The More Things Change the More They Stay the Same

I am currently reading Liar’s Poker by Michael Lewis. The book is a classic but for those that may be unaware it chronicles the author’s time in the bond unit of Salomon Brothers – the Kings of Wall Street at the time. The book takes place in the mid-eighties and you could say it describes in great and entertaining detail the dirty underbelly of Wall Street.

Today I came across an article in the Boston Review that could have came straight out of a chapter in Liar’s Poker. The article, titled Legerdemath details Omer Rosen time on Citigroup’s corporate-derivatives team. The team’s directive was “to help companies decrease and manage their risks” but really it boiled down to making money for the bank.

In either case, whenever possible we used our superior knowledge to manipulate the pricing of the trade in our favor.

I learned to think we were simply smarter than the client. For unsophisticated clients, being smarter meant quoting padded rates. For the rest, a bit of “legerdemath” was required. Most brazenly, we taught clients phony math that involved settling Treasury-rate locks by referencing Treasury yields rather than prices.

Rosen was working for Citigroup in the early 2000’s. He recently had the following conversation with a friend:

Last year a friend in the credit-card division of one of the major banks told me that his group had received an award. “Great news,” I thought. He then explained that the group had managed to increase the rates charged on the bank’s entire portfolio of credit cards before regulation limiting such increases took effect. Does this sound like an industry that is learning?

With incentives still completely misaligned between customers and their finance “partners” on Wall Street it is no wonder the more things change the more they stay the same.

See the entire article here. http://www.bostonreview.net/BR36.1/rosen.php

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One response to “The More Things Change the More They Stay the Same

  1. santos February 3, 2011 at 9:34 am

    this man screwed over his clients. he committed horribly immoral acts at the expense of those he was supposed to serve. his claim of having been so green he didn’t know it was bad is a weak attempt to absolve himself. it just means his own internal moral fiber was compromised from the beginning, to not be able to realize the wrongs he was perpetrating. i’m glad he told his story, but he is a bad person through and through.

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