreted as a contingency to prevent the firm’s
exposure to the potential heavy loss the problematic assets would deliver to the firm.

Conclusion

Margin Call shows the ethical dilemmas inherent in the financial industry, showing the
conflicting pressures faced by individuals caught between their loyalty to the company, personal
gain, and the potential harm to others. Individuals within the firm face the choice of either acting
in their immediate self-interest or considering the bigger consequences of their actions on
society. The decision to sell the risky assets at a fire sale price is a morally complex, as it shifts
the risk and losses onto innocent parties and potentially starting a financial crisis. The film
attracts viewers to reflect on the choices made by these characters and the ethical challenges
surrounded in the finance industry during times of crisis.

Guide Questions

1. Did anything that happened in this movie remind you of something that has occurred in
your own life or that you have seen occur to others?

Yes, the movie reminds me of doing the right things out of my passion, as it portrays the
consequences of ethical lapses and the impact of individual choices on a larger scale. The
characters in the film faced with a high-stakes financial crisis and conflicting with moral
dilemmas that force them to question their values and priorities. I am driven to reflect on how my
own passion can serve as a guide for ethical decision-making. The movie serves as a reminder
that sincere passion can be a powerful motivator for ethical behavior, encouraging me to make
decisions with a sense of purpose and responsibility.

2. Does the film reflect on a current event or contemporary issue?

One scene in the film shows John Tuld enumerating to Sam Rogers the recurring cycle of
financial crisis stating that these things happen since the early dates and it will continue to
happen all over again. It depicts that the cycle continues and will always expose the industry to
moral debates about ethical practices within the financial industry. Margin Call can be seen as
offering insights that remain applicable to contemporary discussions on financial stability,
accountability, and the potential impacts of risky financial strategies.

3. Were the technologies being depicted in the movie new? If not, what do you think were
done in the past uses these technologies?

Since the movie is set on 2008, the technologies depicted in the movie is somehow the
same as to the current state of technology we are using today. Particularly, in using financial
models such as VaR (Value at Risk) models, which are used to determine projection for risk
management purposes based on current and historical figures. The film showcases financial
models, risk assessment, and data analysis to understand the implications of the risky assets held
by the bank. However, the film highlights the human elements and ethical considerations
involved in financial decision-making rather than showcasing advanced technologies.

1. Cite economic principle that you can identify in the film.

The film highlights the fundamental economic concept of risk and uncertainty in financial
markets as the characters deals with the unpredictable nature of the market and the uncertainty
surrounding the future value of complex financial instruments. Also, the concept of leverage is
central to the film's plot. The investment bank is heavily leveraged in risky assets, contributing to
the firm's vulnerability and the potential for financial instability. Margin Call illustrates the
dangers of over-leverage in amplifying both gains and losses. And significantly, the film
identifies the concept of moral hazard as characters debate the consequences of their actions on
the bigger financial crisis contributing to the moral dilemma.

2. What are the ethical dilemmas faced by the characters in the film?

The moral dilemma depicted by the characters in the film revolves around the decisions
faced by individuals within the investment bank when they discover the potential heavy losses.
The characters become aware of the firm's high exposure to risky assets and the potential
disastrous consequences for both the institution and the financial system. The primary moral
dilemma is whether to prioritize the short-term survival of the firm and protect its executives and
shareholders by immediately selling off the risky assets, even if it means causing widespread
financial harm to clients, investors, and the economy. The film shows the tension between the
personal interests of the characters, who may benefit from the fire sale, and the larger ethical
responsibility they have to the public and the financial system.