I regard banks and other financial institutions as black boxes, largely because it is hard to account for the value of their assets. However, there is a different and more fundamental reason why these companies are hard to asses: they are too complex to understand. There are just too many contracts and regulations that they have to honor. The complexity of these businesses makes them very dangerous. The risks of these firms cannot be quantified or even described until after they surface in the news.
HSBC's (HBC) money laundering investigation and settlement are just the latest example of this. Analysts would not have predicted this would have been a material risk until now. Other scandals abound and demonstrate that financials are, at best, speculative bets.
HSBC Settlement
HSBC entered into a huge settlement agreement with the U.S. Department of Justice over money laundering investigations. The settlement involves HSBC paying about
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