Book 5, Page 225, 2nd to the last paragraph, last sentence… “…Nontheless, most large banks manage to do so, and generally, do an excellent job of managing their risk…” I guess Citi, Meryll, HBOS and the host of others, dont fall into the category of Large Banks…
Well, traditional finance also assumes markets are efficient and investors are rational.
AllLevelsPass Wrote: ------------------------------------------------------- > Book 5, Page 225, 2nd to the last paragraph, last > sentence… > > > “…Nontheless, most large banks manage to do so, > and generally, do an excellent job of managing > their risk…” > > I guess Citi, Meryll, HBOS and the host of others, > dont fall into the category of Large Banks… I snickered as well when I read that last week.
I am sure syllabus will be drastically changed for 2010
Yeah there is something in the bond material about CMO’s being safe.
LMAO!!!
CMO’s can be safe…just no one can accuratly identify the risks given the thousands of ABS in those tha’ngs. so ppl relied on the credit ratings from Moodys and S&P etc…I guess they dont know what they are doing. Who knew? 
I think it is probably entirely accurate to say that “most large banks . . . generally, do an excellent job of managing their risk”. Lots of them, and many others, effectively made one huge, catastrophic mistake recently, but I don’t think that’s the same thing as saying that generally speaking, they do a bad job of managing risk.
How about the Rogue Trader story in Societe General… They also did an excellent job at managing their risk? Those unexpected situations (black Swans) show whether you’re doing an excellent job or not. The Bible says, If your strength fails in the day of adversity, then you are weak…
The problem here is that banks have accurately managed the risks they were aware of. They had no idea that the risk-free stuff on their balance sheet was in fact… worthless.
I ain’t big on the bible but that’s a great quote