WHAT DO THE BANKS THINK THEY ARE DOING? By CAMERON DUODU
They are taking the whole world for a ride, that’s what the banks are doing.
You think of a bank as a safe institution in which you put your money, and it is there waiting for you whenever you need it. If you’re lucky, the sum you put in the bank may even have increased – due to the fact that some banks now pay interest on current accounts. If you put the money in a savings or a deposit account, of course, then you will definitely get interest on it.
Then we began to hear stories about how some banks have turned themselves into “casinos” and use customers’ money to “gamble” on currencies, commodities (such as cocoa), and “derivatives” as well as ‘collaterised debt obligations” or “CDOs”.
Now when you and I began life, gambling was frowned upon by almost every person of integrity. And banks were supposed to possess so much integrity that if your bank manager spotted, from the movements of money in and out of your account, that you might be gambling, or otherwise taking risks with your income, he would call you and read you the riot act. Which, in this case, meant him warning you that if you gambled away the money which should have gone into paying your rent, he wouldn’t give you an overdraft. He would bounce your cheque to your landlord. And you would be evicted.
If banks were supposed to help us live stable lives, how could THEY be gambling? Well, they have been doing it. You probably heard of Bear Stearns Bank and Lehman Brothers in 2008-9. Of Goldman Sachs. AIG. Barclays. J P Morgan. Northern Rock. Royal Bank of Scotland. Lloyds TSB. Citibank.
Almost all of them have been stricken by a bug called “bangambling” and lost so much money that the governments that should have been going to them to borrow money, had to infuse money into them. And I am talking money: it was so much that the governments dared not call it “money”. Instead, they called it “quantitative easing”.
We simple-minded folk thought that if the banks had needed to be rescued by the governments of the world, then they would feel so disgraced that they would never “bangamble” again. But we were joking. Having learnt that the governments of the world were afraid of them, because many of the banks were deemed to be “too big to fail”, they went right back into their “casino-banking” mode. And sure enough, very soon, they were paying back the money the governments had “quantitatively-eased” on them. They laughed — all the way to the Bank of England and the Fed.
But their hubris was ill-judged. For — the inevitable happened again. A trader of the French bank, Societe Generale, known as “Jerome”, cost the bank over $5 billion in unauthorised trading or gambling. This was in spite of the fact that a huge amount of publicity had been given to the activities of 14 bank traders who, in the past two decades, have frittered away $20 billion in gambles that did not pay off. And that $20 billion number is only what has been disclosed! We do not know whether some have been hidden in — or absorbed into — false balance books.
Britain, in particular, was scandalised when it realised that it had been possible for a single rogue trader, Nick Leeson, a futures dealer based in Singapore, had incurred a loss of $1.4 billion in deals in derivatives which had triggered the collapse of Britain’s “venerable” Barings Bank. (“Venerable” because it counted Her Majesty Queen Elizabeth The 2nd among its customers!)
And then, last week, another banking scandal rocked Britain. It was reported that Kwaku Adoboli, a 31-year-old Ghanaian employed by one of the banks favoured by the world’s corrupt dictators, a Swiss bank called Union Bank of Switzerland (UBS) had incurred a $2 billion loss for his employers. By the end of the week, the size of the loss had increased to $2.3 billion.
Apart from the secret, wicked pleasure of learning that a Swiss bank had lost some of the money it had secretly stolen from corrupt 3rd world leaders who died with their boots on, you ask yourself, “Ah?” How can a 31-year-old man who only joined the bank in 2006, have managed to be entrusted with such a huge sum as 2,300,000,000 dollars?
But that is not the end of the story, though! If he made a loss of $2,300,000,000, then it meant that the sums that had passed through his hands were in the region of $50,000,000,000 to $100,000,000,000!
That is because, in the type of trading he was doing — currencies — the rise or fall of the exchange rate is not normally precipitous – if it rises or falls even 1% in a single day, then panic buttons will be pressed. So the size of losses or profits is never higher than 2 or 3% of the sum used in buying or selling “positions”. To incur a $2.3 billion loss, a stupendous amount of money would have been betted. By a young man who knows how to buy kenkey and fish, kelewele or waache from the streets of Tema! Yiee! Mini sane ner?
A friend of mine who is knowledgeable about these matters tells me that because of the size of the numbers involved, he doesn’t think Kwaku Adoboli could have been doing it all by himself.
“He is obviously being used as a scapegoat. If he had made a profit, we would never have heard of it. And the fact that he had been allowed to continue doing these things since 2008, shows that he was very good at it. His bosses have probably been collecting enormous bonuses from his activities, and were hoping to collect some more. But, even whiz-kids like him are subject to the laws of gambling: you win some and you lose some. He lost some — big time. And he’s being thrown to the wolves. Because in the ruthless world of banking, success has many fathers, but failure is attributed to only one “rogue trader”.
