[HN Gopher] Credit Suisse Loses 4.7B
       ___________________________________________________________________
        
       Credit Suisse Loses 4.7B
        
       Author : cwwc
       Score  : 129 points
       Date   : 2021-04-06 10:50 UTC (12 hours ago)
        
 (HTM) web link (www.wsj.com)
 (TXT) w3m dump (www.wsj.com)
        
       | andys627 wrote:
       | Who took the other side of this bet? Ie who made 4.7b?
        
         | alex504 wrote:
         | Whoever sold the jesus guy stock
        
         | yellowstuff wrote:
         | This wasn't really a two sided bet, Archegos bought a lot of
         | stock and essentially borrowed a massive amount of money to buy
         | even more stock, then the stock lost value.
         | 
         | If Company X is worth $60B on Monday and $40B on Tuesday then
         | some people who were short could make a lot of money, but in
         | general $20B of value has been destroyed and the world is
         | poorer on Tuesday.
        
       | flerchin wrote:
       | In 2019 they reported ~$20B profit. So this is like one quarter's
       | profit. You win some, you lose some.
       | 
       | https://www.credit-suisse.com/media/assets/corporate/docs/ab...
        
         | ckastner wrote:
         | You mean they reported ~$20B in _revenue_. Profit was $3.4bn.
        
           | flerchin wrote:
           | Correct! I don't spend a lot of time reading annual reports.
        
             | thehappypm wrote:
             | If this is true, why post a comment about one?
        
       | osrec wrote:
       | As someone who has worked in the Investment Banking industry for
       | a while, I'm always amazed that risk professionals get paid
       | significantly less than the front office guys. This in turn
       | attracts less talented people in risk, who can then be outsmarted
       | by the whipper snappers in the front office teams.
       | 
       | If IBs don't want to lose bucket loads of money every so often,
       | pay your risk guys a bit more so you hire the same calibre of
       | individual that would otherwise end up on the
       | trading/structuring/quant desks.
        
         | noisy_boy wrote:
         | The entire model is balancing risk and reward. Being careful
         | means you'll be eaten by your competitors, your shareholders
         | will punish you and executive comp will take a hit - what is
         | the point of playing the game then? Instead reward taking risks
         | and if shit hits the fan, there are always heads that can roll
         | (if need be), fines that can be negotiated with DOJ/SEC and
         | ever-sneakier tactics can be invented to structure even more
         | clever deals - it is all just normal part of doing business.
         | The two execs that got fired would have been handsomely
         | rewarded if Bill Hwang's bet went the right way, irrespective
         | of the recklessness.
        
           | osrec wrote:
           | Yeah, but the "measure of recklessness" needs to go beyond
           | just value at risk and portfolio sensitivities. Those things
           | can be gamed by clever people and risk can be easily hidden.
           | 
           | Unfortunately, most risk managers I knew barely understood
           | the theory enough to identify the hidden risks in the books
           | they oversaw. Most even struggled to get the right data out
           | of the systems to do their jobs properly!
           | 
           | You do make a valid point - if the recklessness somehow pays
           | off, you're a hero (eg. Paulson).
        
         | saucoidev wrote:
         | I agree but i this is still playing the same game, and it's the
         | rules that need changing
         | 
         | There is a system set up which incentivizes your employees to
         | screw over their own company, by taking more risk than they
         | should, frontrunning their own clients, etc. And it
         | necessitates setting up your own internal police (compliance,
         | risk) just to make sure they don't get too out of hand.
         | 
         | There are personal incentives there for the IB people to try to
         | outsmart and get something past risk, or avoid getting caught
         | by compliance, not to try to do what's best for the company or
         | their client
        
           | mason55 wrote:
           | > _and it 's the rules that need changing_
           | 
           | Why? The shareholders & execs were free to impose stricter
           | compliance and risk rules. They chose not to.
           | 
           | As long as you don't have contagion spreading to the rest of
           | the financial system then who cares. The new rules put into
           | place re: bank capitalization after the GFC seem to have
           | worked here. Shareholders & execs are taking the hit, the
           | rest of the banking system doesn't seem to be affected, and
           | everything seems to have worked as it's supposed to in this
           | case.
        
