Lessons for the Rest of Us in the J.P. Morgan Debacle

There's no such thing as predictable risk in market trading. So embrace uncertainty, for better and for worse.

Models are seductive -- the mathematical kind, that is. Take J.P. Morgan Chase. The giant financial institution in the late 1980s started lavishing resources, brainpower and management attention on modeling risk to manage risk. "Risk was the bank's obsession," write Bethany McLean and Joseph Nocera in All The Devils Are Here: The Hidden History of the Financial Crisis. "It wanted to measure risk, model risk, and manage risk better than any institution had ever done before."

Investors Will Make Big Banks Safer

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Chris Farrell
Contributing Columnist, Kiplinger.com