Whether UBS is shown to have been aware of Adoboli's trading is almost beside the point. If the bank was aware of it and did not stop it, then its failure to do so is unconscionable. If it was not aware of the trades, then its compliance and risk management departments' failure to prevent them from happening in the first place is equally appalling.
In the post-Lehman, Dodd-Frank, Basel III era, it is nearly unfathomable that a global bank of UBS's heft, wealth and importance could allow this kind of loss to occur. Where were the adults?
There will almost certainly be regulatory consequences for the rest of Wall St as a result of this debacle. The banks will howl, but tighter rules could actually help protect the rest of us from their bad behaviour.
In the past few months, it seemed, Wall St was beginning to regain the upper hand on its regulators.
A coalition of 44 Republican senators vowed to block any nominee - not just Elizabeth Warren - to head the new Consumer Financial Protection Bureau unless the agency is essentially gutted. (Warren's replacement, Richard Cordray, is still awaiting Senate approval.) There had been much talk in Congress about watering down certain provisions of the Dodd-Frank law to make them more palatable to Wall St.
The banks also seem to have had some success influencing the still-to-be-written derivatives regulations from the Commodity Futures Trading Commission. The drafting of many of the CFTC's regulations has been delayed - whether because of Wall St's influence or a preference for thoroughness is not exactly clear.
Until these new rules are written, disseminated and approved, Gary Gensler, the chairman of the CFTC, told me, the regulatory regime on Wall St hasn't really changed all that much from the days before the crisis.
Now, one suspects, the global regulatory agencies will have no choice but to come down hard on big banks and demand the tougher rules that Wall St abhors.
Suddenly, the critical comments made earlier in the week by Jamie Dimon, chief executive of JPMorgan Chase, about the Basel III capital rules seem woefully shortsighted. "I'm very close to thinking the United States shouldn't be in Basel any more," Dimon told the Financial Times.
"I would not have agreed to rules that are blatantly anti-American. Our regulators should go there and say: 'If it's not in the interests of the United States, we're not doing it."'
A mere three days later - on the third anniversary of the collapse of Lehman Brothers no less - it became even clearer that some Wall St firms don't have the slightest clue about how to manage their businesses to prevent the kind of unexplainable trading losses that an increasingly fragile world economy can no longer abide.
* William Cohan is a former investment banker and the author of Money and Power: How Goldman Sachs Came to Rule the World.
- Bloomberg
