J. C. Chandor's "Margin Call'

A century ago, the Austrian Marxist Rudolf Hilferding predicted that banks and investment houses—increasingly indistinguishable from each other—would soon rule capitalism's roost, bringing to heel even the great trusts whose wealth and power had attracted the attention of reformers like Teddy Roosevelt.

In theory, these bankers and brokers were merely the disinterested facilitators who brought capital and enterprise together, assessing potential and risk and extracting a modest profit for their services. In practice, Hilferding noted, they constituted a chokepoint that could decide the life or death of companies, industries and whole nations. In the U.S. this alarming fact led to the creation of the ultimate backstop: the Federal Reserve system, whose credit line— the power to print money, ultimately backed by taxpayer dollars—was the only resource that could be mobilized to prevent a catastrophic stoppage of capital.

Notwithstanding the Fed, such a stoppage occurred with the Crash of 1929. Banks and brokerages were temporarily separated, and the Fed took over supervision of the money supply. But there was simply too much money to be made by those who could game the system, and gradually the New Deal regulatory apparatus was dismantled by successive business-friendly administrations, Republican and Democratic alike, culminating in the repeal of the cornerstone Glass-Steagall Act in 1999 under Bill Clinton.

Garbage in….

By the turn of the millennium, the financial sector accounted for 40% of the U.S. economy— a facilitator turned devourer, whose principal business was not lending but trading, and whose tokens were exotic "instruments" whose underlying value rested on bad consumer debt, deliberately sold and misleadingly packaged. This was the system, fueled by speculation and obscene profit taking in the form of executive salaries and bonuses, that crashed again in 2008.

Of course, large investment houses maintained risk assessment divisions that monitored their exposure on leveraged positions, using complex algorithms and modeling. But garbage in, garbage out. The whole system rested on creating an appearance of value where none might exist; in short, on fraud. The algorithms would finally flash a warning signal, but only when it was too late, or the analysts were too weak or compromised to pick it up.

The honest accountant

That is the point at which Margin Call begins. An unnamed Wall Street powerhouse that resembles Lehman Brothers is in a periodic housecleaning, with traders and analysts being summarily dismissed and frog-marched out of headquarters on 30 minutes' notice. It's not that the firm suspects it's in trouble; it's simply a routine corporate shakeout.

Among those dismissed, however, is Eric Dale (Stanley Tucci), a veteran analyst who, fiddling with his programs, has discovered that the firm is a volatile heartbeat away from going underwater— that is, holding unsecured obligations in excess of its net capital worth.

Eric tries to alert his superiors, although one wonders why: He's being dumped on the street, so why should he care if the building is about to fall? Somewhere, we are made to suppose, a good accountant's instincts lie buried, or perhaps the shock of what's being done to him hasn't quite caught up with the loyalties of a midlevel company man.

Already out the door, Eric tries to make one last call on his cell phone to warn of the impending disaster, only to discover that his line has been cut. He smashes the phone on the pavement, and walks off.

Batman, or the Joker?

Eric has, however, managed to hand over a flash drive to a junior analyst, Peter Sullivan (Zachary Quinto), who quickly diagnoses the problem and alerts his boss, Will Emerson (Paul Bettany). The bad news passes up the line, and finally the firm's chief executive, John Tuld— a not-so-subtle play on the name of Lehman's Dick Fuld— is summoned in a black helicopter, like Batman to save a besieged Gotham City.

But Tuld (Jeremy Irons) isn't Batman; instead, he's the Joker. The city will crash, but the Joker's own criminal enterprise must survive the wreckage, and even position itself to feed on it. This means dumping as much of the firm's toxic assets as possible before the market perceives what's going on. As the firm's chief trader, Sam Rogers (Kevin Spacey), tells Tuld, "You're selling something that you know has no value."

Tuld replies: "We are selling to willing buyers at the current fair market price." It doesn't get more basic than that.

Of course, Sam has been peddling junk for years, albeit junk certified as the genuine article by rating agencies and accepted as tender on the market. It's not his job to evaluate the product, only to move it.

The Corleones, by contrast

Tuld also affects surprise. Convening an emergency meeting, he asks Peter to explain the company's problem to him in the simplest terms: "Speak as you might to a young child or a golden retriever." The double reference (a child is innocent, a retriever is a symbol of wealth and privilege) is meant both as a disclaimer of responsibility and an assertion of power.

But if Sam has really been kidding himself— a dubious enough proposition— surely Tuld is in the know. He and his peers have designed the game, and the only thing Peter can tell him is that it's up. Peter's immediate instruction to dump everything is the same snap decision Al Pacino's Michael Corleone makes to take out his Mafia rivals in The Godfather. It's time for the blood to flow.

Although first-time director J. C. Chandor tries to humanize the firm's personnel, particularly Sam, these characters are far less appealing than the Corleones, and also far more dangerous. Here we find no family code of honor, no Sunday spaghetti dinners, no weddings and christenings— just hiring and firing, and the casual destruction of others people's lives and labor.

Remember the Tulip Mania?

The Mafia, moreover, was merely a parasite on the economy. Firms like Bear Stearns, Lehman, and Citibank were the economy, to a staggering extent. Their survivors and successors— stronger than ever thanks to massive bailouts and consolidations— still are.

At the film's end, Tuld is dining alone in the executive dining room, the day's piracy done. Sam, having also done his job, approaches Tuld and says he wants out. Tuld, not missing a bite, recites for him the history of panics and crashes going back to the Dutch Tulip Mania of the 17th Century. Thus it has ever been and thus it must always be: Such is the law of the market, and the only law for those who play it is survival.

It's all about paper and the value people agree to assign to it, Tuld says. Periodically, the agreement collapses, and that's when the master predators carve up the ruins, re-game the system, and earn their keep.

Urban pleasures

Well, that's one vision of the world— though one that, despite Occupy Wall Street, still seems to prevail. Margin Call should be set beside the 2010 documentary, Inside Job, as the only serious attempt to depict the crash of 2008 and its still-unfolding consequences.

Margin Call was made on the cheap— reportedly for $3.4 million— and has, to this point, returned a modest profit. Its more bankable performers, including Demi Moore, undoubtedly worked for scale, and the whole cast acquits itself well.

Irons's portrayal of John Tuld, in particular, exudes a vulpine charm as he warms to the work of destruction. At one point, looking out at the city he is about to lay waste, he reflects with intense pleasure at how much he has enjoyed it. I guess the Joker felt the same way about Gotham.♦


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