The top trader was in charge of the risk position for his desk and had oversight for the entire firm’s position. (750 people, regularly traded 5% of the NYSE hedging its book). The idea that you’d have a manager overseeing traders would have been considered absurd. They wouldn’t have known enough and would have lacked authority.

One guy I knew would simply do overlays if he didn’t like what the traders on the desk were doing or if he thought their positions were good but in total it made for too big a bet in one direction. The managerial types were number two on the desk, the uber trader was number one.

Jeez, the Street is being run like commercial banking but paying itself like investment bankers. No wonder it’s blown itself up.

Don’t read too much into the particular winners and losers from a crunch. There’s a lot of luck involved. In the 1998 bond market crunch, Morgan and Lehman did better than Goldman. Goldman’s losses were probably the main reason that Corzine lost the top job, and the firm deferred its IPO. And on Black Monday in 1987, Morgan made tons of money from puts on the S&P index that it bought beforehand (but after the banks had made a crash likely by selling tons of portfolio insurance to investors).

Put if this way, if the best trader isn’t running prop trading (or at least pretty senior on that desk), it’s a management failing, or perhaps that best trader is too young to have convincingly proven himself.

Really?