Word: crisises
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The role of proprietary trading - when banks buy and sell investments for their own accounts rather than their clients - and other principal investments in the financial crisis is getting new scrutiny. On Thursday, Feb. 4, the Senate Banking Committee held its second hearing in a week on President Obama's...
The intern, of course, wasn't the only one who was risking the firm's dollars. McDonald, himself a relatively junior trader, had a Lehman-funded trading account of $450 million. In the years leading up to the financial crisis, Lehman Brothers built up huge positions in real estate, derivatives...
And Lehman wasn't alone. Merrill Lynch lost nearly $20 billion on investments in collateralized debt obligations (CDOs). Morgan Stanley had a nearly $4 billion loss in proprietary trading in the fourth quarter of 2007. Goldman Sachs spent $3 billion to bail out one of its hedge funds. And Citigroup...
"The financial crisis was caused by the juxtaposition of regulators who really didn't believe in regulation, and excess leverage," says Jon Corzine, the former governor of New Jersey and a former chief executive of Goldman Sachs. "We need stricter, higher capital rules for the banks. That's a much...
But academics and economists and even some Wall Streeters say proprietary trading and other principal investments played a much larger role in the losses that were at the heart of the financial crisis. What's more, if the firms had been barred from using their own money to buy mortgage...