         | itsoktocry wrote:
         | > _pay your risk guys a bit more so you hire the same calibre
         | of individual that would otherwise end up on the trading
         | /structuring/quant desks._
         | 
         | Reverse the causation here: they don't pay risk guys enough
         | because they don't _really care_ about the risks they are
         | taking.
         | 
         | Because, you're right, if they cared they could solve issues
         | like this tomorrow.
        
           | SkyMarshal wrote:
           | They do care about the risks they're taking and invest a lot
           | of money into risk management. But the real risk management
           | is in buying politicians with campaign donations, lobbying,
           | and revolving door jobs after they leave office. Favorable
           | regulations, weak punishments, and bailouts are much more
           | effective. Bank risk departments are just risk theater.
        
           | vmception wrote:
           | Exactly, I always like to remind myself of the New York State
           | court cases that reaffirmed Compliance Officers are at-will
           | employees, and can be fired for any reason, like raising
           | compliance issues.
           | 
           | Some people are regulatory hires.
        
           | ethbr0 wrote:
           | I think it can be chalked up to cost center vs profit center.
           | 
           | Staffing trading makes money.
           | 
           | Staffing risk costs money.
           | 
           | It's inevitable the latter is going to get the short end of
           | the stick, probably the bare minimum requires to satisfy
           | regulation, when salaries are allocated.
        
         | rwmj wrote:
         | Has anyone senior working at Credit Suisse lost any money here?
         | There's your answer.
         | 
         | (Perhaps in hypothecated future gains in share options - but
         | even there, maybe not.)
        
           | bidirectional wrote:
           | Yes, of course they have. How does a company losing a sum
           | equal to nearly 2 years of profit not have the most dramatic
           | impact on senior officials at said company? Where do you
           | think the executive bonuses and value of shares (not just
           | options, senior officials will already be vested) come from?
           | 
           | Beyond those losses, the head of investment banking _and_ the
           | head of risk were both fired yesterday.
           | 
           | The real problem is lower down the ranks, where someone on
           | the trading floor can take outsized risk to boost their
           | potential bonus, where worst case scenario they're fired
           | without much ceremony and get another job somewhere else.
        
             | Spinnaker_ wrote:
             | It's called the Bob Rubin trade. For years you stack up
             | risk and profit immensely from it ($125 million). When
             | things eventually blow up you simply... step away.
             | 
             | So sure, people were fired, but it's not like they are
             | giving back all the money they made.
        
           | osrec wrote:
           | Lara Warner (Chief Risk Officer), was fired today, so I guess
           | she's lost a fair bit.
        
             | [deleted]
        
       | tibbydudeza wrote:
       | @ArchegosFO
       | 
       | Martian Institute of Technology (MIT) - Online class of 1945 I
       | give bad financial advice
       | 
       | Already a twitter parody account :).
        
       | lordnacho wrote:
       | As a former fund manager, I have some things to explain and some
       | things to ask.
       | 
       | First, the thing to explain:
       | 
       | Basically CS was one of several Prime Brokers. This basically
       | means the guy who lends money to the speculators. Same as buying
       | a house, you have a down payment that's your money, and then a
       | bank lends you between 115% (boom times) and 30% (safe as houses)
       | of the value of the house. If the house falls in value and you
       | can't pay the mortgage, the bank can sell your house, and
       | hopefully that will mean they recover their entire loan. Note
       | that they only lose once the value has declined by your down
       | payment amount.
       | 
       | I actually knew the boss of a PB who got fired because a rich guy
       | came in and wanted a lot of leverage, the risk managers said no,
       | and he overruled them. And then the customer proceeded to lose
       | hundreds of millions speculating, and it ate the bank's capital.
       | So it's not the first time that risk gets overruled.
       | 
       | So somehow, CS has lost $4.7B on this Archegos financing, after
       | Archegos lost whatver they put up. From what I gather, Archegos
       | had $10B of equity in total? Typically (sensibly) you don't put
       | all your eggs in one basket as a fund, even a quite concentrated
       | fund.
       | 
       | How big was the position?
        
