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	<title>Comments on: The Morgan Stanley desk of shame</title>
	<link>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/</link>
	<description>FT Alphaville from FT.com</description>
	<copyright>Copyright The Financial Times Ltd 2006. "Alphaville", "FT" and "Financial Times" are trademarks of the Financial Times.</copyright>
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	<pubDate>Mon, 08 Sep 2008 09:23:05 +0000</pubDate>
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	<language>en</language>

	<item>
		<title>by: hampden</title>
		<link>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9743</link>
		<pubDate>Thu, 20 Dec 2007 13:04:40 +0000</pubDate>
		<guid>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9743</guid>
					<description><![CDATA[agreed - can't believe a trade of that size wouldn't get management attention...]]></description>
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		<title>by: Sam Jones</title>
		<link>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9741</link>
		<pubDate>Thu, 20 Dec 2007 12:11:08 +0000</pubDate>
		<guid>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9741</guid>
					<description><![CDATA[Thanks Hampden. Agree with your points. What I was trying to get across was not to do with the mechanics of the trade so much (of which i'm a little ignorant) but rather the gall in blaming the whole thing on a single desk when it seems actually to be a much broader, sector wide issue. And by "curio" I probably meant "facet" or something - didn't mean to unintentionally belittle!]]></description>
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		<title>by: Carlomagno</title>
		<link>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9739</link>
		<pubDate>Thu, 20 Dec 2007 12:05:05 +0000</pubDate>
		<guid>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9739</guid>
					<description><![CDATA[I'm ignorant about these things. Can a single desk really commit $14bn without approval from top management?]]></description>
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		<title>by: Hampden</title>
		<link>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9738</link>
		<pubDate>Thu, 20 Dec 2007 12:03:15 +0000</pubDate>
		<guid>http://ftalphaville.ft.com/blog/2007/12/20/9782/the-morgan-stanley-desk-of-shame/#comment-9738</guid>
					<description><![CDATA[You've missed the problem here.

Morgan Stanley were long $14bn super senior Mezz ABS CDOs and short $2bn BBB Mezz ABS CDO. Speculating, quite reasonably, that poorly rated mezz ABS CDOs would underperform super AAA mezz ABS CDOs. They used a hedge ratio of 14:2 because BBB tranches are more leveraged than super senior. (i.e. if ABS do badly BBB CDOs deterioriate faster than AAA).

Where they got stuck is that Mezz ABS CDOs have performed so badly that both BBB and super seniors have been wiped out (or written down to severely distressed levels).

The real question is why was the desk allowed to take such a huge strategic trading position in the first place (without senior management approval)? Management at many big institutions took the view that large positions in super senior were acceptable risks. This may seem short sighted - but only with the benefit of hindsight.

There is in excess of a trillion dollars of super senior CDO cash and synthetic debt outstanding on mortgages, corporate debt and EM debt; hardly a 'curio'.]]></description>
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