Monday, September 19, 2011

Kweku Adoboli: Ah, yet another rogue trader.

Man, I don’t know why anyone in his or her right mind would think for a New York, Singapore, or London minute that financial institutions needed to be regulated.

After all, if, say, some thirty-something trader wants to go rogue, he’s a criminal, right? And you can’t regulate criminals. Just like the poor, as long as there’s testosterone and money to be made, rogue traders – make that criminal rogue traders -  will always be with us.

The latest is Kweku Adoboli of UBS (formerly, I imagine)  – who the commenting wags on the WSJ are already saying looks like President Obama since, after all, with a continent of over 1 billion people, not to mention the millions in the diaspora, one might expect that they all look alike. (The Deal Journal apparently took down Adaaeugenieoboli’s picture but, trust me, he looked about as much like Barack Obama as he does like Princess Eugenie, whose picture remains – and was there to begin with – because Adoboli, according to his Facebook page, was a member of “a group devoted to the infamous hat Princess Beatrice wore to the April royal wedding of England’s Prince William and Kate Middleton.” Social media really is the gift that keeps on giving, no?)

Anyway, as The NY Times had it, Adoboli was arrested last week in London “on suspicion of fraud by abuse of position”, which I guess translates into unauthorized trading – to the tune of $2B in losses – mucking around with what might have been equities, or what might have been (oh, heinous of heinous) derivatives, at the UBS Investment Bank. The day after the “oops” discovery of this slight problem, UBS shares dropped 8 percent. The rest of the European banking sector experienced a lift. (Reverse coattails?)

The incident raises questions about the bank’s management and risk policies at time when it is trying to rebuild its operations and bolster its flagging client base.

Ya think? Even though the $2B loss is a piffling piddle, a piddling piffle, when compared to the $7B goner that Jérôme Kerviel of Société Générale, the last of the big time rogue traders, racked up a few years back.

The case could also bolster the efforts of regulators who have pushing in some countries to separate trading from private banking and other less risky businesses.

Ya think? Could it be that Messrs. Steagall and Glass will be vindicated yet?

One has to wonder what was going on in Adoboli’s mind while he was UBS-needs-a-new-pair-of-shoes-ing his way into what will likely be prison time.

Did he set out to make a little walking around money for himself by somehow pocketing the proceeds? Was he trying to pump his bonus? Surprise his boss with a bit of ‘hey, look what I made for us while everyone else was wasting company time – I friended it on a Saturday at 3 p.m. -  signing up for the Princess Eugenie’s hat FB page’?

I really don’t know how these things start, but it’s pretty clear how they end up, isn’t it?

Even if the initial motive is “good” (if greed is really good), when things start to turn bad, the options become fess up (ugh!) or keep trying to dig yourself out of a hole. This is how gamblers end up taking a bullet, is it not?  Good money just keeps chasing bad.

UBS sent out a memo to employees:

We urge you to stay focused on your clients, who are counting on you to guide them through these uncertain times.

Because, let’s face it, they better not be counting on the “us” that let this incident happen on our watch. And, of course, we know that you will stay 100% focused, and that there will be no gossip – let alone joke tweets racing around the trading floor – in response to this situation.

We want to reassure you that we, together with the rest of the management, are working closely with the Investment Bank’s management and risk and controlling to get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened.

Ah, the old close-the-barn-door strategy. Except that we always want to leave that door just a wee bit ajar, just in case we want to sneak a peek at a horse, or feed it a sugar lump with a carrot chaser…

We will keep you updated on the progress of our investigation.

The Group Executive Board

Well, that “Group Executive Board” signature sure does make it all seem personal, like there’s someone up there who’s got accountability and responsibility on his mind.

All I know is that young Mr. Adoboli would have been better off if he’d spent more time admiring Princess Eugenie’s millinery, and less time playing with the house money.

Here’s couple of earlier post on Jérôme Kerviel;

For Jérôme Kerviel, payback’s going to be one frothing bee-yotch on wheels…

I suspect I’ll be doing a similar one for Kweku Adoboli in a couple of years.

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