Another bank insider said: “No matter how much beef you add to the compliance departments, and how big a stick the regulator wields, you have to expect there will be at least one guy who thinks he can outwit the system.”
Another professional banker has contributed this insight: “Volatility positions can blow out pretty quickly in the current environment, but you’d expect them (banks) to have had controls in place.” The one who said this is the head of execution at a large “investment bank”. Casino bank, that is — the type which governments should be strictly separating from ‘retail’ — or ordinary — banks through a process called “ring-fencing”. No Government wants to do it.
Why? Because many politicians are the pawns of the banks. If you scrutinise the membership of the boards of directors of some of the biggest banks in the world, you will find out why. Many bank advisers, consultants as well as board members, are ex-Ministers or ex-Government officials. They contribute privileged information to the banks. But even more important, they provide access — for lobbying purposes — to serving Government Ministers and officials. And they get extremely well paid. That’s why bank executives are so arrogant. They’ve got everyone ‘sorted’.
One of the most arrogant appears to be Oswald Gruebel, the chief executive of UBS. He has gruffly dismissed calls for his resignation, following the losses Adoboli is alleged to have caused. He described the calls for his resignation, rather lamely, as “politically motivated”. He would say that, wouldn’t he?
UBS has also claimed that Kwaku Adoboli was “already under investigation” by the bank when he voluntarily revealed his actions to them on Wednesday, 14 September, 2011, leading to his arrest at the ungodly hour of 3.30 a.m. Was that necessary for a guy who had voluntarily informed his bosses of the losses he had incurred?
Adoboli remains in custody in London, after being charged with acts of fraud and false accounting dating back to 2008. His next court appearance is Thursday, 22nd September.
Speaking for the first time since UBS revealed the loss, 67-year-old Gruebel blandly told the Swiss weekly, Der Sonntag, that the loss couldn’t have been prevented. “If someone acts with criminal energy, then you can’t do anything. That will always be the case in our business,” Gruebel added.
“I’m responsible for everything that happens at the bank,” Gruebel told the paper. “But if you ask me whether I feel guilty, then I would say no.”
That is par for the course, as far as the big international banks are concerned. Those who run them expect to take huge risks so that they can also make enormous profits for their institutions, and collect prodigious sums in bonuses. It is even said that the bankers get their bonuses ALTHOUGH they have made losses! They have tio be kept happy so that they can use their alleged expertise to recoup their losses and make profits from their trading activities.
Indeed, there were funny scenes inside the US Congress when some of the top bankers were questioned live on television, in the wake of the collapse of institutions such as Freddie Mac and Fannie May. “Are you still using your luxurious executive jet?” was one of the questions I remember hearing someone ask a bank executive. But, of course, the US Congress couldn’t do much about the banks, because the banks pay so much money to Congressmen, through “lobbyists” specially hired for the purpose.
Even Obama could not touch the banks, for he is alleged to be closely associated with the Rothschilds, who have banking interests. So much so that when he asked his Treasury Secretary, Timothy Geithner to reform one of the banks, Geithner, an old Goldman Sachs hand, “slow-walked” the President. Yes, he stalled the President of the United States!
itutions?
Confronted about this, after being exposed by a journalist called Suskind in a new book about the Obama administration, Geithner, of course, denied it. But no banking reform of any seriousness has so far occurred in the US under Obama. And Geithner is still firmly in place at the Treasury. The question is: who suggested that Obama should appoint a man so much in cahoots with the banking industry, to such a key position as Secretary to the Treasury, the ultimate policeman of the banks? Geithner is allowed to run with the hares and hunt with the foxes! No wonder Obama’s economic policy lies in absolute ruins.
But back to Kwaku Adoboli. My insider friend asked me, “If you gave the keys of a 200-miles-per-hour Ferrari to your 12-year-old son, and he crashed it, whom would you blame?”
Poor Kwaku and his father, John (who has been besieged by reporters in the past week and thus been impeded from enjoying his quiet retirement as a former UN official). Yes, the banks catch guys like Kwaku when they are them young; (Kwaku was smatched by the bank at the age of 26), use them when their instincts and reactions are at their sharpest, and then almost always discard them after they reach 35 or so. Kwaku had at most four years to go. With any luck, the judge – and jury – will appreciate the position from his point of view. But that’s going to be difficult, because the boy’s reputation has been thoroughly trashed by the British media. There is no juror on earth who wouldn’t have heard of him by now. And they only know the bank and police side of the story, so far
