Yes, Brad, He Has

This has produced another edition of “Simple Answers to Simple Questions.”

Just to expand this a bit, and to deal with the 1987 absurdity, the proximate cause of the 1989 adjustment—an adjustment of less than 10% in the Dow that only took two full calendar months to return to its level at close on 12 October—was that a certain Japanese bank (for which I happen to have been trading derivatives at the time) declined to go forward with LBO funding for United Airlines.

You’re welcome to believe that one, but no one at the bank did. And I don’t remember there being any reference to it when Gillian Tett wrote that firm’s obituary.*

*It is saddening to note that of the three firms where I worked that failed in spectacular displays of mismanagement, the chronicler of the failure goes from Gillian Tett to William D. Cohan. It’s like having Robert Caro write the first chapter, but only being able to get Kitty Kelley for the next.**

**The third’s obituary was never Writ Large. By this, from August of 1991, certainly belies the idea that “Real Estate Only Goes Up” would be the conceit of anyone with a sense of even recent American history:

Security Pacific surprised Wall Street with poor financial results in three of the last four quarters, partly because of problem real estate loans in Britain, Australia and Arizona and the cost of quitting certain businesses. The weak California real estate market has casts a cloud over all California banks.

Taking on Security Pacific’s loan portfolio could present a major risk for BankAmerica. However, the bank’s officials said they had thoroughly examined Security Pacific’s portfolio. Other industry analysts said that any new problem loans could be compensated for by the savings in expenses because of the merger.

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