Nearly one and a half years have passed since unregulated credit derivatives nearly took the world's economies down. The lessons were supposedly learned, the regulators informed and armed to respond. And what happens? Most of the largest investment banks - now commercial banks (for the moment) - pay themselves massive bonuses for a year's growth fueled by TARP money. Stock markets rally by 50% or more fueled by high frequency trading and blind optimism. Regulators hem and haw about losing business to other countries and fudge reform until it is unrecognizable as such. And everyone - mostly CNBC it has to be said - is happy. Then along comes President Obama and his henchman Paul Volcker to take away the punchbowl just as the party is starting. They advocate real reform in the guise of the old Glass-Steagall Act, and the party starts to fizzle out. Is it their fault? No. The men - and they are mostly men - behaving badly are the CEOs and MDs and traders in the very banks and firms that were behaving badly a year and a half ago. And they don't seem to have got the point that the people are fed up with them. In the past two days alone there are some egregious examples of greed and bad taste to support my argument.
First, Michael Spencer, founder and CEO of ICAP, took 45 million pounds out of the business just as he prepared a profit warning. Saying it was to support City Index - a legal (in the UK) gambling business - is no excuse. (He should have quietly taken a bet at City Index that his share prices would fall and covered the whole 45 million - then replaced it.)
Second, Bank of America's senior executives were warned to disclose Merrill Lynch's mounting losses just two days before the shareholders were due to vote on the acquisition. According to NY attorney-general Andrew Cuomo's investigation, they ignored the advice.
Third, bank lobbyists are lining up to tackle their favorite Senators and Congressmen on the Hill to get them to water down, or kill, the Volcker Rule. Even as CME Group says it won't really have a negative impact on volumes.
And fourth, although this is a smaller story, the rumored sale of CEP provider Aleri to Sybase prompted a competitor to offer a sort of 'cash for clunkers' program. StreamBase sent out a press release saying that it was unlikely Sybase would maintain Aleri's products, so it very generously offered to trade them in for StreamBase’s under the an "Amnesty Program". Can you say "opportunistic"? Someone sent me this photo to illustrate: