Archegos Greed Got the Better of Wall Street
Letting someone build huge stakes using derivatives hidden from public view puts the onus on prime brokers to police their own risk. Maybe that’s not ideal.
Too tempting.
Photo: Bloomberg
The implosion of Archegos Capital Management, a fund that’s been forced to liquidate more than $20 billion worth of stocks, should prompt regulators to ask whether this was another financial calamity that could have been avoided.
Allowing investors to build massive stakes in individual companies using derivatives hidden from public view — and using borrowed funds to do so — puts the onus on a handful of Wall Street prime brokers to police their own risk. Maybe that’s not ideal. Bill Hwang’s investment firm, which ended up having to meet one of the largest margin calls on record, was a disaster waiting to happen.