Margin Call; A Trader's Dillemma

The 2011 thriller Margin Call is already being called one of the greatest Wall Street movies of all time.   The movie shows how one investment firm (rumored to be modeled off of a combination of now bankrupt Lehman Brothers/ Merrill Lynch) decided to preemptively dump its toxic assets at the onset of financial collapse, effectively kick starting an industry wide sell-off and subsequent crisis.

One of the most dramatic scenes in the film is when Sam Rogers, the firm’s veteran trading floor director played by Kevin Spacey, informs his traders that their only option is to sell as many of their toxic MBS products as they can during that day’s trading session; an insignificant short term solution with lasting long-term consequences.

If I was working on Roger’s trading floor that day, I surely would have been faced with one the most challenging decisions of my life.  On one hand, knowingly selling the worthless assets will ruin any client relationship I’ve built up during my career.  On the other hand, if I dump 93% of our MBS assets, I can look at $1.3 million bonus, for the day. 

In answering the question, is there an honorable response to such a request, the short response is absolutely not.  If I sell, yes I make my bonus for the day, but I’m only spreading around these toxic assets to other firms, multiplying the stress/ risk of financial collapse across the industry as a whole.  However, if I don’t sell, my firm is going underwater and my job won’t exist by the afternoon.

If I came down to it, I probably would have left the firm after being told to dump the troubled assets.  Even if I pulled off the fire-sale, the firm would most likely not survive the ordeal (as seen with Lehman and Merrill Lynch in the ’08 collapse) and I would probably be getting laid off anyways.  At that point, I’m thinking that it’s easier to get a job on Wall Street when you haven’t consciously sold your interviewer hundreds of millions of dollars in troubled assets.  Yes, forgoing the $130,000/ hour paycheck would be difficult, but the future value of a career combined with the morality of the decision would lead me pack up and start looking for a new job.
-Harper Coulson