Margin Call Page #4

Come in.

How do we look?

- I should go.

- No. You should stay.

So?

It's legit.

The kid killed it.

The formula's worthless.

- What does that mean?

- It's broken.

There are eight trillion dollars of paper

around the world

relying on that equation.

Well, we were wrong.

No, you mean you were wrong.

Now, don't get me started.

We discussed this.

I'm heading for the conference room.

No, I want you to hear this.

I don't want to hear this.

How do you think I've stuck around

this place so long?

I called Tuld.

Do we have a contingency plan here?

- A contingency plan?

- Yes.

No, we went all in on this one.

So we've gotten ourselves

quite exposed here, haven't we?

To Tuld or the market?

To both.

He's here?

- Tuld's helicopter just landed.

- I know. Come with us.

- Where's Sam?

- I don't know. You sure you want all of us?

Yes.

One piece of advice for everyone

before we go in there.

This could get a little ugly.

But whatever you do, just tell the truth.

No sugarcoating

Do not change a word of it.

No one here is smart enough,

including the rocket scientist.

- Mr. Cohen.

- Morning.

This way, please.

He's already in there waiting for you.

Excellent.

John.

Please, sit down.

Welcome, everyone.

I must apologize for dragging you all here

at such an uncommon hour.

But from what I've been told, this

matter needs to be dealt with urgently.

So urgently, in fact, it probably

should have been addressed weeks ago.

But that is spilt milk under the bridge.

So, why doesn't somebody tell me

what they think is going on here?

Mr. Tuld, as I mentioned earlier,

if you compare the figure

at the top of page 13...

Jared, it's a little early for all that.

Just speak to me in plain English.

Okay.

In fact, I'd like to speak to

the guy who put this together.

Mr. Sullivan, is it? Does he speak English?

Sir?

I'd like to speak with the analyst

who seems to have

stumbled across this mess.

Certainly. That would be Peter Sullivan.

Right here.

Oh, Mr. Sullivan, you're here.

Good morning.

Maybe you could tell me

what you think is going on here.

And please,

speak as you might to a young child

or a golden retriever.

It wasn't brains that got me here.

I can assure you of that.

Well, sir, as you may or may not know,

I work

here for Mr. Rogers as an associate

in the Risk Assessment

and Management Office at MBS.

Please. Just relax. Stand up.

Tell us in a clear voice.

What is the nature of the problem?

Okay.

As you probably know,

over the last 36 to 40 months

the firm has begun packaging

new MBS products that

combine several different tranches

of rating classifications

in one tradable security.

This has been enormously profitable,

as I imagine you noticed.

I have.

The firm is currently doing

a considerable amount

of this business every day.

Now the problem, which is, I guess,

why we are here tonight,

is that is takes us, the

firm, about a month

to layer these products correctly,

thereby posing a challenge

from a Risk Management standpoint.

And, Mr. Sullivan, that challenge is?

We have to hold these assets on our books

longer than we might ideally like to.

Yes.

But the key factor here is

these are essentially just mortgages.

So that has allowed us to push

the leverage considerably beyond

what you might be willing or allowed to do

in any other circumstance,

thereby pushing the risk profile

without raising any red flags.

Now... Thank you, Mr. Sullivan. Sit down.

What I'm guessing your report here says,

and give me some rope here.

What I'm guessing it says is that

considering the, shall we say,

bumpy road we've been on

the last week or so,

that the figures your brilliant co-workers

up the line ahead of you have come up with

don't make much sense any more

considering what's taking place today.

Actually, not what's taking place today,

but what's already taken place

over the last two weeks.

So, you're saying

this has already happened?

Sort of.

Sort of.

And, Mr. Sullivan, what does your model

say that, that means for us here.

Well, that's where it becomes a projection.

But...

You're speaking with me, Mr. Sullivan.

Well, sir,

if those assets decrease by just 25%

and remain on our books,

that loss would be greater than

the current market capitalization

of this entire company.

So, what you're telling me

is that the music is about to stop

and we're going to be left

holding the biggest bag

of odorous excrement

ever assembled in the history of

capitalism.

Sir, I'm not sure that I would put

it that way. But let me clarify.

Using your analogy,

what this model shows

is the music, so to speak, just slowing.

If the music were to stop, as you put it,

then this model wouldn't be even close

to that scenario.

It would be considerably worse.

Let me tell you something, Mr. Sullivan.

Do you care to know why

I'm in this chair with you all?

I mean, why I earn the big bucks?

Yes.

I'm here for one reason

and one reason alone.

I'm here to guess what the music might do

a week, a month, a year from now.

That's it.

Nothing more.

And standing here tonight,

I'm afraid that I don't hear a thing.

Just

silence.

So, now that we Know the music has

stopped, what can we do about it?

Mr. Cohen? Ms. Robertson?

I'm afraid I think this is where

you're supposed to step back in.

Lord knows we've relied enough

on Mr. Sullivan tonight.

What do you have for us?

What have I told you since

the first day you stepped into my office?

There are three ways to make a living

in this business,

be first, be smarter, or cheat.

Now, I don't cheat.

And although I like to think we have

some pretty smart people in this building,

it sure is a hell of a lot

easier to just be first.

Sell it all. Today.

Is that even possible, Sam?

Yes, but at what cost?

I'll have to pay.

Really?

I think so.

Where is this going to come back to us?

Everywhere.

Sam, I don't think you seem to understand

what your boy here has just said.

If I made you,

how would you do this?

You call the traders in for their normal

Because they're going to know

it's the end either way.

You're going to have to throw them a bone,

and a pretty big one.

And then you've got to

come out of the gates storming.

No swaps. No nothing.

all your trades have to be gone

because by lunchtime,

word's going to be out.

And by 2:
00 you're going to be selling

at 65 cents on the dollar, if you're lucky.

And then the feds are going to be in here,

up your ass, trying to slow you down.

Ramesh?

They can slow you down.

They can't stop you.

It's yours to sell.

But, John, even if

we manage to pull that off,

and that's saying something,

the real question is,

who are we selling this to?

Same people we've been selling it to

the last two years,

and whoever else will buy it.

But, John, if you do this,

you will kill the market for years.

It's over.

And you're selling something

that you know has no value.

We are selling to willing buyers

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