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{{a|risk|}}No. It’s still too soon. | {{a|risk|}}{{quote|No. It’s still too soon. | ||
:—JC, June 2019.}} | |||
''Later...'' | ''Later...'' | ||
It is no longer too soon, for on July 29, 2021 the Credit Suisse Special Committee to the Board of Directors has presented its ''{{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|Report on Archegos Capital Management}}'' to the board and, for some reason known only to the board, they have published to it to the known world. This seems to be a final act of self-harm from an organisation whose serial acts of self-harm the report catalogues in such clinical, precise detail. | {{Quote|It is no longer too soon, for on July 29, 2021 the Credit Suisse Special Committee to the Board of Directors has presented its ''{{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|Report on Archegos Capital Management}}'' to the board and, for some reason known only to the board,<ref>''What on Earth did they think they would achieve by releasing this report?'' It caused ''another'' precipitous drop in the firm’s stock price — nearly four percent — to go with the twenty percent drop it suffered when news of the default first broke.</ref> they have published to it to the known world. This seems to be a final act of self-harm from an organisation whose serial acts of self-harm the report catalogues in such clinical, precise detail. | ||
That said, it is an act of self-harm for which the watching world should feel tremendously grateful. Not only a sizzling read, arriving just in time for Bank executives as they head for a fortnight to the sun loungers of Mykonos and Ibiza, but it is a beautifully clear explanation of the business of [[equity prime brokerage]] in particular and global markets broking in general, and a coruscating dismemberment of the way investment banking operates, both inside Credit Suisse and without. | |||
:—JC, July 2019}} | |||
This is a proper horror story, make no mistake: Stephen King has not a patch on this. | |||
''Everyone'' involved in the business of prime services, and global markets broking generally, should read {{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|the Credit Suisse Report}}. | |||
And while the goings on at CS were breathtakingly, class-leadingly chaotic — it is hard to believe that any one organisation could have made ''so'' many unforgivable errors, in such scale, over such a long period, so consistently, missing many opportunities to cotton on, without catching even ''one'' lucky break as the apocalypse unfolded around it — this really is a royal flush of idiocy — the ''makings'' of all these [[joint and several liability|joint and several]] catastrophes is imprinted in the DNA of ''every'' multinational organisation. An onlooker who denies it — who does not shudder and think, ''there, but for the grace of God, go I — is showing precisely the lack of awareness that nearly sank CS. | |||
'' | After all, CS was by no means alone in taking a hammering in the fallout from Archegos. It just took the worst hammering, and has been the most candid about why. Its Special Committee makes a number of excellent recommendations — all worth heeding — but stops short of the one that must have been most tempting to the Board: ''get the hell out of the broking business altogether''. | ||
Almost all the most egregious errors were sociological, and not systemic: they speak of human foibles, the thrall of power, human seduction by the simplicity of models and the internal primacy afforded to capital calculations — a proxy means of measuring ones ability to withstand catastrophe and not avoiding catastrophe as an end in itself — with arse-covering, deference to hierarchy, fiefdoms and silos, inexplicable insouciance in the face of steadily escalating risk and, when it comes to it, outright idiocy. | |||
This sums up how dire the whole sorry business was: In early March, 2021, Credit Suisse gingerly ''asked'' Archegos to consider a new margin proposal under which CS would take $1.35 billion of ''funds it currently held for Archegos'' and recharacterise them as [[initial margin]]: ''asked'', that is, when Credit Suisse was contractually entitled to ''demand'' that, and more, on 3 days’ notice. Archegos promised to consider the request, but while it was thinking about it, requested CS pay it the $2.4 ''billion'' in excess [[variation margin]] Credit Suisse was holding. ''And Credit Suisse paid it without question''. | |||
In other words, two weeks before Archegos blew up, Credit Suisse, knowing it was woefully under-collateralised, still paid Archegos 2.4 billion dollars. Archegos used that money to put on a further billion and a half dollars in additional long positions, making Credit Suisse’s whole situation even worse. | |||
Breathtaking. | |||
===Concerns about Archegos=== | ===Concerns about Archegos=== |