The Movie "Margin Call" pulls back the curtain on Wall Street

If you have not seen the Movie "Margin Call"; you should.

Margin Call parallels the real life collapse of "Bear Stearns" a once major and reckless money making Wall Street firm.

The first of the large Wall Street firms to go under during the financial crisis, Bear Stearns ran out of cash in mid-March 2008 and was rescued from bankruptcy through a deal involving JPMorgan Chase and the Federal Reserve Board days later. The collapse of the company, one of the biggest underwriters of risky mortgage-backed securities, portended the major Wall Street meltdown that was to come a few short months later.

During the real estate boom, banks started giving out loans to borrowers who normally don’t qualify for them, and sold them to Wall Street firms. The firms in turn created complex securities from these mortgage loans, and sold them to investors.

AIG was a large "insurer" of these securities - called "MBS" product in the movie - short for Mortgage Backed Secuirities "product".  The government’s $182 billion bailout of insurance giant AIG should be seen as the Rosetta Stone for understanding the financial crisis and its costly aftermath. The story of American International Group explains the larger catastrophe not because this was the biggest corporate bailout in history but because AIG’s collapse and subsequent rescue involved nearly all the critical elements, including delusion and deception. These financial dealings are monstrously complicated, but this account focuses on something mere mortals can understand—moral confusion in high places, and the failure of governing institutions to fulfill their obligations to the public.

When the housing market began to crumble and borrowers started defaulting on their loans, investors lost confidence in Bears' ability to uphold the copious agreements it had with other financial institutions, leading to a slew of withdrawals and executives' realization that they didn't have enough cash to continue operating. Stock portfolios also suffered a huge blow after the firm agreed to be bought for 93 percent less than the closing price on the Friday before the sale.

The fallout from the firm's meltdown not only shook Wall Street investors -- it also hit Bears' employees hard. Of the company's 14,000 employees, only 5,000 lasted through to the sale to JPMorgan, according to the Wall Street Journal.

The movie does not say exactly who the firm is - but it is clear it was Bear Sterns who was the inspiration of the movie

“Wall Street 2: Money Never Sleeps” and “The Company Men” are now joined by “Margin Call” in this genre

Margin Call depicts the events, over a 24-hour period, at a fictional and never named brokerage, which discovers it is immensely over-levered with toxic mortgage debt. The firm’s brain trust gathers to figure a way out. Unlike Bear Stearns or Lehman Brothers, the firm realizes it’s in trouble ahead of anyone else and devises a way a slightly unethical one to survive.

The movie hints - the way to survive they selected was actually financial suicide anyway.

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