This event takes up a chapter in Buffett’s biography, The Snowball, and it is a good illustration of why we need the TMPG. I reread that chapter every couple of years, and it still gives me nightmares.1 After the dust settled, we had to grapple with the wider implications of the scandal for the market itself and particularly the role of regulatory oversight.
15) An interesting perspective is the interaction between credit risks and market risks. For many reasons, both historical and practical, market and credit risk have often been treated as if they are unrelated sources of risk: the risk types have been measured separately, managed separately, and economic capital against each risk type has been assessed separately.