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Illustration: Annelise Capossela/Axios

The bubble didn't burst. That's the main lesson to be drawn from the failures of Greensill and Archegos — headline-grabbing implosions that were certainly bad for Credit Suisse, among others, but that did nothing to slow the broader market's surge to new all-time highs.

The big picture: Speculative financial bubbles tend to be self-fueling. Investors using cheap borrowed money invest in assets that go up in value, generating paper profits that in turn get levered up even further and invested even more aggressively.

  • It's a strategy that works until it doesn't. When one or two big lenders or speculators go bust, that can cause the cycle to get thrown into reverse, with credit suddenly tightening sharply and a rush to the exits as investors realize the greater fool is no longer going to appear.

Driving the news: Archegos, a large and highly-levered fund, imploded last week, sending share prices of its stockholdings plunging and causing multi-billion-dollar losses across various banks.

  • The Archegos blow-up came on the heels of the bankruptcy of Greensill, a finance house based in London.
  • The two collapses were unrelated except for the fact that Credit Suisse seems to have lost billions in both of them, and the fact that neither could have happened without a broader market environment of banks who are happy to lend freely to anybody who seems to be making money.

Background: Greensill stretched the definition of supply-chain finance well past its natural breaking point. Eventually it lost the backing of a key insurer, which meant that it could no longer access markets itself.

  • Archegos, similarly, lost the backing of its prime brokers, who exercised their prerogative to sell the fund's holdings. While some of the banks were reportedly willing to try to sell the stock slowly, so as not to perturb the market, Goldman Sachs and Morgan Stanley announced enormous block sales before the market open, precipitating some massive declines.
  • The episode is reminiscent of the movie "Margin Call" — except this time, the fire sale didn't cause the broader market to crash. Quite the opposite.

Go deeper

What we know about the victims of the Indianapolis mass shooting

Officials load a body into a vehicle at the site of the mass shooting in Indianapolis. Photo:

Eight people who were killed along with several others who were injured in a Thursday evening shooting at a FedEx facility in Indianapolis have been identified by local law enforcement.

The big picture: The Sikh Coalition said at least four of the eight victims were members of the Indianapolis Sikh community.

Pompeo, wife misused State Dept. resources, federal watchdog finds

Former Secretary of State Mike Pompeo. Photo: Joe Raedle/Getty Images

The State Department's independent watchdog found that former Secretary of State Mike Pompeo violated federal ethics rules when he and his wife asked department employees to perform personal tasks on more than 100 occasions, including picking up their dog and making private dinner reservations.

Why it matters: The report comes as Pompeo pours money into a new political group amid speculation about a possible 2024 presidential run.