‘UBS’s rogue trader loses $2 billion’, say the headlines. The rogue trader has been arrested, UBS has made appropriately contrite noises about risk management and internal controls and the world’s financial press is treating the whole thing like an unfortunate accident.
Somewhat like an air crash—it shouldn’t have happened, shows problems in training and safety systems and so on.
It’s interesting, this rogue trader phenomena. What do you think are the chances of seeing this headline. “Rogue trader makes massive profit but sacked for violating risk management guidelines.”
If the big global banks have traders who are prone to going rogue, then the rogue must be coming good and making money. What happens then? Does the bank sack the rogue and donate the profits to charity?
Or does it quietly pocket the moolah and raise the trading limit given to the profitable rogue? One can only guess.
What do you think are the chances of seeing this headline? “Rogue industry continues to endanger global financial system. No end to making leveraged gambles while being underwritten by governments”.
Remember, this UBS was one of the TBTFs (Too Big To Fail) whose failure was threatening the financial system in 2008. It used $75 billion of aid from the US Federal Reserve at the time.
It’s such a convenience. Do all the risky leveraged trading that you’d like to. When things go bad, blame some rogue and wait for a public rescue. Meanwhile, individual investors must feel that it such a pity that they can’t blame their losses on any rogue except themselves.