         | incrudible wrote:
         | It was not a loan, it was a total return swap on leveraged
         | CFDs. CS took the market risk for a fee, picking up pennies in
         | front of a steamroller.
        
           | lordnacho wrote:
           | Principle is the same. There's still some kind of margin
           | maintenance with swaps (I traded swaps too). Plus as the PB
           | you can ask for sensible terms.
        
           | sschueller wrote:
           | Well they seem to be getting run over by a steamroller every
           | other week. Greensill is already yesterdays news...
        
         | CapriciousCptl wrote:
         | Archegos was at 15% equity / gross positions and had stakes as
         | large as 25% in their investees. Their positions were enormous,
         | concentrated and not reported on a 13F because Archegos was a
         | set up as a family office. All according to WSJ. What they were
         | thinking, who knows, but I bet it involves lots of talk about
         | beta, other greek letters and VaR.
         | 
         | https://www.wsj.com/articles/inside-archegoss-epic-meltdown-...
        
         | duxup wrote:
         | I read elsewhere (can't read this article) that some other
         | banks had made similar deals with Archegos, but they saw the
         | trouble coming and were able to offload their exposure / shares
         | (sell the house using the analogy) before other banks and thus
         | were able to get out with limited or no losses.
         | 
         | Does that sound right?
         | 
         | It seems strange to me that using the house analogy ... there's
         | potentially WAY more than say a 15 percent loss (using the 115%
         | number) if other lenders decide to nope out.
        
           | lordnacho wrote:
           | Disregard the 115%, that's from the pre-GFC times when banks
           | used to give you more money than you needed to buy the house,
           | plus some more to buy a car.
           | 
           | You're right there were several deals, but again, you're
           | allowed to ask questions as a PB. Clearly if you're lending
           | money to a guy who is borrowing from a bunch of other people
           | to do the same thing, you should have a think about it.
        
             | duxup wrote:
             | >you should have a think about it.
             | 
             | Yeah in a couple other articles it seems some banks refused
             | to lend to / cut off Archegos at some point(s). These guys
             | who are all leverage all the time ... seems inevitable they
             | get it wrong.
        
             | tedunangst wrote:
             | Turns out banks don't like telling other banks what all
             | their internal positions are.
        
         | freebee4567 wrote:
         | if you are levered 10 to 1 and the stock has an implied vol of
         | 10% you only need a 1 SD move to eat all your capital. Viacom
         | is now at 60% implied vol so they could get those losses with a
         | position as small as $10 billion.
        
           | lordnacho wrote:
           | That implied vol is annualized. It follows a square-root law,
           | so that daily is something under 4% (60/sqrt(trading days)).
        
             | chrisgp wrote:
             | Just curious, is that still true if your model of daily
             | returns isn't gaussian? If prices have intermittent shocks
             | (Ornstein-Uhlenbeck, etc) is the daily vol much higher?
        
         | fractionalhare wrote:
         | _> From what I gather, Archegos had $10B of equity in total?
         | Typically (sensibly) you don 't put all your eggs in one basket
         | as a fund, even a quite concentrated fund._
         | 
         | It was $20B. Hwang's whole schtick from the outset of his
         | family office was to hyper lever up on high growth companies.
         | By doing this he went from $1B to $20B of actual capital in
         | about 2 years. Then he blew up spectacularly because he was
         | levered up about 5x in a ridiculous concentration.
         | 
         | There's no royal road to excess returns, etc. He probably could
         | have kept this going longer, but sooner or later one of his
         | superholdings was going to have a market event sparking a loss
         | (like VIAC) and even his volume wasn't going to be able to prop
         | up the price anymore. Chain reaction from there.
         | 
         | This is a good cautionary tale: going around to a bunch of
         | banks and getting crazy leverage _Big Short_ style doesn 't
         | always end in a lionizing outcome. In fact it usually doesn't.
         | What sucks is the leverage is going to be demonized here, when
         | the actual problem is Hwang's lack of transparency (albeit
         | legal) to his brokers and his frankly stupid risk management.
         | 
         | Plenty of funds safely chug along for years running at 3-4x
         | leverage, they just have the good sense to keep beta < 1 and
         | stay roughly market neutral in their long/short holdings...
        
