Madoff won the trust of the elite few in the form of recommendations – the rest is history. The herd mentality that ensued is an example of when wisdom of the crowd results in a basic failure of due diligence.
This should not have occurred at the supposed level of intelligence assumed to exist in the financial sector. After all, aren’t HSBC, Nomura, Goldman Sachs, etc. meant to employ some of the brightest professionals around?
Their recruitment procedures certainly make such implicit claims though most apparently forgot to apply that basic of a trait which requires professionals to stop and think.
Though banks earned hefty fees from their lending, it is a shambles that at a time when those that entrusted them with their financial assets are the ones left with questions unanswered – this is to all effects the worst time for banks to decline to comment.
Unfortunately, banks are like petrol stations, you just can’t live without them and until the open source version comes along, you might as well close your eyes, plan for the worst and pray for the best.
I remember when I was working in London for HSBC Markets, that the rumors started circulating regarding Nick Leeson’s overly stretched position in Japan’s Osaka Exchange. His single actions, led to the collapse of Britain’s oldest merchant bank (233 years) – Barings. From his office in Singapore, Leeson left a hole of $1.4 billion.
Banks across the globe took note and pledged to never allow themselves to be placed in this type of situation, one that could take down entire corporations and all the trusted investors with them. Time heals, people forget and money breeds greed and contempt.
How stupid many clever people may be feeling, and rightly so. So who’s up next? Stay tuned, there’s still some serious sweating going in Wall Street.
