SoftBank has been chasing all kinds of bets over the last years, some of which make even r/wsb sound wise in comparison.
That's the problem when there is way too much "dumb money" floating around to be invested for even the most minuscule returns - it will inevitably flow towards high-interest, high-risk stuff. And SoftBank in particular was propped up by a lot of Saudi-Arabian oil money (or, given their dismembering of Khashoggi, I prefer blood money).
> According to Forbes, Son's estimated net worth is US$30 billion, making him the second richest man in Japan,[1] despite having the distinction of losing the most money in history (approximately $70bn during the dot com crash of 2000).[3]
And that's by law: https://en.wikipedia.org/wiki/Gresham%27s_law
In an environment dominated by information asymmetry, the "bad investments" drive out the good ones. When we say, "dumb money," we're describing information asymmetry. The dumb money isn't as knowledgeable about the value of investments as the so-called "smart money."
But the net effect of a market being dominated by dumb money is that good investments either vanish, or get turned into bad investments to compete with the other bad investments for money.
These credit facilities all have covenants and reporting requirements. When these things get frozen or wound down, almost assuredly some sort of risk covenant or similar was breached, which gives the fund manager the option of freezing or winding down the facility.
So how does an investor manage the risk? They vet the company (Greensill), and trust that its risk department / capital markets team can manage their credit facilities. In this case, it turns out that bet might've been off, but thats what happens in fintech investment sometimes.
Leverage.
Which is also the answer to the question: "What causes most collapses of both individual investors and entire economies?"
Great question, and the answer is likely: they don't. I'd guess they just counted every last person they could (and probably some twice) to inflate the number of jobs at risk to try to get the mythical "too big to fail" tag. The 50k jobs was stated by lawyers in court with seemingly 0 documentation to back it up.
>Lawyers for Greensill on Monday told a court in Australia, where the company has been fighting to retain credit insurance, that trouble at the company could cause clients to default on their debts and jeopardize 50,000 jobs.
How does anyone know what is going on / manage risk / assess anything at SoftBank if they're funding a startup ... that owns a bank... that gives loans to suppliers... that is then reliant on some fund out there that this other bank relies on to back their loans, that can be tanked by two fund managers?
The amount of disconnect and even just potential randomness due to a fund manager's whims seems unmanageable.
It seems like it's impossible to be sure of anything, and just some unrelated events that would impact those fund manager's decisions are impossible to account for / could bring a lot down with it...