Commentary
Recent news reports that the top Justice Department antitrust lawyer, Jonathan Kanter, is planning to scrutinize large private investment funds’ practice of “rolling up” competing companies to create monopolies and oligopolies.
That may be a good idea on the antitrust front, but let’s take a step back and look at the risk front.
In 1995, a young trader in Singapore named Nick Leeson, who was supposed to be doing low-profit, high-volume, arbitrage trades on the Nikkei, was approving his own trades. When he entered into a short straddle of the Nikkei and Singapore exchanges, the Kobe Earthquake cratered the markets in the region, causing Leeson’s trade to fail catastrophically. To hide it, Leeson entered into a number of risky trades that, ultimately, drove his employer, Barings Bank—chartered in 1764—into bankruptcy with losses of $1.4 billion….