The week Wall Street went into meltdown
THE SENIOR CREDIT strategist at one of the biggest banks in the US, has been much in demand. In August, hedge fund and other clients are calling constantly for updates and insights on the turmoil in credit markets, where fast rising short-term spreads and underperformance of high-quality credit is threatening to inflict horrible losses. The only way to speak to them all is to stick strictly to 15-minute slots arranged back to back. Time is precious.
One of the bank’s traders appears at the strategist’s elbow, an individual used to positioning all the derivatives on the new credit indices, well versed in the credit curve steepener, the ABX tranches and mezzanine ABS CDOs. He asks if the senior man, when he has a minute, can explain something that’s troubling him.
Sure. What is it that he doesn’t quite get? The trader wants to know: "How do we fund the financial system? Where do the banks get all their money from?"
Deep breath. The strategist sits down in front of a screen and pulls up a bank’s financials.
