For Want of a Nail ……
April 6 2021
First – a definition.
“Lessons learnt: lessons which are never learnt by those who need to learn them.”
Today we learn that Credit Suisse has lost 4.4 billion Swiss francs following Archegos’ failure. This comes on top of its problems with Greensill, now in administration. This will result in a first quarter loss of ca. 900 million Swiss francs and has already led to the departure of its Head of Investment Banking and Chief Risk Officer.
A world of pain awaits.
– There may be more departures. Others will be nervous about the scrutiny now being given to past decisions.
– There will be internal investigators, internal audit, external investigators, lawyers, accountants and regulators crawling over thousands of internal documents.
– The remediation costs will be horrible.
– Clients whose money was invested in these ventures will need to be pacified if legal action is to be avoided.
– Enforcement action from regulators may follow. Scrutiny by them certainly will.
– It will be urgently looking to see where else it has made similar mistakes.
And a number of other banks also involved with these two entities will be undergoing something similar, though with less publicity. They have either had – or will have in due course – their turn in the sun.
Still, it’s not all bad news. The Chief Executive has said that “Serious lessons will be learnt.”
Would it be unkind and/or tactless to say that if it had learnt any of the serious lessons that were available to be learnt from the many similar disasters over, ooh I don’t know, the last couple of decades or so, they might not have had to learn them now and that £3.4 billion would still be in the bank?
It would. Oh well. Never mind. Let me update the definition instead.
“Lessons learnt: lessons which are never learnt by those who need to learn them, until it is too late.“
Same old, Same Old
March 30 2021
Perhaps there was a clue in the name: Archegos. Arch. Egos. As a description of many in finance it can scarcely be bettered. A novelist might even think it a tad too unbelievable, unless you were seeking to write satire.
But why bother when reality serves it up on a plate.
The founder of Archegos Capital Management, Bill Hwang described himself in 2008 as “like a little child looking for where can I invest to please our God.” Not long after – in November 2009 – Goldman Sachs’s Lloyd Blankfein described bankers as “doing God’s work“. Oh dear. The full extent of what bankers had been doing had yet to reveal itself, whether to God or anyone else. Still, PR advisors would do well to note that such statements do not impress. Rather they tend to bring to mind the Ralph Waldo Emerson quote:
“The louder he talked of his honour, the faster we counted our spoons.”
Back to Mr Hwang. At the time of his humblebrag he was running Tiger Asia Management, which ended up being one of the largest investors in the expanding and profitable Asian market.
What God thought of Mr Hwang’s activities is unknown. What the SEC thought is, however. For in 2012 following a lengthy investigation, also involving the HK regulator, he pleaded guilty to insider trading and manipulation relating to trading in various Chinese stocks in late 2008 / early 2009. Surely not when he was trying to please God? Yes, apparently so.
A humongous fine inevitably followed. And almost as inevitably, the following year in 2013 Tiger Asia Management was wound up and Archegos rose, Phoenix-like in its place.
Now it is in trouble as a result of risky and very large investments having soured. Also in trouble are a number of banks which funded it, provided it with services and helped it trade. Questions no doubt are being asked – and, if not, they should be – about banks’ exposure to the firm, was this within risk limits, why so much leverage and so on. Other questions might also be asked: what due diligence was done? Was a fund run by a convicted insider dealer really a suitable client? How was it monitored? And so on.
Still, since bragging seems to be the fashion, might I modestly refer you to this article and my comments on what is often found when something goes wrong: “…so often, in virtually every case, there were bloody great red flags, or there was a clue that was missed.”
The name might have permitted a wry smile. Mr Hwang’s track record should not have done. Does no-one ever read this stuff?
October 31 2020
Two quotes from a novel written in 1871 seem particularly apposite:
“You must have a pride in your own work and in learning to do it well, and not be always saying ‘There’s this and there’s that – if I had this or that to do, I might make something of it.’ No matter what a man is – I wouldn’t give twopence for him, whether he was the prime minister or the rick-thatcher – if he didn’t do well what he undertook to do.”
“But the effect of her being on those around her was incalculably diffusive: for the growing good of the world is partly dependent on unhistoric acts; and that things are not so ill with you and me as they might have been, is half owing to the number who lived faithfully a hidden life, and rest in unvisited tombs.”
Perhaps after this strange year we might learn to value and reward not just the “stars” and those who shout the loudest about their worth (which owes more to good fortune than they will ever admit, publicly anyway) but also all those doing well every day their unhistoric acts.
And the novel? Well, there’s a riddle to solve during idle lockdown hours.