From the reporting, it seems that the failure was very simple – putting 75% of their money in long-term bonds. Who said bonds are boring…apparently, regulations (Basel 3?) do not require accounting for sovereign bonds until they are sold. So, this is like you got a $1 mln house in downtown Detroit and continue listing it as an asset even as squatters moved in. Curiously, their reporting showed 75% of holdings were “held to maturity”, so it seems any reasonable professional would have been able to flag the problem. At the end, a private entity – Moody – was first to report the problem, not the government. Please correct my description, I am not a money professional.
some thoughts on this:
Who was responsible for this maturity regulations?
Is it normal for congressmen who created regulations to then become lobbyists to try to weaken the same regulations, or advise how to go around them? This is a huge maris ayn and perverse incentive
Risk management was apparently “not a priority”.
Main lesson is that any romantic long-horizon goal is danger to current responsibilities. Communists & Nazis could kill millions i the name of happy future; Moschichists do not need to daven on time as they hasten the geula, etc. We need to be ehrliche yidden first before saving the world/learning Torah kuloh, etc.