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| :—Shakespeare: ''Tiger King Lear'', I, iii}} | | :—Shakespeare: ''Tiger King Lear'', I, iii}} |
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| What follows is heavily derivative and based on assumptions and extrapolations from a single footnote that may well be entirely mistaken. Nevertheless, I think it illustrates an interesting hypothetical point. | | What follows is heavily derivative and based on assumptions and extrapolations from a single footnote and may — most likely is, in fact — entirely mistaken. Nevertheless, even if it is, it illustrates an interesting hypothetical. |
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| While other brokers shipped losses most conveniently measured in the ''billions'', one — [[Goldman]] — yes, ''that'' [[Goldman]] — reported “immaterial losses”.
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| Be assured, other brokers will be stamping their feet, cracking their cheeks, cursing obstreperous ill fortune, beating their fists on the ground, beseeching whichever mischievous God looks after the fates of regulated broker-dealers and wailing “how in the name of all that is holy can it be that while I took a regular shellacking, that [[Goldman]] outfit got away with it, without so much as a crease in its trousers, ''again''?”
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| “What kind of second sight, what extra-sensory perception, what gift, what kind of compromising photos of the Almighty must Goldman have to lead such a honeyed life? What does the [[Vampire Squid]] ''have'' over the Fates that other mortal dealers do not?”
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| Perhaps, I gingerly venture, ''nothing''? Perhaps it is as simple as this: ''Goldman didn’t have much risk on in the first place''. This may be prudent business selection; it may be that Goldman didn’t have much of a relationship with Archegos in the first place. According to a communication from CS’s credit risk team in April 2020, “Archegos had disclosed that its long positions with CS were “representative” of the positions Archegos held with its six other prime brokers at the time (namely Morgan Stanley, Jefferies, Nomura, Wells Fargo, Deutsche Bank, and UBS).”
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| Notice anyone ''missing''?
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| If this is right, then less than 12 months before ''Götterdämmerung'', Archegos ''wasn’t on Goldman’s books at all''. If, as it claimed, Archegos preferred to “leg into” positions pro rata across its prime brokers, then a very-late-to-the-party Goldman may not have had much Archegos risk on its book in the first place. Without that long, deep, fearful, profitable client relationship, Goldman had less skin in the game, is likely to have treated Archegos with less reverence — it would not have been a “platinum client” — and may therefore have declined to put positions on in such a cavalier fashion, and would have been less bothered about upsetting its customer by closing it out at the first sign of trouble. This is consistent with how, by all accounts, Goldman conducted its book during the end game.
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| Whether this is really true or not is beside the point. But it points to another potential source of destabilising risk: a fellow broker who cares less about the [[commercial imperative]] than you do. Even a small block sale could have triggered, or amplified, a catastrophic run on concentrated holdings in a thin market with a single, incapacitated bidder.
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| | {{archegos goldman}} |
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| ===Red flags=== | | ===Red flags=== |