           | dcolkitt wrote:
           | > Big Short style doesn't always end in a lionizing outcome.
           | 
           | That movie was the worse thing that ever happened for a
           | generation of traders. It reinforces all the worse biases
           | traders tend to have. The moral of the story was to make a
           | single concentrated bet, to throw risk management to the
           | wind, to double down as you lost money, and to completely
           | ignore any expert that disagreed with your investment thesis.
           | 
           | In reality for every Michael Burry, there's 100 stubborn
           | overconfident idiots who YOLO everything into a bet that
           | blows up in their face. First off, it's much better to make
           | as many small independent bets than to have one big trade.
           | It's also better to make trades with a fixed, ideally short,
           | time horizon. Even if you're ultimately right, without a
           | catalyst, the market can remain irrational longer than you
           | can remain solvent.
           | 
           | Finally the best traders tend to be extremely open minded and
           | willing to change their views on a dime. The human mind is
           | heavily biased towards overconfidence. Good traders should be
           | flipping their views as evidence comes in. This has been
           | empirically verified by Philip Tetlock. The best forecasters
           | are those who are quickest to change their mind. If they hear
           | some expert with an opposing opinion, they don't dig in their
           | heels like the heroes of The Big Short.
           | 
           | The problem is the qualities that make a great narrative hero
           | are almost exactly the opposite of those that make a great
           | trader or forecaster. We love a story about a bold
           | contrarian, who goes all in on a single bet, and sticks to
           | his guns no matter what obstacles come his way. The story
           | practically writes itself.
           | 
           | But it's precisely this mythologizing that causes this style
           | of trading to be the least rewarded in the market. Everybody
           | wants to be the hero of their own story. There's way too many
           | Michael Burry wannabes, and not nearly enough George Soroses.
        
           | lotsofpulp wrote:
           | >What sucks is the leverage is going to be demonized here,
           | when the actual problem is Hwang's lack of transparency
           | (albeit legal) to his brokers and his frankly stupid risk
           | management.
           | 
           | Seems to me the onus is on CS and other prime brokers to
           | require Hwang to disclose or otherwise do due diligence on
           | his other bets.
        
             | fractionalhare wrote:
             | They can wag their finger, but they don't legally have
             | recourse for finding out this information ahead of time if
             | Hwang and his existing lenders don't volunteer it. That's
             | just the current state of play with margin lending.
        
               | lotsofpulp wrote:
               | Then the onus is on CS to correctly price that risk, or
               | not lend the funds.
        
               | fractionalhare wrote:
               | And that is why heads of risk lost their jobs this week!
        
           | occamrazor wrote:
           | Personally I don't understand why so many people are blaming
           | Hwang and Archegos. He lost his own money and the money of
           | the banks who gave him leverage _without_ a proper risk
           | assessment. I haven't seen any claims that Hwang lied to the
           | banks and it's the banks' job to do due diligence and apply
           | sane risk management practices.
        
             | fractionalhare wrote:
             | I don't personally have any skin in the game, but of course
             | I blame him for losing his money. It's his fault, who else
             | would I blame? Pretty cut and dry case of terrible risk
             | management here. What seems controversial?
             | 
             | Nobody held a gun to his head and told him to load up crazy
             | leverage on a highly concentrated basket of equities... And
             | the banks that lent him money didn't have transparency as
             | to his leverage elsewhere.
        
             | lordnacho wrote:
             | I think it's more an awe for the scale of capital
             | destruction.
             | 
             | In the end this isn't a domino that topples the whole
             | financial system, risk was taken by a guy who had money,
             | and banks who are capitalized to lose money now and again.
        
