Matt Taibbi: The $2 Billion UBS Incident: 'Rogue Trader' My Ass

[marmar]

from Rolling Stone:



The news that a "rogue trader" (I hate that term – more on that in a moment) has soaked the Swiss banking giant UBS for $2 billion has rocked the international financial community and threatened to drive a stake through any chance Europe had of averting economic disaster. There is much hand-wringing in the financial press today as the UBS incident has reminded the whole world that all of the banks were almost certainly lying their asses off over the last three years, when they all pledged to pull back from risky prop trading. Here’s how the WSJ put it:

The Swiss banking giant has been struggling to rebuild trust after running up vast losses in the original financial crisis. Under Chief Executive Oswald Grubel, the bank claimed to have put in place new risk management practices, pulled back from proprietary trading and focused on a low-risk client-driven model.

All the troubled banks, remember, made similar promises in the wake of the financial crisis. In fact, some of them used the exact same language. Some will recall Goldman’s executive summary from earlier this year in which the bank pledged to respond to a "challenging period" in its history by making changes.

"We reviewed the governance, standards and practices of certain of our firmwide operating committees," the bank wrote, "to ensure their focus on client service, business standards and practices and reputational risk management."

But the reality is, the brains of investment bankers by nature are not wired for "client-based" thinking. This is the reason why the Glass-Steagall Act, which kept investment banks and commercial banks separate, was originally passed back in 1933: it just defies common sense to have professional gamblers in charge of stewarding commercial bank accounts. ............(more)

The complete piece is at: http://www.rollingstone.com/politics/blogs/taibblog/the-2-billion-ubs-incident-rogue-trader-my-ass-20110915

[mod mom]

1. Always glad to recommend a Taibbi pice. Bookmarked for later reading.

[Blue_Tires]

2. The banks keep swearing over and over they've turned over a new leaf

but have a full relapse soon after...

[Octafish]

3. US Government sent at least $77 BILLION to help bail-out Swiss-owned UBS

As the numbers reported keep changing upward, no one may know exactly how much...

Banks Borrowed $1.2 Trillion From The Fed During The Financial Crisis

Thank goodness for Matt Taibbi, one of the few journalists writing on economics, finance and fiscal policy worth reading.

[Mimosa]

4. Right!

Who else is even following the saga of the banksters?

[Octafish]

5. Money just doesn't 'disappear.' It needs help to walk away.

Some other Swiss banker is very happy to find a new home for the new owner's loot.

Guess who helped, uh, set the system up?

Know your BFEE: Phil Gramm, the Meyer Lansky of the War Party, Set-Up the Biggest Bank Heist Ever.

[avaistheone1]

15. Agreed.

Especially that kind of money.

[FarCenter]

6. While it may be Swiss-owned, UBS' trading operations are in the UK and US

In the UK they acquired SG Warburg, and this is the division of the company that employed the rogue trader.

In the US they acquired Paine Webber, which has a trading floor in Stamford, CT that has an area of 2 football fields. It is said to be the largest in the world. 37% of UBS employees are in the US according to wiki, the same percentage as are in Switzerland.

[Octafish]

7. And helping UBS get the most out of the US taxpayer is Phil Gramm.

Of course, Phil answers to a higher power.

Thanks for the heads-up on the division of labor at UBS, FarCenter. Without electronic transactions, it'd be nigh impossible to move that mountain of money over the Alps.

Guess who helped set that protocol up, back when he was a lowly vice president?

[FarCenter]

10. And the electronic transactions are probably all copied at Ft Meade and Langley

[The Wizard]

24. Phil Graham

should be horse whipped, and his assets seized.

[truedelphi]

17. I will vote for any man, woman, child, butterfly or dog that

States they will reinstate Glass Steagall.

Anyone who has been in office and refused to see that this is done is simply a puppet of the Big Banks.

And that entity I vote in 2012 for must damn well better insist that the banks pay back the money that was loaned them, not with the "paper investments" of dubious value but with real US dollars.

Oh and Goldman Sachs can give the US taxpayers their nature refuge down in Patagonia as well.

[gratuitous]

8. The trader was "rogue" because the money went bye-bye

If he'd made UBS a shitload of money with the same shady practices, they would have given him a fat bonus and a corner office. But rest assured, all you little people, that UBS is shocked - shocked! - to find out that one of its traders was engaged in some questionable dealings.

[truebrit71]

9. Absolutely spot on...

The only reason the trades became "unauthorized" was when they went the wrong way...

