Who's Responsible for not Anticipating Credit Crunch Mass.... at Bank 1 . Directors & CEOs2. Quants3. Risk ManagementWho be the first one to be kick out....?

Directors are of course responsible for all screw ups due to policy, rather than individual idiocy.Even though anyone who has had a decent education in finance knows about liquidity risk, this has been systematically ignored.I do note the strong correlation between retail and heavy credit losses.By that I do not mean they messed up direct lending, but their management of the risks was poor because some IBs "in their hearts" are really retail operations, with the IB being a (usually) lucrative sideline.Northern Rock was not directly hurt by bad loans, indeed the British market seems still to be relatrively robust even after the credit crunch.Goldmans did better than most, and of course is not a retail bank.My take is that at the very top level of banks too much of the retail bank culture that says "loans on property are pretty safe" was in positions of power.Also risk is often heavily in thrall to accountancy with little understanding of the nature of any sort of exposure other than simple default or value of stock going down.

So far the CEOs have largely taken the blame for the subprime chaos. See here for further details.

can you please talk a bit more on why Goldmans did better than others apart from because it's not a retail bank.QuoteOriginally posted by: DCFCDirectors are of course responsible for all screw ups due to policy, rather than individual idiocy.Even though anyone who has had a decent education in finance knows about liquidity risk, this has been systematically ignored.I do note the strong correlation between retail and heavy credit losses.By that I do not mean they messed up direct lending, but their management of the risks was poor because some IBs "in their hearts" are really retail operations, with the IB being a (usually) lucrative sideline.Northern Rock was not directly hurt by bad loans, indeed the British market seems still to be relatrively robust even after the credit crunch.Goldmans did better than most, and of course is not a retail bank.My take is that at the very top level of banks too much of the retail bank culture that says "loans on property are pretty safe" was in positions of power.Also risk is often heavily in thrall to accountancy with little understanding of the nature of any sort of exposure other than simple default or value of stock going down.

QuoteOriginally posted by: stt106can you please talk a bit more on why Goldmans did better than others apart from because it's not a retail bank.They saw it coming and shorted the market ?

QuoteOriginally posted by: TraderJoeQuoteOriginally posted by: stt106can you please talk a bit more on why Goldmans did better than others apart from because it's not a retail bank.They saw it coming and shorted the market ?en... did you mean they kind of predicted it or they reacted more quickly than others before the situation getting worse and worse.it would be great if you have some details.

They had a firm wide meeting of all the risk management to look at all the subprime mess they had on their hand. It was some time during the summerThen they decided to unload most of the bad stuff. They also bought insurance against it.compared to other firms, GS is very well diversified so they don't take a big hit like BS, ML, etcit's a quick run down, do search on Bloomberg for articles on details

thanks a lot for the reply

I heard they bought up whole load of equity tranches before the crunch. After the crunch it almost didn't matter whether you were senior or not (you were f*ct regardless). So since correlation increased massively equity tranches worth a lot more. Friend mentioned this after going out drinking with some credit traders from gs so could be bollox

QuoteOriginally posted by: RiskCapitalWho's Responsible for not Anticipating Credit Crunch Mass.... at Bank 1 . Directors & CEOs2. Quants3. Risk Managementhere simple arithmetic could be helpful: - 2 and - 3 (from the list above, I mean)