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8 pages/≈2200 words
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Accounting, Finance, SPSS
Movie Review
English (U.S.)
MS Word
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Movie Title: Margin Call Name of Reviewer: Brief background of the Movie The movie is set in around 2007, before the onset of the global financial crisis. It occurs in an unnamed investment bank for over 24 to 36 hours. At this time, financial institutions earned enormous profits from selling mortgage-backed securities to investors. It also appears to happen before the real estate bubble burst. The firm appears lucky to have recognized its high exposure to mortgage-backed securities before the rest of the other market participants. Key Participants * John Tuld. He is the CEO of the investment firm. He is an egoistical character who instructs the firm to sell worthless and risky assets to unsuspecting buyers. He ignores warnings that this would start global turmoil in the capital markets, but he is solely focused on his self-interests and making money. * Sam Rogers. Sam is the Head of the Trading Floor. Sam is concerned by the CEO's instruction to sell all the risky assets because it would mark the end of the markets. However, he is compelled to go ahead with the CEO's commands, and despite having ethical concerns, personal financial pressure motivates him to stay in the firm. * Peter Sullivan. Peter is a risk analyst who identified a problem with the firm's mortgage-backed securities trading model. He informs his superior and appears to question the actions the senior management took, but he is not in a position to influence decisions. * Will Emerson. He is the Head of Trading, and he informs Sam Rogers about Peter's concerning findings. * Jared Cohen. Jared is the Division Head of Trading, and he is under immense pressure from John to find a solution to the impending catastrophe. He suggests the firm sell all its risky assets and attempts to coerce Sam to agree to this decision. * Saah Robertson. She is the Chief Risk Management Officer. She appears to have been aware of the problems associated with the firm's MBS trading and has a key role in the dismissal of Eric Dale. The CEO decided she would be the scapegoat for this entire crisis and receive an attractive severance package. * Eric Dale. Eric is the former Head of Risk Management. After Peter makes sense of his model, the firm starts aggressively looking for him to ensure that he does not leak sensitive information. He is offered an attractive remuneration for his silence. Brief Synopsis of the Movie The opening scene depicts a corporate downsizing, with the firing of Eric Dale, the firm's Head of risk management. Before leaving the building, he hands over a USB stick to Peter Sullivan, a risk analyst. Eric asks Peter to look at the model he has been working on, and tells him to be careful. Peter, a former astrophysicist, dives down into the model and finds that the models on which the firm had been running its mortgage-backed securities trading no longer make sense. The firm had taken high-leverage positions on its MBS assets, and the model showed that if the asset value were to decline by 25%, the firm's losses would exceed the current market capitalization. Concerned by this, Peter informs the Head of trading, Will, who then tells the Head of the trading floor, Sam Rogers. Sam convenes a meeting with the Head of the division, Jared, and Sarah, the chief risk manager. The three then inform the CEO, John Tuld, who convenes a senior partner meeting in the middle of the night. In this meeting, Peter briefs John about the precarious situation the firm is in if the assets decline in value, and John demands an answer. John instructs Sam, through great persuasion, to immediately organize a fire sale to get the risky assets off the firm's books. This meeting sets the scene for numerous ethical issues because the firm would start global turmoil by selling off these assets. Sam Rogers promises massive bonuses if the firm manages to meet a target of selling 93% of the risky assets. List of Ethical Issues and Dilemmas 1 The rationalization for the fire sale, while being aware the assets were worthless. At the senior partner's meeting, John Tuld justifies why the firm should sell all its risky assets first thing in the money. The characters involved in this are Sam and Jared. 2 Money as a tool to induce compliance among employees. Sam Rogers comments that John should "throw a big bone to the traders" for a successful fire sale. Sam promises fat bonuses if the traders manage to sell 93% of the risky assets. Eric Dale is promised high compensation for his silence, while Sarah expects a fat severance package for being the scapegoat. Furthermore, despite his reservations, Sam decides not to resign because he needs the money. The movie portrays money as a key incentive for the characters, and it is a tool to demand compliance. 3 The suppression of concerns and silencing of the risk management department The firm does not consider the importance of the risk management department. It is the first department to suffer layoffs, with Eric Dale losing his job and Sara Roberston being the scapegoat for the crisis. The firm did not heed the warnings of the risk management analysts regarding the high leverage levels of the MBS trading. Ethical Issues 1 The rationalization for the Fire Sale The scene is set in the senior partner's meeting in the middle of the night, organized by the CEO. After being briefed by Peter that the firm holds risky MBS assets, he turns to Jared, demanding a solution. After sensing some hesitance from Jared, John claims: What have I told you since the first day you walked into my office? (pause) That there are three ways to make a living in this business... Be first, be smarter, or cheat. Well, I don't cheat, and even though I like to think we have got some pretty smart people in this building of the two remaining options, it sure is a hell of a lot easier to just be first. Jared responds by saying: "Sell it all today..." At this point, John turns to Sam and asks whether the firm can sell all its risky assets to unsuspecting buyers. The two engage in an interesting dialogue where John senses Sam's reluctance to the fire sale. Sam is hesitant to the fire sale because: * It would come back to hurt the firm and everyone involved. * He asks that even if it were possible to sell all the risky assets, to whom would the firm sell to? * He indicates that if they proceed, the firm will have killed the market for years, and it would be over. If the manage to sell, they would never sell anything to buyers again. * He indicates the firm was selling assets it knew to have no value. * Sam was concerned the firm would be starting a global financial crisis which could destroy the firm. However, despite the concerns raised by Sam, John is adamant that the firm must proceed with the fire sale. Werner (2014) identified that John made the following rationalizations to justify his decision: * Everybody is and will do it (the denial of responsibility). He emphasizes that the firm should be the first to sell off its risky assets because once the other firms recognize the riskiness of MBS products, they will do the same. As a result, the firm has no choice but to act on Peter's findings as soon as possible before the other firms catch up. * The fire sale will ensure the firm's survival (the denial of injury). Sam questions John's decision to sell something the firm knows has no value. John responds, "We are selling to willing buyers at the current fair market price; so that we may survive." John denies that the firm will do anything wrong since it will sell those assets to informed, willing buyers at a fair market price. He disregards Sam's concerns that this would cause global market turmoil and cause the competitors' collapse. He emphasizes that the competitors would do exactly the same if they were in the same position. In this case, Sam appears to apply a utilitarian ethical philosophy. He evaluates the harms and benefits of the fire sale and considers the decision would have an adverse effect on the markets, which does not justify the firm's survival. However, John is egoistical and only makes decisions to maximize decisions for their self-interests (the survival of the firm). He is short-term-oriented and will take advantage of others to achieve his goals. He argues that the firm is nothing more but a player in the market, and it cannot control how the market reacts. The firm is a powerless participant; its priority should be survival, and the firm should consider the ensuing turmoil as an opportunity to make more money. In the end, there have always been winners and losers. After much persuasion, Sam agrees to the fire sale and promises hefty bonuses to the traders if they achieve their target. The film does not show the after-effects, but I consider this as one of the precursors to the panic selling of risky MBS assets by financial ins...
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