brvheart, on 22 May 2012 - 08:13 AM, said:
Isn't that Strat's whole point? The bosses did know.
Yeah, I read it too fast.
strategy, on 23 May 2012 - 02:25 AM, said:
they knew what he was doing, they just didn't fully grasp the risk in it. it was thought to be hedged.I think the actual dollar loss from the trader will be overshadowed by the profits they'll lose to increased regulatory oversight, etc. etc. people had a field day with this one because of what the CEO had said previously about his risk management skills.
Due to the stock price hit, their market cap is down over $30B since it was announced. I agree that the lost profits due to the potential for increase oversight, etc, is much more potentially harmful, even though it is a HUGE stretch to suggest that the potential for a few billion in trading losses (especially on a hedge, which would additional oversight would likely still allow) is so harmful to uninvolved parties (since involved parties are accepting of the risk) that additional oversight is warranted. Put it this way - additional oversight is very likely to be more harmful to the average American than the volatility caused by banks being allowed to do proprietary trading and similarly risky stuff. Hell, half of what has caused the recent crisises has been supposed hedges or AAA-rated securities (sub-prime, municipal/sovereign bonds, CDS), all of which would still be allowed under any suggested oversight, in fact, additional oversight would increase dependence on things thought to be risk-free. History has shown us that 'risk-free' assets are anything but. By removing the options available to financial institutions, we would be forcing them to overinvest in certain asset types, thereby magnifying shared risk and the potential for contagion.Right?
Long signatures are really annoying.