On learning something once and for all, bankers wouldn’t make it as bricklayers, Madoff’s $50bn lesson to the mortals of the world

Hobbes, in June last year we bumped into one of my girlfriend’s friend and her husband.

Me, an amateur entrepreneur (if that is possible) trying to make ends meet.
Him, a successful London-NYC currency trader friends with movie stars, up and coming successful Spanish tennis players, and hooked on luxury hotels, cars and vacations.

But me, being myself, I used the informal meeting to torpedo him with questions and opinion on market news of a possible meltdown. He could not give me an answer or opinion to anything, even his vocabulary was poor in financial terms and we moved to the videogame and film fields, where he obviously felt much more comfortable.

An Italian friend of mine always compares me to her dad, a successful managing director of an Italian bank. I’ve never met the man, but according to her, we are the only two people who read the FT for pleasure. Difference is, he’s in a 6-figure salary and I’m trying to figure out how to make £6.

Going back to our unexpected street meeting, after we walked away knowing of their last vacation in St Tropez and how much fun they had in Los Angeles the weekend before, my girlfriend started what finally was a morally and psychological crusade on how smart and brainy I was comparing to him and what a waste I was sitting in a reception desk with my three degrees in the pocket and an empty bank account.

Not very supportive, I know. But I came out of the dip re-enforcing my believe that I didn’t like the City life, the loong hours, the selling, the lying (although I did try to get a job in finance for a couple of months to no avail, so I guess that was a good eye-opener as well.)

Fast forward to 18 months later. The credit crunch is full on. CEOs of financial dinosaurs swear for their auntie’s grave they didn’t know what was going on at the trading floor. Government officials, regulators, central bank mandarins pledge that they didn’t see it coming, ‘who could have!’ they ask while now they look for someone to blame. The bad boys of yesteryear (Private Equity firms) seem just the ‘right-place at the right-time’ lucky ones (with caveats protecting some of their loans to some bankers shame).

Then we have a small Scandinavian country going burst with billions in savings from private British and Dutch savers and local governments, and what is shameful and pathetic is that no one at the government level has been sacked or even made responsible or accountable.

And now, after multibillion write-downs, write-offs and right-to-remain-silent, Bernard L. Madoff Investment Securities LLC, an investment bank for investment bankers turns up that had set up a Ponzi scheme, what Wikipedia defines as:

[…] a fraudulent investment operation that involves paying abnormally high returns (“profits”) to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business.

What makes this piece of news interesting is that Mr Madoff, respected Wall Streeter, defrauded $50bn (abnormally high returns minus fees) to hedge funds and investment banks and other select clientele (investors, in the above definition).

As usual, the news keep dripping down little by little. The joke is on the best thinking brains at investment banks and hedge funds (again). So far (and I mean so far, because by now we should have learnt the lesson) Reuters reports €350 for BNP Paribas, $329.1m goes for Reichmuth & Co., €302 for Nomura, €605 spared to Natixis, €75m UniCredit SpA, $595m to British tax-payers, sorry, RBS, €360 for Man Group, $1bn to we-are-smarter-than-thou HSBC and a shocking $3.10bn for Banco Santander (I saw that one coming, but not the shape, and still waiting for more)

Talent is overrated, says Geoff Colvin. Well, I am starting to think that some people deserve massive pay outs, because they are worth it, and they deserve every single penny they attract. But millions of people just get on the aura wagon and expect to get paid  according to their closeness to the black-hole. They don’t deserve it, they never did, they never should have, they never would have.

But hey, if you can con these uber-smart financial gods, either you are really a one of a class, or you learn how the system works, it is everything facade. Good for you Mr Madoff.

And remember Hobbes, if you expect anyone to take care of your business, look around, no one is better qualified to do the job than yourself.

.calvin

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