[Roy Rolling]

14. gratuitous and truebrit71

100% correct...

[tomp]

36. without a doubt. nt

[dembotoz]

16. in the 70's, the packers were a rogue football team--they lost all the time.

[Kaleko]

27. Yup, that trader was a patsy,

used by his bosses to be thrown to the cops if any of their tacitly approved big gambling bets went wrong.

[QC]

11. KICK

[joeybee12]

12. KNR

[amborin]

13. new rules re: proprietary trading are still very vague, that's part of the problem

[Major Hogwash]

18. We need to reinstate Glass-Steagall, even if Bill Clinton doesn't agree.

Maybe he can visit the millions of individual investors who lost billions of dollars when these banks lost their money on schemes with Enron, Worldcom, etc.

[ooglymoogly]

22. While Bill Clinton was making hundreds of millions. nt

[DeSwiss]

19. K&R

[katty]

20. yeah Matt heard you on radio..1 rogue?! all rogues

run amuck

[abelenkpe]

21. Banks: We can self regulate no need for reform

Works out really well in practice no?

[Uncle Joe]

23. Kicked and recommended.

Thanks for the thread, marmar.

[The Wizard]

25. Other than Madoff

any of these crooks even indicted. The United States Attorney General is asleep at the switch. It's either incompetence or malfeasance.

[bertman]

26. REC and kick. Can hardly wait until our DOJ finds all of those 'rogue' U.S. traders

who have been doing the same stuff.

[myrna minx]

28. K&R n/t

[Lucky Luciano]

29. "Rogue Trader" is the right term.

Unfortunately, this guy will make it harder for people who start out in the back/middle office from advancing to the front office for their shot at stardom. The rogue here started out in the middle office booking trades and doing all the boring reconciliation crap that the people starting out in the front office don't have to torture themselves with (it is very boring work in the back/middle offices). He must have done a good job and was then offered his chance in the front office.

Then some clients asked him to put on some trades that required UBS to commit some capital (are client driven trades where UBS needs to commit capital as a counterparty prop trades? This is very gray). He clearly manages this all wrong - got caught and was probably forced to double down a bunch of times to escape from his fuckups - and he was able to do this by being able to fake a bunch of trades to cover up his mess using his background from the middle/back offices to conceal his tracks. Then the chickens came home to roost and he was caught "needing a miracle."

Faking trades to cover up losses is definitely criminal and rogue trading.

When this was first reported, I suspected he was from the middle/back offices originally just like Jerome Kerviel from SocGen. This sucks for the honest middle/back office people looking to move up to be big shot traders because they will probably be forever blocked in their dead end boring jobs now since they will perceived as huge operational/fraud risks in the front office.

[dd2003]

32. sounding like someone who knows

you also know compliance is constantly watching over like dogs and goes ape sh*t if something is wrong. ubs knew, he got thrown under the bus.

[Lucky Luciano]

35. I am saying that someone who knows how to cover his tracks...

like a back office guy...they can fool the IT systems that compliance relies on.

[Enthusiast]

30. And just imagine. In the face of this

criminality Republicans are whining about how Dodd-Frank is too much government intrusion into business.

[kenny blankenship]

31. "defies common sense to have professional gamblers in charge of stewarding commercial bank accts"

Yes it does. And yet the law which said that was once more A-OK in the USA passed the Senate 98-2, and was signed by a Democratic President over 10 years ago.

Which gives you some idea of how corrupt your government is, and also how thick and settled in this corruption really is.

It is 100% corrupt. Few people up there can remember when it was even slightly better. There is only one way out of this, and none of us are going to like it.

[NBachers]

33. How's that thair "reputational risk management" workin' out for ya?

A new term for me.

Maybe that's what's wrong- I haven't hired a "reputational risk manager."

[Lucky Luciano]

34. There is another term for that: "Public Relatipns.". nt

[formercia]

37. "reputational risk management"

Also known as the 11th Commandment: "Don't get caught."

[lib2DaBone]

38. This is all part of a planned Depression....

break it down... so the banks can swoop in and buy hard assets for pennies on the dollar.

Then, start the bubble all over again... so the banks can benefit from the interest rates.

This whole economy thing is no "ACCIDENT".

It's a classic transfer of wealth from weak hands to strong hands of the world Banksters.

[tropicanarose]

39. Right on! This whole single rogue trader thing absolutely is a complete joke.

[Yo_Mama_Been_Loggin]

40. The Wall Street Urinal refers to him as a rogue.

They wouldn't lie.

:sarcasm: