In his slender, sly book on the Great Crash of 1929, JK Galbraith casts a cool eye over the frenzy of borrowing money and buying shares that led, ultimately, to the huge financial collapse of that year and to the Great Depression that followed. It was as though investors had only just discovered the law of geometric progression, says Galbraith; and, when the market crashed, it was as though they only then realised that it could also work in reverse.
Funnily or not so funnily enough, the financial crisis of 2008 was a result of precisely the same kind of over-leveraged buying, with the added complication that much of what was being bought and sold in financial markets was debt — mortgages and the like, allegedly secured by ever more attenuated lines of credit, stretching across the world and involving a vast network of interconnected banking institutions. The packaging and repackaging of debt to be sold on made it seem safe for a while, even a triumph of capitalism’s ability to generate ever more new forms of exchange and thus the increase of financial value. The law of geometric progression made it look like investors could make huge amounts of money with very little risk. And for a time they did. Then the law of geometric progression went into reverse.
Sophisticated gambling
Margin Call is a striking film about the 2008 crash. It’s set in the heart of a large investment bank that drives the buying and selling of shares, futures, derivatives and the like, to the value of trillions of dollars — a very sophisticated kind of gambling, really. The firm in question is never named in the film, but the suggestive figure of $68-million is mentioned: one of the firm’s directors is said to have earned that amount in bonuses in one year. The number is exactly the same as the amount earned in bonuses by one of the directors of Goldman Sachs, at the very moment its hugely over-leveraged pyramid was about to collapse.
Whereas the excellent documentary Inside Job (great catchline: “The film that cost over $20-trillion to make”) tried to get inside the mechanics of the 2008 crash, seeking and naming those responsible, Margin Call takes the dramatic route. It makes a riveting fictional story of what happens in a short period when one of the investment bank’s analysts does some presumably complicated maths and comes to see that disaster is looming. (You’ve got to ask why, in reality, no such analyst predicted the crash, or perhaps even did some historical thinking and wondered about patterns that echoed those of 1929, but that is a question beyond the scope of the movie.)
A uniformly excellent cast bodies forth the personalities involved here, not just as cogs in the wheels of this vast financial machinery but also as people with ambitions — and with responsibilities, even if they ignore them until it’s too late. Zachary Quinto, who so successfully played Mr Spock in the Star Trek reboot, is the young analyst who’s on to a bad thing; Paul Bettany embodies the cynical, reckless kind of trader who would want to see himself, in the phrase bruited by Tom Wolfe, as a Master of the Universe. Penn Badgley, by contrast, plays the naively money-hungry tyro who will of course have even his most sordid dreams shattered.
At a more senior level within this firm, we have Simon Baker and Demi Moore in boss positions; the chilly supervisor played by Moore seems a role she was born for. Kevin Spacey is the manager of a team of brokers who have to be motivated to do their jobs, even if that includes sparking ruination all round, with some half-hearted and deeply ironic rhetoric. Spacey has a very fine moment when his manager has to make the relevant speech, and he also has a cutting interaction with Jeremy Irons, as the highest-up of high-ups, who helicopters in in the early hours of the morning as the scope of the looming crash becomes apparent.
The sharp dialogue of the script and its swift pace ensure that Margin Call has a thriller’s tension, building suspense from early on and not letting go. Its narrative feels very close to what must have happened in such an institution in 2008, and the thought, while watching it, that millions of people’s livelihoods and welfares depend on what’s going on here makes it even more absorbing.
Disaster 101
The financial stuff is admittedly complex, but the movie gives enough of an explanation of it to allow the story to proceed, and it doesn’t feel like the viewer is being left with any impenetrable mystery about how this disaster came about. In big-picture terms, in fact, it seems pretty straightforward: too many people borrowed too much money so they could keep buying financial “instruments” and selling them on, while the gap between what they owed and what they really owned grew ever larger. The “margin call” is when the creditor at the end of the borrowing chain wants his money back — and the geometric progression goes into reverse.
So here we sit, in 2012, with a global financial crisis that threatens us all. It may be some small comfort to be able to get a grip on the sorts of processes that led to this situation, and Margin Call provides a compelling account of how it must have felt to be in the middle of that nexus.
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