September 2008, Peter drops [music] a

bomb.

Jesus, we're screwed.

$1.2 trillion in assets would be worth

zero in no time.

This is [music] the story of the

greatest financial collapse and how it

unravels within 24 hours.

An elevator opens on the 42nd floor of a

Midtown Manhattan skyscraper. Four HR

people [music] step out carrying file

boxes. Everyone on the trading floor

knows what that means. They split up,

each with a list, [music]

each hunting specific names.

Eric Dale.

Eric Dale was the head of risk

management. [music]

19 years at the firm. The guy whose

entire job was to measure how much

danger the company was in.

Minutes later, he's in a glass

conference room. Everyone on the floor

watching through the walls. The firm is

offering 6 months severance

>> [music]

>> at half salary. You have until tomorrow

to accept or the offer is revoked. What

about my current work?

I'm in the middle of something

important. The firm has a transition

plan. We appreciate your concern.

They [music] didn't. They didn't even

know what he was working on. They cut

his email, his phone, his building

access.

But as Eric packed his desk, [music] a

young analyst named Peter Sullivan was

waiting outside. Peter had a PhD in

propulsion engineering from MIT, an

actual rocket scientist. But the money

on Wall Street was better. So here he

was.

I just wanted [music] to say thank you.

You were the one person here who

actually

don't

here.

Eric reached into his box and pulled out

a USB [music] drive.

I was close to something.

They wouldn't let me finish.

Take a look.

Be careful.

The elevator doors closed. Peter stared

at the drive in his hand. He had no idea

he was holding a detonator.

To understand why this tiny USB drive

was about to bring down the global

economy, you need to

the lie that built it. It started with

[music] a simple, irresistible question.

Why rent when you can own?

And America said, "Yeah, why the hell

not?"

Banks were handing out mortgages like

Halloween candy. A strawberry picker

earning $15,000 a year

>> [music]

>> got approved for a $720,000

home loan.

A stripper in Las Vegas bought five

investment properties. They called these

ninja loans. No income, no job, [music]

no assets, no worries. You still got

your loans approved. The banks giving

out these garbage loans didn't care

whether people paid them back because

they weren't keeping the loans. They

were selling them to other buyers.

Wall Street had invented a magic trick.

They took thousands of these toxic

mortgages, bundled them together into a

single financial [music] product, and

called it a mortgage-backed security.

Think of it like a sausage. Each

individual ingredient might be

questionable, but once you grind it all

together, slap a nice label on it, and

this bundle of subprime mortgages,

AAA, safe as US Treasury bonds. But half

these borrowers don't have jobs. Half of

them do.

Glass half full, my friend. AAA. Next,

pension funds bought them. Retirement

accounts bought them. Banks in Iceland,

Ireland, and [music] Germany bought

them.

Everybody was feasting on these

sausages,

but nobody wanted to look at what was

actually inside.

10:17 p.m.

The floor was empty. Just Peter.

Just the hum of servers and the glow of

monitors. [music]

He'd been working on the file that Eric

handed over, a risk analysis on the

firm's mortgage-backed securities, the

sausages. [music]

He was testing what would happen if the

market got volatile.

Peter ran the model again.

Same result. [music]

His hands went cold.

"Hey, can you guys come look at this?

Inside his computer, they discover this

massive 60% [music] discount to the

intrinsic value on Incogni. Just

kidding.

Let's be real for a second.

Have you ever Googled yourself and felt

exposed?

Your home address, phone number, and

even your SSN are sold behind your back

by data brokers.

It's a goldmine for scammers crafting

fishing attacks or identity theft in

your name. And once it happens,

>> [music]

>> it would take months, even years, to fix

the financial and reputational damage. I

signed up for Incogni in minutes, and

they immediately [music] started

contacting data brokers to get my

information removed. They handle all the

legal back and forth for you.

But the real deal is the custom [music]

removal feature on their unlimited and

family unlimited plans.

If you find your info [music] on a

specific sketchy site, you just point

Incogni's agents to that URL, and they

manually [music] remove it for you.

Go to incogni.com/crayoncapital

and use code crayoncapital for 60% off.

They can't harm you if they can't find

you.

That's incogni.com/crayoncapital.

[music]

Code crayoncapital for 60% off.

Link in the description.

Now, back to the real finding. [music]

His colleagues gathered. They use a

model called VAR, value at risk. That's

how a bank measures danger.

Think of it as a weather forecast for

money. It looks at decades of market

history and says, "99 days out of 100,

[music] the worst you'll lose is $50

million.

So, relax. You're covered."

But here's the fatal flaw.

That model only tells you about the 99

normal days. It says nothing about the

1% outlier that destroys you.

Peter realized the hurricane was already

here. The losses, sitting on the firm's

books, had already blown past anything

the model thought was possible. [music]

11:44 p.m. Sam Rogers, the head of

trading,

>> [music]

>> arrived. He looked at the model for 3

full minutes.

You're certain?

If you're wrong, you never work [music]

again.

If you're right, none of us do.

Within minutes, the 42nd floor

transforms. The vacuum of the night is

sucked out as the C-suite executives

descend. Sarah Robertson,

>> [music]

>> the chief risk officer, and Sam's boss,

Jared Cohen, the head of capital

markets.

Sarah, how did we miss [music] this?

Our math was based on independence. We

assumed if one guy in Ohio defaulted, it

wouldn't [music] affect a guy in

Florida. But the bubble tied them

together. It's a perfect correlation.

When one tile falls, the whole floor

goes.

Suddenly, a corporate helicopter sliced

through the Manhattan skyline, landed on

the roof. John Tuld, CEO, late 50s.

Hadn't been in this building in 2

[music] years. Someone tell me the

problem.