         | TuringNYC wrote:
         | >> From what I gather, Archegos had $10B of equity in total?
         | Typically (sensibly) you don't put all your eggs in one basket
         | as a fund, even a quite concentrated fund.
         | 
         | >> How big was the position?
         | 
         | I think you're trying to get to "how was the loss so big?" The
         | size of the position is only part of the answer.
         | 
         | The other comments answer the size of the position. But there
         | are several other factors here.
         | 
         | They probably liquidated too late -- they ended up liquidating
         | with giant block trades. That unwind also cost a lot because
         | the block trade is at a discount to market value. Further, the
         | larger the unwind, the bigger the price hit you take.
         | 
         | Finally, these types of unwinds can spook others in the market
         | and further drive down the price.
        
           | satellite2 wrote:
           | Or too early as most of the liquidated assets regained a lot
           | Friday afternoon and almost everything by Monday...
        
         | mannykannot wrote:
         | According to Matt Levine, Archegos's positions in sevaral
         | companies was large enough that it had, by its own actions,
         | significantly driven up their prices. The bubble burst when one
         | of these companies - ViacomCBS - issued new stock with the
         | intent of capturing more of this sudden interest, and sales of
         | the offering fell way short of expectations.
        
           | mensetmanusman wrote:
           | It would be hilarious if it was Viacom's unexpected new greed
           | that sparked the ensuing "bank run" by the bankers, ha
        
           | ethbr0 wrote:
           | In insane scenarios like this, is there anything preventing a
           | company from issuing new stock, waiting for the price drop
           | from liquidating major holders, and buying back an equivalent
           | amount?
        
             | tim333 wrote:
             | There's a bit of a lag while they file paperwork to issue
             | the new stock.
        
       | BlasDeLezo wrote:
       | I lost 50 Euros once. I was very upset all day.
        
       | herodoturtle wrote:
       | "Archegos was a fund run by and managing the personal fortune of
       | Bill Hwang, an investor who had built up large positions in
       | companies worth billions of pounds, despite a previous insider
       | trading conviction."
       | 
       | "Credit Suisse's investment bank under Chin acted as prime broker
       | to Archegos funds, lending it large sums of money to allow it to
       | build up bigger positions in the shareholdings of quoted
       | companies. Hwang had placed big bets that certain stocks,
       | including Chinese technology company Baidu and US media group
       | ViacomCBS, would see their share prices rise. When the stocks
       | fell, both Hwang and his lending banks suffered heavy losses."
       | 
       | This reads as if Credit Suisse was bankrolling a maverick fund
       | manager's speculative investments.
       | 
       | Strikes me as a rather unhealthy disregard for risk, and
       | completely goes against the spirit of capital preservation.
       | 
       | That's four thousand seven hundred million dollars down the drain
       | - by one of the world's most prestigious banks.
       | 
       | Leaves a bitter taste in my working class mouth.
        
         | robk wrote:
         | the money went somewhere. unless you hold CS shares it may well
         | have gone into your retirement fund's allocation indirectly.
         | who knows, but you're probably no worse off.
        
         | jerf wrote:
         | A casual reading of that may make it sound like Credit Suisse
         | made some sort of conscious decision to lend money, but from
         | what I see in the financial industry, lending is handed out
         | like candy on Halloween, almost right down to the bowl left out
         | on the street that says "Take Two" and uses the honor system.
         | It's just "leverage". It came with the account and they used
         | it, and it's likely very minimal oversight was ever exerted
         | beyond basic automated checks asserting that sufficient assets
         | were in place to be margin called if necessary.
         | 
         | I see a lot of people calling this the "everything bubble", but
         | to my mind, history may record this as the "leverage bubble".
         | With such low interest rates and free money being shoveled out
         | of the helicopter as fast as it can with more than a whiff of
         | desperation about the whole exercise, there's leverage
         | everywhere, and leverage stacked on that leverage, and
         | leveraged assets being held up as collateral for levered
         | leverage. It seems, at least for today, that this was not The
         | Great Deleveraging, but at some point in the not-too-distant
         | future one seems inevitable to me.
         | 
         | (Subject to the usual "the market can remain irrational longer
         | than you can remain solvent" timing issues, in that I wouldn't
         | dream of trying to call a date on this, but I can't help but
         | think The Great Deleveraging is inevitably coming, when
         | something somewhere pops like this, and the act of margin
         | calling to make up for it pushes down other assets in value,
         | which causes more margin calling and assets getting
         | automatically sold, which pushes down other assets in value,
         | which causes more margin calling and asset selloffs, and it
         | just doesn't stop until there's hardly a speck of leverage left
         | in the market and valuations are a smoking crater, along with
         | every account that was based on leverage. A basic understanding
         | of differential equations would suggest that it's likely the
         | market will at some point experience a phase transition, where
         | we don't gradually go from this being impossible, to kinda
         | happening more and more as leverage increases, but instead we
         | can go in very short time from this being essentially
         | impossible to completely inevitable, and nobody actually knows
         | when this threshold will be crossed.)
        
