Morgan Stanley is the latest Wall Street bank to acknowledge significant losses tied to last month’s giant implosion of Archegos Capital Management, the investment firm run by former hedge fund trader Bill Hwang.
As part of its quarterly earnings report, Morgan Stanley — which unlike some competitors had kept quiet on its exposure to Archegos — disclosed that it had lost $911 million related to its dealings with fund. Archegos was a so-called family office, meaning it did not manage outside money, but it had borrowed all over Wall Street to finance incredibly large, concentrated positions.
When Archegos’s bets went bad, banks found themselves in a race to dump securities related to its trades. In the fire sale that ensued, some fared better than others. Goldman Sachs was able to move quickly and is widely seen to have fared the best in terms of extricating itself from an ugly situation.
But the fallout nonetheless left deep losses across Wall Street. Credit Suisse and the Japanese bank Nomura seemed to suffer the worst damage, disclosing $4.7 billion and roughly $2 billion in losses related to Archegos’s trades.
On a conference call with analysts, Morgan Stanley’s chief executive, James P. Gorman, faced questions about why his bank had chosen not to disclose losses as others had.
He answered that the size of the loss was not large enough to matter in the context of the otherwise strong performance of the bank in the first three months of the year.
“We were having a record quarter. The business was having a record quarter. The equities business where this resided was having a record quarter,” he said, according to a transcript of the call. “So you’ve got to be at a level where it’s material to the overall quarter, and I’ll leave that up to the lawyers but we’re very comfortable with that.”
The Treasury Department said on Friday that it was putting Vietnam, Switzerland and Taiwan on notice over their currency practices but stopped short of labeling them currency manipulators.
The report, which Treasury submits to Congress twice a year, aims to hold the United States’ top trading partners accountable if they try to gain an unfair advantage in commerce between nations through practices such as devaluing their currencies. The announcement came in the Treasury Department’s first foreign exchange report under Treasury Secretary Janet L. Yellen.
A currency manipulation label requires partners to enter into negotiations with the United States and the International Monetary Fund to address the situation. The Treasury Department said that Switzerland, Vietnam and Taiwan did not meet the manipulation criteria.
The Trump administration had labeled Vietnam and Switzerland as manipulators in its final report in 2020. The Biden administration’s report undid those designations, citing insufficient evidence.
Instead, the department said it would continue “enhanced engagement” with Vietnam and Switzerland and begin such talks with Taiwan, which includes urging the trading partners to address undervaluation of their currencies.
“Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,” Ms. Yellen said in a statement.
Taiwan is the United States’ 10th largest trading partner in 2019, according to the United States trade representative. Vietnam is the 13th largest, and Switzerland is 16th.
The Treasury Department did not label China as a currency manipulator, instead urging it to improve transparency over its foreign exchange practices.
Treasury kept China, Japan, Korea, Germany, Italy, India, Malaysia, Singapore and Thailand on its currency monitoring list, and added Ireland and Mexico.
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