Foreclosures, Margin Call, and US Century Bank ... by gimleteye

Too bad free tickets to "Margin Call", the Wall Street movie by first-time film maker JC Chandor, aren't offered to protesters at Occupy Miami and everywhere else. I watched it last night at the Coral Gables Cinema. The movie mysteriously misses the big theater chains here. Hmmm. Wonder why.

If "Margin Call" were at the multiplexes here, one would be tempted to offer free transportation and tickets to the demonstrators so that they might know the barely legal, and often illegal behavior, that inflated the US economy through the housing bubble and then crashed to cinders. "Margin Call" captures the rotten core of Wall Street. It misses, however, the tendrils that spread straight into places like Miami, where zoning and permitting of platted subdivisions and strip malls were the small gears and corruption-- destroying the Everglades, for example-- feeding into the big gears that propelled the greatest wealth transfer in US economic history.

It is a good thing that "Margin Call" is told with no hint of that underlying morality tale. Instead the characters reveal with their silence and their words, that stealing vast sums of money has always been the driver of the financial sector. It goes without saying, too, that once the US surrendered its manufacturing capacity that the driver of last resort would become mass produced housing tied to a blinded, mass consumer market. Florida is where all these tawdry pieces of the current economic disaster come together. And it's not over by a long shot. That is another story.

The focus of "Margin Call" is an investment bank, based on Lehman Brothers, that failed in 2008. (Lehman, by the way, was the largest supplier of derivative mortgage "investments" into Florida state pension fund pools. Former Gov. Jeb Bush, when he left office, took his first sinecure with Lehman, happy to reward one of key advocates for the housing boom that Bush had turned into a massive campaign fundraising spigot through top lieutenants like Al Hoffman and Rodney Barreto, a director of US Century Bank.)

In the movie version, it is only the mortgage backed securities side of the business that collapses in a 24 hour period. Not the whole enchilada. Not the trillions of dollars in vanished equity and taxpayer bailouts. Actors Demi Moore, Jeremy Irons, and Kevin Spacey give star turns and terrific performances as characters they can sink their teeth into. They are manifestations of pure greed with no regrets so long as they can take the money and run. In the movie version, they live to see another day after the crap they spawned is pawned off to unwitting, equally greedy counter-parties like UBS, Merrill Lynch and Citibank. The crap they sold, for eighty, seventy or sixty five cents on the dollar is now worth fifty, forty or thirty cents-- if anything at all.

In real life, the failed investment bankers got off scott-free and are now living off the fat of the land, behind gated walls, monitored by video cameras. And we have locals doing the same.

In real life, mortgage backed securities were fictive investment vehicles cobbled together from housing units. The OWS'ers want to be recognized as people with needs, not demographics. But Wall Street, and Main Street, depends on selling the illusion of caring about customers while really just plowing them into statistics that can sliced and diced a thousand ways to create equity that benefits only insiders.

Mortgage backed securities offered better risk and return than government securities, so long as the risk parameters conformed to historical averages. The central discovery that animates "Margin Call" is that these masters of the universe had no idea how to measure risk. But risk never matters to Wall Street, so long as laws and legal barriers protect the junkies.

The same way so many ordinary homeowners legally used their homes as ATM's for personal lines of credit to fund lifestyles, children's braces tuitions and God knows what else, the masters of the Lehman and Goldman Sachs universe used debt made from assortments of mortgages into opportunities to multiply leverage 1000 fold. It was alchemy verified by phD math wizards whose algorithms simply failed to account for what would happen when the underlying crap was exposed for what it was. (I know, because I watched this as a registered investment advisor at the same time I was trying/helping to save the Everglades from one incursion after another. No more.)

It is something of a mystery (not really) why that underlying crap has never been exposed. For example, US Century Bank sponsored developments and strip malls in West Dade, around Tamiami Airport or Krome Avenue, in Florida City and Homestead. The entire Miami-based homebuilding apparatus, including LBA lobbyists and downtown law firms, that let the little guys front for the big boyz.

The same agnostic greed at the heart of "Margin Call", adopted as unblinking virtue, permeates County Hall. Even back in the day, it was promoted under the banner of "jobs, jobs, jobs". How many times did we hear that, from the dais of the county commission; from the Latin Builders or Natacha Seijas or Joe Martinez or Pepe Diaz, Javier Souto, Alex Penelas?

That movie ought to be made by JC Chandor or another enterprising film maker. A Pulitzer Prize or Oscar, awaits.