Thursday, October 9
Excellent overview of how the risk models failed us from former LTCM counsel.
This is the best explanation of why the risk modeling on Wall Street is inadequate for the job and is a great way to understand why this crisis is escalating. I am still waiting for a cogent article that outlines that even if the regulators and internal risk management teams had adequate models, they probably still would've been thwarted from managing the risk because of typical corporate politics. Everyone who has worked at a large corporate knows that the revenue producing side of the business wields the greatest power when it comes to arguments about managing risk at the margins. It's clear that internal risk management teams were ineffectual in trying to stop the credit structuring teams when they were pulling in abnormal amounts of revenue.