MovieChat Forums > Margin Call (2011) Discussion > Completely ridiculous basis for the firm...

Completely ridiculous basis for the firm's problems

posted 9 years ago by qwerty79789
14 replies | jump to latest

Would it have been so hard to have someone with some basic knowledge of Wall Street read the script? After they got done dying from laughter about the magic excel spreadsheet that could be "solved" to show a higher VAR than they'd been estimating and therefore something something "our whole market capitalization! We have to sell this worthless garbage that only we on all of Wall Street know about because we solved the magic excel spreadsheet!" they could have deleted all that and actually given them something not so completely ludicrous.

[–] android_movie 9 years ago

Exactly.

And for the head of the desk to say "explain to me like I am a child". No head of the desk would say that! I have dealt with many heads of desks and they can all talk smartly and will never show such weakness in front of his peers!

Show me the holes!

[–] gilb 8 years ago

"And for the head of the desk to say "explain to me like I am a child". No head of the desk would say that!

True, but it was actually the CEO who said that, which is very likely in many firms.

[–] riraho (141) 2 years ago

i sort of took that scene to indicate that Irons' character was well ahead of the curve and knew exactly what the problem was -- he just wanted to direct everyone into line with what his plan was to fix it.

[–] ExTechOp (2770) 2 years ago

i sort of took that scene to indicate that Irons' character was well ahead of the curve and knew exactly what the problem was -- he just wanted to direct everyone into line with what his plan was to fix it.

That's an excellent take, one that had never occurred to me.

We know, of course, that the "real" reason for that "explain it to me" line is exposition, a way to bring the audience up to speed.

But it makes complete sense that Tuld (Irons) would want a simple explanation spoken out loud, so that he could then propose a simple solution. Which is exactly what he did. "Sell it all today!"

[–] UNTRugby 9 years ago

I would guess they didn't want to waste 30 mins explaining MBSs, CDOs, CDSs, and synthetic CDOs and then still have most of the audience not understand it.

[–] jelkin-1 9 years ago

I have to say that I don't agree with you. I work in (admittedly a rather different area of) finance and Tuld reminded me of an equity partner at my firm when he said that. What he really wanted was for the brainy analyst to get to the crux of the matter quickly and simply and not wade through tons of detail (as brainy people are wont to do). Maybe a function of the sort of company I work at but in my experience it's the really senior types that *aren't* worried about asking for simplicity; the way I saw it, if you're a powerful CEO then you're very secure. And don't forget that if he's been around for decades then he's not going to understand all the complex modelling that goes on as it wouldn't have been around like that when he was junior enough to do the number-crunching.

As for the magic spreadsheet...I could be wrong but the way I saw it was that they'd estimated volatility (at the heart of the VaR calculations) by using past data, but actually the model for doing so was highly flawed and they were seeing a huge disparity between actual volatility and that which the model would have predicted. Not that the guy was "solving" anything as such, but he was finding evidence that the model was really out of whack.

[–] johnsonium 8 years ago

Exactly. I don't work for a financial corporation but I do work for one of the largest company in America. The executives here are almost boastful of their ignorance of the details. I've had countless meetings with VPs that start with the executive saying, "Look, I don't understand what you do. You are the experts.". It's weird and off-putting. If they don't understand what's going on at the ground level how can they make informed decisions?

[–] Carlo (126) 9 months ago

They didn't become VPs or executives because of their understanding of the financial world. They became VPs and executives because of their connections to the higher echelons of that world. Small hint: Cohen and Robertson are both Jewish names and they're at the top of the firm. It's not hard to figure the criterion of selection that these banks use..

[–] Blubonnet_Spearman 9 years ago

Whine, whine. You Wall Street types are a tiny percentage of the audience for this film. It only had to be credible for the main viewing audience which it is. It ain't no documentary

[–] bpollen 9 years ago

I wondered about that, too. Don't most places and investors have spreadsheets that keep a running total of losses and gains? It'd be easy to add a formula calculating that in the event of a larger loss. Very elementary stuff.

There must have been something else that was used, for that company to be the first, or one of the first, to catch on to the problem.

UNLESS....in this case the investments were mbs packages. So the value of each package wouldn't change much (it works like a bond I guess), but there has to be another program that is tracking the defaults. So that would tell you if one of the packages is worthless, although on the exchange, it would still read as profitable for a while. Remember that it's rated AAA by the rating agencies, too. Not many are paying attention to the underlying mortgages (as we learned in The Big Short). They just go by the rating agencies' ratings.

But whatever, I got the idea.

[–] masurra 8 years ago

I got the impression that the vague description of what was the reason for the companys eventual implosion was an intentional part of the script. It is implied a few times in the movie that many of the ppl working at the firm doesn't understand what they are doing, some of them doesn't even seem to want to know. During several scenes they are talking about this abstract thing lying there in the numbers being able to cause a tidal wave mega disaster in the financial system.

I reacted like the TS when I saw the movie the first time but nowadays I look at it with this perspective and it works better.

_______
"if seagal was thinner this could have been a theatrical product."

[–] lordrosemount 8 years ago

I thought that was what was going on: these were MBSs, and the data they'd got over the past few weeks suggested that defaults on the underlying mortgages were at a higher rate than the models had estimated, so the real value of the products was clearly a good deal less than the market value. That, and/or they were seeing unfavourable property price data.

What I didn't quite get was how it happened that Stanley Tucci had sort of half figured this out before Zachary Quinto came and finished the job. I'm unsure what work he had been doing if he hadn't twigged the basic problem, or if he had, why it should have been particularly difficult to run the numbers. I could probably figure it out if I thought about it hard enough, but let's just say it wasn't very clear from the material presented.

[–] Gabe1972 8 years ago

It's a film for a general audience, not an interoffice discussion on spreadsheets. I'm sure them including actual investment bank spreadsheet, going over the cliff technical discussion for forty five minutes would have really kept the audience rapt! Give me a break. It's a film.

Time wounds all heels.

[–] riraho (141) 2 years ago

True..they could have just found the report on Dale's computer...but it's a movie.