13 terrible financial markets decisions - banks, individuals and regulators

Pulling Hair

Here's 13 of the worst decisions made by banks, regulators and individuals in recent financial markets history.

1. Barings - sending Nick Leeson to Singapore

2. Societe Generale - not keeping a closer eye an Jerome Kerviel

3. Merrill Lynch's decision in June 2007 to grab and attempt to sell into the market some $850m of collateral it held against its exposure to two troubled Bear Stearns hedge funds. Merrill gave up its efforts, but only after it received bids of 20 cents on the dollar for the collateral.

The hedge funds subsequently went belly up anyway, but more importantly, this episode set off a chain-reaction which resulted in the general re-pricing of CDOs (at the lower prices Merrill itself received for the Bear collateral) - and among them were $23bn in Merrill's own portfolio. The almost immediate upshot was a $7.9bn third-quarter 07 write-down for Merrill - and that was just the start of it.

The end result of this tremendously short-sighted decision was, of course, huge losses, liquidity problems, job cuts, a firm in crisis and its ultimate sale to Bank of America.

4. Investing / dealing with Bernie Madoff.

5. Allowing Lehman Brothers to fail.

6. The part-acquisition of ABN AMRO by The Royal Bank of Scotland

7. Merrill Lynch's decision in the Fall of 1998 to take the knife to its fixed income business and drastically cut back headcount. This decision was made in the wake of the Long Term Capital Management / Russia crisis, but the market disruption that followed was relatively shortlived, and the markets soon recovered. Too late for Merrill, though, which had effectively destroyed its fixed income franchise and lost out on the subsequent market boom in this area.

8. Credit Suisse's $11.5bn acqusition of DLJ in late 2000, right at the top of the (then) market.

9. Bear Stearns' decision in June 2007 to provide $3.2bn to bailout two of its troubled hedge funds. The funds went belly up anyway, Bear hit liquidity / funding problems, and was soon forced into the arms of JPMorgan.

10. The industry's collective decision to buy, warehouse and sell subprime mortgage debt between 2005 - 2008. The 'suckers' ended up being most of the big banks.

11. Anyone who took the risk on the other end of a transaction from Goldman Sachs in the immediate run-up to the financial crisis.

12. Bank of America's 2008 acquisition of Countrywide.

13. MF Global's decision to appoint Jon Corzine CEO

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