August 13, 2017
“On the trading floor at RBS, Hayes noticed that it wasn’t the biggest clients who elicited enthusiastic laughter and applause when they”
August 13, 2017
“called. Instead, it was small pension funds and other unsophisticated investors—so-called dumb money. They lacked access to high-quality financial data and generally weren’t as sensitive to tiny differences in the prices that banks would offer them. In other words, they were ripe for being duped, and RBS traders fought to get access to them.”
August 13, 2017
“BM had a problem. The company, with operations all over the world, had issued debt to finance its European businesses in Swiss francs and German marks. But IBM preferred to have all its debts denominated in American dollars—otherwise its finances were tethered to volatile and unpredictable international exchange rates. In 1981, IBM turned to Salomon Brothers for help. The Wall Street firm approached the World Bank—one of the leading issuers of debt anywhere, and an entity with a tolerance for bonds denominated in a variety of currencies—and convinced it to sell a slug of bonds that were identical to the IBM debt except for one crucial difference: They were in dollars. Then IBM and the World Bank simply swapped responsibility for making interest payments and eventually repaying the principal on their respective bonds. It was the birth of a new financial derivative: the swap.”
Notes From: David Enrich. “The Spider Network.” iBooks.
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