By Anita Raghavan
Simply as WASPs, Irish-Catholics and Our Crowd Jews as soon as made the ascent from immigrants to powerbrokers, it truly is now the Indian-American's flip. Citigroup, PepsiCo and credit card are only a handful of the Fortune 500 businesses led by way of a gaggle referred to as the "Twice Blessed." but little is understood approximately how those Indian emigres (and teenagers of emigres) rose throughout the ranks. till now...
The cave in of the Galleon Group--a hedge fund that controlled greater than $7 billion in assets--from legal fees of insider buying and selling used to be a sensational case that pitted prosecutor Preet Bharara, himself the son of Indian immigrants, opposed to the simplest and brightest of the South Asian enterprise neighborhood. on the middle of the case was once self-described King of Kings, Galleon's founder Raj Rajaratnam, a Sri-Lankan-born, Wharton-educated billionaire. however the so much stunning allegation was once that the éminence grise of Indian enterprise, Rajat Gupta, was once Rajaratnam's partner and mole. If now not for Gupta's nose-to-the-grindstone upward push to move up McKinsey & Co and a place at the Goldman Sachs board, males like Rajaratnam could have by no means made it to the pinnacle of America's moneyed elite.
Author Anita Raghavan criss-crosses the globe from Wall highway boardrooms to Delhi's Indian Institute of know-how as she uncovers the secrets and techniques of this subculture--an outstanding story of triumph, temptation and tragedy.
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It finally became obvious that Jett’s trading performance was an accounting illusion with no economic substance. Kidder fired Jett, and General Electric, Kidder’s parent company, took a charge of $350 million. qxd 7/13/07 2:42 PM Page 42 A DEMON OF OUR OWN DESIGN company to PaineWebber for $600 million in late 1994. One more illustrious Wall Street name passed into history. These and any number of other screwups made risk management a hot topic on Wall Street. Merrill Lynch was early on the case because of a spectacular trading loss on its mortgage desk in 1987, followed shortly thereafter by Bankers Trust.
Meanwhile, in Orange County, California, treasurer Robert Citron had been structuring trades with the help of friends at Merrill Lynch to borrow on the short end of the yield curve to finance positions in the usually higher-yielding intermediate-term rates. Citron’s strategy depended on short-term interest rates remaining relatively low when compared with medium-term interest rates. This they did in the early 1990s, so Citron’s yield curve bet made money and everyone was happy, with no questions asked.
Because all of the firms running these programs had the same type of hedging strategies in place—albeit with different clients—in the face of a market drop we would all have to sell to increase our hedges. Palmedo’s conclusion: “You have $3 billion of positions you need to hedge. Between you and LOR and everyone else who is doing this—not counting some places that have started doing this sort of hedging in-house—there must be 20 times that amount. ” Palmedo had figured it out. In his view, actions would drive the market down even further, and this in turn would require us to increase our hedges further, which would lead to a downward spiral in prices.