FETZ

Why Did Warren and Hank Invest in Goldman?

I think you mean systematic risk cannot be diversified away. Go back and check your Finance 101 textbooks. Systemic risk refers to the collapse of the whole financial system.


On Dec 08 07:00 PM Kinabalu wrote:

> "More specifically, systemic risk emanates from Level 2 and Level
> 3 asset classes which cannot be marked to active markets.... So,
> if Hank Paulson and Neel Kashkari were intending to attack systemic
> risk, a comprehensive re-statement of Level 2 and Level 3 assets
> should have been undertaken"
>
> Systemic risk is the portion of risk that is related to the market
> and that can not be diversified away. Paulson was almost certainly
> intending to attack systemic risk. However, the concept that such
> risk emanates from specific categories of assets seems intuitively
> wrong. The author seems to be saying that because Level 2 and level
> 3 assets are hard to mark to market you can't reduce the risk in
> investing in them by diversification.
>
> I have significant questions about the attractiveness of GS as a
> banking entity but it's not because of systemic risk, which they
> have historically been very good at covering.

GE, Goldman Bond Spreads: Unrealistic and Unsustainable

I don't think anyone in their right mind can think GE debt is AAA or any entity in the world without credit enhancement is AAA anymore including the USA.