Behind The Markets Podcast: Trevor Greetham
Behind the Markets Podcast
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What Do You Think About the LDI Crisis?
In 2007, the subprime lending division that was bought by Hong Kong Shanghai Bank, HSBC. They had a profit warning in February of 2007 and it was their loan book which was the problem. The pension funds were solvent but suddenly they had all of these liability hedges which are long dated swaps on interest rateswhich were going badly out of the money. It's very similar actually to the plight of some of these banks that put their deposits into treasuries and are losing money on the treasuries. You can make the case this is more like a mini-investment fiasco where the central banks provide liquidity for bank runs under control. I think you can see stock markets recovering to the
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