           | NortySpock wrote:
           | This feels like history rhyming...
           | 
           | "[T]he practice of 'buying on margin' allowed a person to
           | acquire stock by expending in cash as little as ten percent
           | of the price of a stock. The balance was covered by a loan
           | from a broker, who was advanced the money by his bank, which,
           | in turn, accepted the stock as collateral for the loan.
           | Credit was easy, and the Federal Reserve System did little to
           | restrict the availability of money for stock investment." --
           | article on the stock market crash of 1929
           | 
           | https://www.encyclopedia.com/history/encyclopedias-
           | almanacs-...
        
           | xhkkffbf wrote:
           | Which differential equations? The heat equation/option
           | valuation doesn't seem to have such a possibility built into,
           | right?
        
             | jerf wrote:
             | I don't have a specific one in mind, just the intuition
             | that recursive processes can have a lot sharper of a cutoff
             | than a less differentially-minded intuition might suggest.
             | 
             | You can also look at it probabilistically, rather than
             | differentially. Consider even just "If the probability of a
             | margin call causing a margin call is X, and a margin call
             | occurs, how many margin calls will occur in a chain?" The
             | number sharply goes up as your raise the probability close
             | to one, it doesn't just smoothly increase. It's even worse
             | once you add in to the model that the probability is not
             | independent, but as more occur the probability of the next
             | one _also_ would increase. Especially if you add that non-
             | independence in, what you 'll see is a phase change, where
             | you get a surprisingly sharp transition between "a margin
             | call doesn't usually cause another one" to "a never-ending
             | cascade of margin calls occurs", rather than a smooth one.
             | 
             | (I may post a model of this. Someone may beat me to it,
             | too. It's not that hard.)
        
               | jerf wrote:
               | I'm not saying this is an accurate model of the financial
               | system, just the sort of thing I was going for:
               | import random         import itertools              def
               | withProb(p):             return random.random() < p
               | def avg100(f):             return sum(f() for i in
               | range(100))/100              # Independent probabilities;
               | look what happens as you get close to 1.         def
               | marginCallChain(prob):             total = 0.0
               | while withProb(prob) and total < 100000:
               | total += 1             return total              #
               | Dependent probabilities:         def
               | marginCallDependent(prob):             total = 0.0
               | while withProb(prob) and total < 100000:
               | total += 1                 prob = 1 - 1 /((1 / (1 -
               | prob)) * 1.01)             return total
               | 
               | If you play with that with something like "avg100(lambda:
               | marginCallChain(.95))", you can find that the chain
               | starts extending a lot as you get close to 1. It's not a
               | terribly sharp phase change, though.
               | 
               | "avg100(lambda: marginCallDependent(.95))" shows more
               | interesting behavior. That only slightly raises the
               | probability of the next margin call based on the fact
               | that one occurred, and what you can see is that around
               | .93-.95, you start seeing that every once in a while, the
               | probability manages to occasionally work itself up to
               | effectively 1 and the chain hits the upper limit I set.
               | As you raise up towards one, you start to see it more and
               | more often; .96 still sometimes manages to have a run of
               | 100 without a crash, but even .965 the odds that one will
               | occur in that run of 100 start to approach 1. There's a
               | phase change between where 100 runs of the model have
               | almost no probability of having a runaway to where the
               | probability of at least 1 runaway is quite probable, and
               | it's more sudden than a linear understanding of the
               | process would suggest.
               | 
               | Again, this is not a model of the financial system; this
               | is a simple model of the point I was making.
        
