I Lost My Firm Billions & I'm Sorry

Technorati Tags : mortgage backed securities, subprime crisis, here is the city

This article is taken from Here Is The City website. A good example on how things could go very wrong: http://news.hereisthecity.com/news/business_news/7811.cntns

'I got laid off in November. Although it hurt a little at the time, I expected it - as I was one of a small number of traders at my old firm responsible for billions of dollars of asset writedowns. I was trading mortgage-backed securities, taking huge positions, and ended up the wrong side of the subprime conflagration.

I never exceeded my limits, kept on the straight-and-narrow with compliance, and made no effort to misprice my book when the markets started to move against me (or mislead anyone in anyway). During 2006 and the early part of 2007, I was a hero, as my positions were making the bank a lot of money. In all this time, I always respected the guys in Risk, was happy to answer any questions about the trades I had made (seeking pre-approval when required), and eagerly digested all the in-house research the firm pumped out about the markets in which I operated. No one at our firm saw that the subprime worm was about to turn. At no time were there voices of doom anywhere issuing dire warnings of the shape of things to come.

When my positions started to head south, and I attempted to cut and run (after consultation with Risk, Compliance and the head of the desk), there were just no takers at sensible prices. In the end, we decided to hold our positions and try to tough it out. Unfortunately this decision cost my former firm billions in writedowns, and it will suffer from our legacy for years to come. Of course, we were too exposed in too small a market, and we didn't really understand the true nature of the risks we were taking (Nobody did, or they wouldn't have done it, would they ?). But did we set out to rip off our shareholders, cause many of the employees at our firms to lose their jobs, and drive the bank itself to the edge of financial meltdown ? No, we did not.

And when we left, were we laughing all the way to the bank, having bagged huge bonuses over the last couple of years and secured lucrative exit packages on the way out ? No, although many of us will never have to work again, actually most of us were in a state of shock over what had happened - we didn't go to work for the money anyway. We went for the hell of it, the buzz, the fix that it gave us. To leave in such disgrace, knowing that the jig was up for us (what other firm in their right mind would employ us now ?) was really hard to take. And then the mud started to fly.

Before too long my boss got fired, then the head of the division went too. Then we heard all this stuff that the losses were down to a few of us traders (no acknowledgment that there was a chain of command right up to the very top, and that the firm's executives were appraised of exactly what was going on at all times). It soon became clear that we were the fall guys. Sacrificing our careers wasn't enough. No, we had to carry the can for all the firm's ills (some of which were not down to us anyway as the very top dogs took the opportunity to 'kitchen-sink' all their problems and heap all the blame on us while they had us in their sights).

At first I was incensed at the injustice of it all, but then I realised that this was just the way the game was played. I'd had my time in the sun, made my fortune, then I was simply thrown to the wolves. In time, I understood that, in the scheme of things, it didn't really matter. People were losing their homes, their jobs and a large percentage of their net worth because of the subprime crisis. I was just miffed because a few people even more culpable than me were heaping all the crap on my head. So, I decided to just take some time out (I'm technically still on gardening leave until the end of May anyway), did some travelling and got my head together.

I'm not ashamed of what I did (I was guilty only of trying to make some money for my firm - and, I admit, myself in the process). But I never tried to buck the system, or sought to be clever in any way. In a way, I was a victim too ( although I acknowledge that we got caught in a trap of our own making and that the repercussions for us were much less severe than for others). But the markets are like that. You have to take the rough with the smooth.

At the moment I've no intention of trying to get back into the market. But, if I was ever tempted back, I know that I could start a hedge fund with a few ex-colleagues. We've talked about it some, but, to be honest, I just don't know if I've got the stomach for it anymore. For me, I doubt that it can ever be the same again. I'll probably move on, and hope that the others whose lives I inadvertently affected will be able to do the same. And, although I know that any apology coming from me will probably sound hollow and not mean much anyway, I am sorry that we got ourselves into this mess. I am sorry for the consequences of our actions. And, despite the financial security it brought me, I wish I'd never got into trading mortgage-backed securities'.

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