It sounds like it was an "investment" in a derivative of derivatives. Nest that notion a few more times and we're really getting somewhere.
BOTTOM LINE: In the last 20 years Wall Street has moved away from an investment-led model, to a gambling-led model.
If you broke your trading book doubling or quadrupling down on derivatives and are sitting on top of a colossal mark-to-market loss, why not have the Fed step in and take it off your hands at a price floor in exchange for newly “printed” digital currency? That’s what the 2008 bailouts did.
Only one problem: eventually, this approach will destroy the currency. Would you want your wealth stored in dollars that Bernanke can just duplicate and pony up to the latest TBTF Martingale catastrophe artist? I thought not: that’s one reason why Eurasian creditor nations are all quickly and purposefully going about ditching the dollar for bilateral trade.
The bottom line for Wall Street is that either the bailouts will stop and anyone practising this crazy behaviour will end up bust — ending the moral hazard of adrenaline junkie coke-and-hookers traders and 21-year-old PhD-wielding quants playing the Martingale game risk free thanks to the Fed — or the Fed will destroy the currency. I don’t know how long that will take, but the fact that the dollar is effectively no longer the global reserve currency says everything I need to know about where we are going.
Forgot to add, the above observation was made by Tyler Durden of ZEROHEDGE:
http://www.zerohedge.com/news/double-or-nothing-how-wall-street-destroying-itself