Commentaries

Now raising intellectual capital

The VaR cover-up

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By Pablo Triana

Pablo Triana is the author of Lecturing Birds On Flying: Can Mathematical Theories Destroy The Financial Markets? The views expressed are his own

Last month, several men and women assembled in a somber room in Washington to discuss one of the key issues (in my opinion, the key issue) behind the financial crisis that has caused so much misery.

Among those gathered were leading politicians and top financial professionals. A world-renowned bestselling author was there, too. You might think that the media would have devoted attention to such an important event. Surely journalists wouldn’t want to miss the opportunity to report on a roundtable of policymakers and experts that promised to tackle the true factors behind the mayhem, right?

Wrong.
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Goldman, liquidity and VAR

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Goldman Sachs’ second-quarter earnings release showed a continued increase in the amount of market risk held on the firm’s trading book. Its risk appetite has continued to expand at a time when extreme turbulence has forced others to scale back.

True, Goldman’s publicly reported figures may overstate its actual positions. But the Wall Street bank also appears to be taking advantage of its access to liquidity from the Federal Reserve to increase risk.

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