<story><title>Credit Suisse Takes $4.7B Hit on Archegos Meltdown</title><url>https://www.wsj.com/articles/credit-suisse-takes-4-7-billion-hit-on-archegos-meltdown-11617687483</url></story><parent_chain></parent_chain><comment><author>lordnacho</author><text>As a former fund manager, I have some things to explain and some things to ask.&lt;p&gt;First, the thing to explain:&lt;p&gt;Basically CS was one of several Prime Brokers. This basically means the guy who lends money to the speculators. Same as buying a house, you have a down payment that&amp;#x27;s your money, and then a bank lends you between 115% (boom times) and 30% (safe as houses) of the value of the house. If the house falls in value and you can&amp;#x27;t pay the mortgage, the bank can sell your house, and hopefully that will mean they recover their entire loan. Note that they only lose once the value has declined by your down payment amount.&lt;p&gt;I actually knew the boss of a PB who got fired because a rich guy came in and wanted a lot of leverage, the risk managers said no, and he overruled them. And then the customer proceeded to lose hundreds of millions speculating, and it ate the bank&amp;#x27;s capital. So it&amp;#x27;s not the first time that risk gets overruled.&lt;p&gt;So somehow, CS has lost $4.7B on this Archegos financing, after Archegos lost whatver they put up. From what I gather, Archegos had $10B of equity in total? Typically (sensibly) you don&amp;#x27;t put all your eggs in one basket as a fund, even a quite concentrated fund.&lt;p&gt;How big was the position?</text></comment>
<story><title>Credit Suisse Takes $4.7B Hit on Archegos Meltdown</title><url>https://www.wsj.com/articles/credit-suisse-takes-4-7-billion-hit-on-archegos-meltdown-11617687483</url></story><parent_chain></parent_chain><comment><author>herodoturtle</author><text>&amp;quot;Archegos was a fund run by and managing the personal fortune of Bill Hwang, an investor who had built up large positions in companies worth billions of pounds, despite a previous insider trading conviction.&amp;quot;&lt;p&gt;&amp;quot;Credit Suisse’s investment bank under Chin acted as prime broker to Archegos funds, lending it large sums of money to allow it to build up bigger positions in the shareholdings of quoted companies. Hwang had placed big bets that certain stocks, including Chinese technology company Baidu and US media group ViacomCBS, would see their share prices rise. When the stocks fell, both Hwang and his lending banks suffered heavy losses.&amp;quot;&lt;p&gt;This reads as if Credit Suisse was bankrolling a maverick fund manager&amp;#x27;s speculative investments.&lt;p&gt;Strikes me as a rather unhealthy disregard for risk, and completely goes against the spirit of capital preservation.&lt;p&gt;That&amp;#x27;s four thousand seven hundred million dollars down the drain - by one of the world&amp;#x27;s most prestigious banks.&lt;p&gt;Leaves a bitter taste in my working class mouth.</text></comment>