How did traders working for banks get it wrong?

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Hi all,

I read that many of the banks current financial problems (in the Uk and elsewhere) were caused by traders working for them who lost vast amounts of money. What were they trading...currencies or stocks and shares or what?

And what mistakes did they make which caused such losses?

Also ,if these professionals got is so wrong then what hope is there for an average retail trader?

Thanks for replies.
 
There was me thinking it was caused by the lending bubble and the greedy bank CEO's risking everything on sub prime lending and then blowing up when it all became over-priced and no one could afford it anymore.

Still, at least it got Carol Vorderman of the telly and that stupid twat talking about football whilst on the blower for a 25k loan like he was ordering pizza.
 
Agree with wasp, nothing to do with the traders, it was the availability of credit for the fat middle class wanabees, which was not there in the first place, not only that, they gave it away on a very loose criteria, and as wasp says it is all through the greedy CEO's and top tier management giving the go ahead.
 
As wasp said (as usual), the lending bubble was the main problem. If it wasn't sub prime something similar would of happened as a change was (is) needed. The other problem was that the FSA and it's ilk did a **** poor job of regulation, there were traders phoning them saying "If I mix this all up it's AAA rated, and yet that doesn't make sense as it's all C rated", and the FSA just went along with it.

But yeah, it's not really the banks losing money as such which is the problem , it's more that things weren't priced correctly and thus the assets weren't worth jack.
 
Perhaps by not sticking to their targets or by changing their trading plans halfway through their trading strategies...

...we've all done it before (haven't we?), who says the 'Big City Traders' aren't infallible?!?

I watched the recent grilling the banking executives went through and it was revealed that many of them had no formal banking qualifications. :eek:

Now that makes you think about who's running what in 'High' places...

...The Buyer & Seller
 
Hotch said:
As wasp said (as usual), the lending bubble was the main problem. If it wasn't sub prime something similar would of happened as a change was (is) needed. The other problem was that the FSA and it's ilk did a **** poor job of regulation, there were traders phoning them saying "If I mix this all up it's AAA rated, and yet that doesn't make sense as it's all C rated", and the FSA just went along with it.

But yeah, it's not really the banks losing money as such which is the problem , it's more that things weren't priced correctly and thus the assets weren't worth jack.
Click to expand...

Don't forget the Credit Ratings agencies. It was they who gave derivatives the crazy ratings, and they must shoulder some of the blame. The FSA et al was naive/stupid enough to think that the ratings were independent and trustworthy.

Basically it was a sorry mess and a lot of people in different areas are to blame, but above all it comes down to greed.
 
big losses stemmed from the CDOs (Collateralized debt obligations) which lost their value once the housing/lending bubble burst, forcing bank(investment) to write them off of their books. The problem with CDOs is that they suffer from the lack of transparency and are not properly being valued by credit rating agencies....just my 2 cents..
 
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I think it was a mixture of many things causing this credit crunch.. but not really not down to traders..... for what its worth here's my thoughts on some of what caused it...

The Main culprit being...
HUMAN NATURE...

followed by and including
love of easy credit (on both sides of the equation)
credit derivatives no one quite understood (honestly they really couldn't be understood),
clueless greedy ratings agencies,
regulators (FSA & BoE) who were just not up to the job,
greedy bankers offering easy credit made avaialble by
securitisation and off balance sheet accounting - (how do regulators explan that one???)
greedy careless heads of banks who really didn't understand what games their banks' staff were playing but were happy so long as the numbers look good.
Banks who each new they were packaging up risky rubbish to sell for good profits (kind of clever) but who nevertheless were kind of stupid enough to think that other's banks' risky rubbish (securitised loans) was a good investment, ha ha h a !!!!
a govt' (or govts) who happily unquestioningly let all this carry on cos they thought it was their economic genius at setting interest rates too low by proxy causing a boom (abolishing bust) but not worrying at all about high levels of debt amongst the population,
too low interest rates, masked by the excuse of cheap Chinese manufacturing & labour, institutional lenders & investors not even bothering to stop & think what 'sub prime' might mean, mostly cos they were getting an xtra 25 basis points for not thinking about it.
This is not to mention the consumers who were happy to spend far too much money they didn't have on luxury items they don't need irrespective of their earnings/financial state, who then started taking storage space in Big Yellow buildings for all the junk they bought but can't fit into their homes.
bubbles everywhere!

Next ... we'll see if the credit default swap market will stand up or not. That was an even more ridiculous racket than the other credit derivatives, no way did bank's management ever understand what they were all about.

The Queen's tough question about the credit crunch has not been answered - Telegraph
 
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The top tier management of these banks are over rated, there is no way that age should substitute talent and know how, there needs to be a big shake up in some major players, the public have not seen the whole board, the FSA needs more stringent measures...
 
An article today in ES on the CDS market I referred to above. Aside from short term profit, CDS trades generaly defied common sense. The market was enormous and unregulated, the risks were never quantified properly by the major players. If these begin to tipover, and in certain sectors it must be inevitable, it will dwarf what we've seen in this financial crisis so far.

Traumatic time if AIG goes bust | Business
 
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