He looked down the table.

Actually, I'd like to hear from the

young man who found this.

>> [music]

>> Mr. Sullivan?

How old are you?

27, sir.

Please, call [music] me John.

Now, speak to me as you might to a

golden retriever or a small child. It

wasn't brains that brought me to this

seat, I can assure you.

>> [music]

>> Sir,

for the last few years, we've been

making a lot of money packaging

mortgages into tradable securities.

But because [music] these take a month

to package, we have to hold them on our

books for a long time. And why is that a

problem? Because they're just mortgages.

[music]

We felt safe borrowing massive amounts

of money to buy them. We've pushed our

leverage to the limit.

>> [music]

>> We are currently holding 1.2 trillion

dollars in these assets.

And I'm guessing the math your bosses

did in the past to doesn't quite work

anymore.

>> [music]

>> It's worse, sir. The math hasn't worked

for 2 weeks.

The historical volatility we used to

predict the future has already been

shattered by what happened over the last

10 days.

>> [music]

>> What does your model say that means for

us?

If the value of these assets [music]

drops by just 25% while they are still

on our books, that loss would be greater

than the value of this entire [music]

company.

So, what you're telling me, Mr.

Sullivan, is that the music is about to

stop and we are left holding the biggest

bag of stinking [ __ ] in the history of

capitalism.

Sell it all.

Today.

You're talking about $1 trillion of

paper, John. [music]

Who the hell are we selling this to?

The same people we've been selling to

for the last 2 years.

And whoever else will buy it.

If we do this, we will kill the market

for years.

Maybe forever.

I understand.

And you're selling something you know

has no value.

>> [music]

>> To people who trust us?

We are selling

to willing buyers at the current market

price so that we may survive.

You'll never sell anything to any of

these people again.

I understand.

Do you?

Do you?

This is it.

Sam.

Then Tuld turned to Sarah Robertson, the

chief risk officer.

He pulled her aside.

Private room, just the two of them.

You filtered warnings about this over a

year ago.

John, I was told in no uncertain terms

it doesn't matter. The board needs

someone to point to.

The SEC, the media, they'll want a name,

a face.

Someone had to take the fall and the

people who gave the orders never do.

The firm didn't care about Sarah's

feelings. They had a few hours until the

market opened and unloaded $1 trillion

in worthless paper onto an unsuspecting

world.

7:30 a.m.

33 traders file onto the floor. It's

dead silent. These are the golden boys

of Wall Street, usually loud and

arrogant. Today, they look like they're

walking toward an electric chair.

Sam Rogers stands [music] at the front.

He's been their mentor for decades. He's

the guy who taught them that in this

business, your word is your bond.

Today, we are liquidating our entire

mortgage portfolio.

Every single cent

you have until the closing bell to move

it all. If you hit your targets, you'll

each receive a $1.4 [music] million

bonus.

And the great betrayal begins.

The traders sit down and pick up their

phones. They're calling their best

friends,

>> [music]

>> their college roommates, the people who

trust them most. Hey Marcus. Yeah, it's

Will.

Listen, I've got some risk over here I

need to move. My [music] loss is your

gain today, buddy. I'll give you a

discount, 96 cents on the dollar.

Marcus, on the other end, [music] thinks

he's getting a deal. He trusts Will. He

buys $100 million of worthless sausage.

By 10:00 a.m., the secret starts to

leak.

The street realizes this isn't a normal

trade. It's a liquidation.

The buyers start to panic. The phone

calls get uglier.

Will, I'm looking at these numbers. This

stuff is toxic.

Why the hell are you selling this to me?

I'm just following orders, Leo. Do you

want the remaining 30-year mixed or not?

I'm at 85 cents now.

The price doesn't stop at 85. It craters

to 73,

>> [music]

>> then 64.

By 3:54 p.m., they just finished their

last call.

They've sold nearly all of it and saved

the firm.

>> [music]

>> Now,

Margin Call is a movie. The characters

are fictional. The firm doesn't have a

real name.

But the crisis it's based on,

every bit of that was real.

This exact scenario played out across

every major bank on Wall Street in

September [music] 2008.

In the 2 years that follow, the weather

forecast hits the real world.

Suddenly, mortgage rates double.

Pensions,

>> [music]

>> packed with those AAA sausages, lose 40%

of their value.

In total, 6 million families lost their

homes as $11 trillion in wealth simply

evaporated. Neighborhoods turned into

[music] ghost towns where welcome mats

were replaced by foreclosure signs.

The government tried to step in. They

signed a $700 billion check to rescue

the banks.

Yep, you heard it right. They bail out

the institutions [music] that built the

bomb, and back at the firm, the lights

were off.

The trading floor was a graveyard.

Everyone was laid off.

Except Sam Rogers.

He found John Tuld in the executive

dining room, calmly eating a steak while

the world outside burned.

>> [music]

>> I want out, John.

I'm done.

Sit down, Sam. You'll get your bonus,

but I need you for another 24 months.

If I'd spent 40 years digging ditches,

>> [music]

>> at least there'd be some holes in the

ground to show for it.

Stop feeling sorry for yourself.

It's just money, Sam. [music]

It's made up. Pieces of paper with

pictures on them so we don't kill each

other for food.

1637

>> [music]

>> 1857

1929

2000 [music]

It's the same thing over and over.

We can't stop it.

We just react. [music]

And the percentages of winners and

losers,

they stay exactly the same. Happy [ __ ]

and sad sacks, fat cats and starving

[music] dogs.

Anyone else would have done exactly what

we did today.

You really believe [music] that? That

it's all just a cycle?

No right, no wrong, just reaction.

Mhm.

I'll stay. not because of your speech,

because I need the money.