Everything in Circles
Jan. 29th, 2023 09:18 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
writerkitA while back I read a whole bunch of histories of the 2008 financial crisis from different perspectives-- basically biographies of specific banks plus one on the hedge fund people who actually made money. The common thread in all of them was overexposure plus being very, very leveraged.
So I'm now reading When Genius Failed: The Rise and Fall of Long-Term Capital Management, which is about the 1998 financial crisis which resulted in LCTM getting bailed out in a move almost identical to the 2008 one. It is fascinating how much this book resembles the histories I read of the 2008 crisis, right down to derivatives being mentioned frequently. If one ignores the years and names, they could be histories of the same events. Including that the problem always seems to be giving one guy, or group of guys, sole control of enough capital to break the firm if it goes badly. And this also set the stage for 2008, as the lesson everyone else took from this was "the government will bail you out if you mess up."
And timing thing I had not realized: Glass-Steagall was repealed in the immediate aftermath of this escapade. Which raises a number of questions about the judgment of everyone involved, since they'd just had an extremely dramatic example of what kinds of disasters investment banking could cause.
So I'm now reading When Genius Failed: The Rise and Fall of Long-Term Capital Management, which is about the 1998 financial crisis which resulted in LCTM getting bailed out in a move almost identical to the 2008 one. It is fascinating how much this book resembles the histories I read of the 2008 crisis, right down to derivatives being mentioned frequently. If one ignores the years and names, they could be histories of the same events. Including that the problem always seems to be giving one guy, or group of guys, sole control of enough capital to break the firm if it goes badly. And this also set the stage for 2008, as the lesson everyone else took from this was "the government will bail you out if you mess up."
And timing thing I had not realized: Glass-Steagall was repealed in the immediate aftermath of this escapade. Which raises a number of questions about the judgment of everyone involved, since they'd just had an extremely dramatic example of what kinds of disasters investment banking could cause.
