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Former Wall Street banker turned journalist William D. Cohan has a sharp column on Bloomberg this morning about what he calls “Wall Street’s Great Scapegoat Hunt.”It all comes down to one point. In scandal after scandal, Wall Street banks offer up one of their own to take the blame. It’s normally a junior banker that the bank’s say acted alone and independently.
Cohan argues that that is never really the case (from Bloomberg):
This is particularly troubling because Wall Street is similar to the military: There is no upside for anyone working in finance to do anything but to follow the orders given by the bosses. The idea of a “rogue trader” is really a myth. The goal at every firm is always to make more money in any way that is legally defensible — by selling more mortgage-backed securities, by doing bigger and bigger mergers-and-acquisition deals or by making a larger and larger bet on the direction of an obscure debt index.
When things go well — the firm lands a big underwriting or a high-profile merger or executes a profitable trade — there is no shortage of people around to claim credit. Of course, when something goes terribly wrong — see “Whale, London” or “Synthetic CDO, Abacus” — the senior executives disappear from the scene faster than cockroaches when the light is turned on. In return, employees get paid more working on Wall Street — without putting any personal capital at risk — than they can at almost any other job on the planet…
Cohan continues the piece with examples — Societe Generale’s Jerome Kerviel (the most indebted man in the world), Kweku Adoboli of UBS (in the middle of a nasty trial in London), and Goldman’s Fabrice Tourre, of the Abacus scandal (studying at the University of Chicago and doing humanitarian work in Rwanda). The list goes on.
It isn’t that these guys are completely innocent, says Cohan, it’s that they’re just following orders. Unfortunately, those orders come from a flawed system that is perpetuated any time one of these young bankers takes the fall for their superiors.
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