Maggie's Farm

The movie's investment bank is said to be a fictional amalgam of Merrill Lynch and Lehman Bros., with a head man whose name is a melding of the names of those two firms' chief officers. It's an alternative-universe imagining of what might have happened if either of those two powerhouse banks had sold out quickly instead of riding the crash into the ground. Instead, Merrill was absorbed by Citibank and Lehman folded, both being too slow to take decisive action.

In fact, though, Goldman Sachs really pulled off more or less what the "Margin Call" bank did, though more slowly rather than in one tense night of sudden revelation followed by a six-hour fire sale. It's not as though any one woke up one day and read a memo that conclusively proved that the zillions of ridiculous uncollectible home mortgages were uncollectible. Many people had figured out long since that the mortgages might well be uncollectible. No one really cared, as long as there were people who believed otherwise and were still willing to buy them.

The mortgages looked collectible as long as you assumed housing prices would always go up at a certain rate. Some people guessed they would go up at a slower rate or even fall, while others disagreed. In hindsight, the ones who disagreed were delusional, but not defrauded.

At first, only a few lone crackpots shorted mortgage-backed securities. They publicly explained their reasoning, but found few people to agree with them. Later, investment banks, including Goldman Sachs started hedging against mortgages, in case they had been wrong about guessing that house prices would increase forever. The ones who hedged earliest and sold off their mortgage investments soonest came out the best. But this conclusion--that the mortgage investments would tank if housing prices ever slowed their increase--was available to every single person who bothered to look carefully at the situation and make his best guess about the future.