               | xhkkffbf wrote:
               | Okay. I see your point. I just tend to think of "phase
               | change" as something different. But if the idea is that
               | margin calls beget more margin calls, I can't disagree.
        
           | herodoturtle wrote:
           | I just wanted to quickly say thanks for taking the time to
           | reply to my comment with so much insight.
           | 
           | I don't have anything valuable to add, but hell, your
           | response was very interesting to read!
           | 
           | It also sent me down some fun rabbit holes on credit cycles.
           | 
           | Cheers from South Africa.
        
         | tootie wrote:
         | I don't work in hedge funds and have only a superficial
         | understanding, but it seems the operative word of "hedge" was
         | completely ignore here. He plowed a huge chunk of his positions
         | into two companies and didn't offset with any swaps or other
         | risk absorbers. This seems like downright malpractice and not
         | just a bad luck.
        
           | bidirectional wrote:
           | Eh, all is fair in love and war. The bank are charging a risk
           | premium on any transactions with him, it's their fault if
           | they underestimate it. It's a family office, not a hedge fund
           | taking outsider capital, so he's entering into transactions
           | with willing counterparties using his own money.
        
         | QuestionC wrote:
         | > This reads as if Credit Suisse was bankrolling a maverick
         | fund manager's speculative investments.
         | 
         | Archegos had secured identical positions with a number of
         | investment banks, including Morgan Stanley, Goldman Sachs, and
         | Nomura.
         | 
         | Credit Suisse was just stuck holding the bag while other banks
         | quickly unwound their positions.
        
           | ashconnor wrote:
           | Layman here. Why was Credit Suisse left holding the bag
           | instead of the losses being distributed between the banks?
           | Was it because they were the broker?
        
             | kristjansson wrote:
             | The other firms were better at listening to the music, and
             | knew that it had stopped?
        
               | herodoturtle wrote:
               | This comment reminded me of that awesome scene by Jeremy
               | Irons in Margin Call :-)
        
               | arthurcolle wrote:
               | Be first, be smarter or cheat
        
               | lotsofpulp wrote:
               | https://www.youtube.com/watch?v=ag14Ao_xO4c
        
             | tedunangst wrote:
             | Because they were last to sell.
        
       | tumetab1 wrote:
       | Insert MEME: Here we go again :D
       | 
       | On a serious note, this is funny to read after the initial
       | reports that this had a small and contained impact. Let's hope no
       | further cascading bankruptcies happen.
        
         | itsoktocry wrote:
         | > _Here we go again :D_
         | 
         | Maybe so. There was a year between Bear Stearns Asset
         | Management funds blowing up in 2007, and Lehman failing...
        
       | jgalt212 wrote:
       | Reg T is very loosely applied, and there are all sorts of work-
       | arounds (TRR swaps, etc) and the regulators just don't seem to
       | care that Reg T is being violated in spirit if not in letter.
       | 
       | https://www.investopedia.com/terms/r/regulationt.asp
       | 
       | I interviewed for am equity swaps trading position many years
       | ago, in full disclosure to me the prospective employer let me
       | know that applying Reg T to derivatives transactions would be
       | very bad for their business.
        
         | Spinnaker_ wrote:
         | Reg T only covers initial equity leverage for retail investors.
         | It probably doesn't apply to anyone you hear about in the wsj.
         | 
         | There are basically no all-encompassing, market-wide
         | regulations for institutions.
        
       | cromka wrote:
       | As a (soon to be former) employee, I was already pitched in the
       | AM today by a headhunter referring to this loss.
        
       | sorokod wrote:
       | Also ( no paywall ) Guardian article
       | 
       | https://www.theguardian.com/business/2021/apr/06/credit-suis...
        
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