Since the dawn of the Great Recession, it seems like banks are in the news on a daily basis, and the news is almost never good.
From failed banks and federal bailouts to overpaid CEOs and trading disasters, the recent past is littered with billions and billions of dollars lost by the world’s big banks and hedge funds.
Read on at your own risk… for six banking scandals that will make you sick.
On September 15, 2011, the financial markets were rocked by the news that a rogue trader at UBS lost $2.3 billion through fraudulent trades.
A mid-level trader, Kweku Adoboli, was arrested and charged with 'fraud by abuse of position and false accounting,' dating back as far as 2008.
Regulators questioned no one at the bank noticed that a mid-level employee racked up losses large enough to require a bailout from Swiss taxpayers.
During the height of the subprime mortgage meltdown, Credit Suisse announced that it would take a $2.9 billion write-down on its collateralized debt obligations (CDOs).
What was most interesting about this scandal is that two Credit Suisse employees, David Higgs and Salmaan Siddiqui, admitted to fraudulently inflating the value of the bank's CDOs so that they could collect larger year-end bonuses and make their boss happy.
According to Forbes, Higgs and Siddiqui pleaded guilty to the scheme in February 2012. Siddiqui said in court, 'I was directed by my boss and my boss's boss. I knew what I was directed to do and did was wrong.' More arrests are expected.
LTCM's monumental loss of $4.6 billion in less than four months is considered one of first and worst hedge fund disasters in history.
LTCM's board of directors included two Nobel Prize-winning economists who invented a 'new method to determine the value of derivatives.'
Unfortunately, this 'new method' could not withstand the chaos caused by the Russian financial crisis.
The Federal Reserve was forced to orchestrate a $3.6 billion bailout of the failing hedge fund when it threatened the stability of the whole U.S. financial system.
Jerome Kerviel, a junior futures trader, racked up the largest loss in history (at the time with his supersized--and allegedly, fraudulent--bets on European stock index futures.
There wasn't enough evidence to convict Kerviel of fraud, but he did end up serving three years in prison for breach of trust and illegally accessing computers.
He was also fined the full amount he lost for the bank ($7.2 billion) and banned from working in the financial services again.
To this day, many believe Kerviel became the scapegoat for all of the bank's own mistakes.
Howard 'Howie' Hubler doubled down on the U.S. real estate bubble using credit default swaps (CDS).
When the real estate market collapsed and his fund imploded, he nearly brought down the whole bank with him.
Only a $9 billion check from Mitsubishi UFJ--the largest ever written--kept Morgan Stanley afloat.
You can read more in Andrew Ross Sorkin's bestseller, Too Big To Fail.
On May 10, 2012, in an unscheduled after-hours conference call, JP Morgan Chase CEO Jamie Dimon announced that risk managers at the megabank lost $2 billion on bad trades in the most recent quarter.
Experts are now estimating that JPM will lose at least another $1 billion from their bad trades over the next few quarters.