Ten Years of Risk-Management Debacles
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Morgan Stanley , 2007: Mortgage trader Howard Hubler, making assumptions about the future valuation of certain highly-rated mortgage-backed securities, costs the firm $9.6 billion when his bets go awry. (Read More: The Inside Story of America's Economic Crisis)
The losses provoke the ouster of firm co-president Zoe Cruz — who has until then overseen risk management in Hubler’s division — and are eventually described by author Michael Lewis as “the single biggest trading loss in the history of Wall Street.”
Lesson: Don’t believe that even the highest-rated debt securities won’t at some point lose value, and don’t let your risk managers report directly to a business head.
-By CNBC's Kate Kelly
@KateKellyCNBC
When you’re in the business of taking financial risk, all your bets can’t be right. Sometimes the best you can hope for is that the self-inflicted damage is survivable. Here’s a list of Wall Street’s greatest whiffs over the past ten years.
