Note: All the quotes below are real sh*t Wall Street says (though those who said them probably wish they weren’t).
Sh*t Wall Street Says – Morgan Stanley
Pro Publica recently reported that traders at Morgan Stanley joked about how crappy a toxic asset was before they sold it to a foreign bank.
They named the asset such things as “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust,” “Mike Tyson’s Punchout,” and “s***bag.” And then they sold it.
Here’s why at least some of these guys should be in jail. They sold an asset they knew was junk.
To illustrate why this is wrong, let’s say a car salesman sells cars he knows are lemons. But he doesn’t tell his customers this (at least not outrightly). When questioned by the law about his actions, the car salesman says that the customer should be sophisticated enough to know the possible downsides of the deal, and so he doesn’t deserve any blame.
Only in a corrupted court system would such an argument pass as legitimate. And yet this is the kind of logic that seems like it would fly if executives at Morgan Stanley or Goldman Sachs were ever put on trial.
Perhaps the most memorable moment in the post-crisis megabank hearings was when Senator Levin quoted a Goldman Sachs employee, repeating the word “sh*tty” lots of times on CSPAN.
Here’s the exact line from the Goldman trader: “Boy, that Timberwolf was one sh*tty deal.”
This was the same situation as what happened at Morgan Stanley. The traders knew that they were holding a toxic asset (in this case, officially called Timberwolf), and yet they sold it to a client.
If you haven’t seen the interchange between Levin and the Goldman Sachs employee, it’s worth watching (language warning):
As bad as this was, it doesn’t top Enron’s antics.
Enron traders weren’t literally on Wall Street (few firms are now), but they were part of the same Wall Street trader culture. They infamously colluded with power plants in California to shut down the state’s power, something they did so that Enron could win bets they had placed on power demands there.
Whenever they did this, the power went out for hours, closing businesses dependent on electricity (and what business isn’t dependent on electricity?) and causing stop lights at intersections to go off (and the car crashes that ensued).
The traders knew what they were doing, and they laughed about it. Here are some excerpts of their conversations:
TRADER: Hey, this is David up at Enron.
POWER PLANT GUY: Uh, huh.
TRADER: There’s not much demand for power at all here.
TRADER: If we shut it down, can you bring it back up in 3 or 4 hours?
POWER PLANT GUY: Oh, yeah.
TRADER: Why don’t you just go ahead and shut her down then, if that’s ok?
One year massive wildfires in California moved the price of energy in Enron’s favor. Here’s a conversation Enron traders had about those wildfires which helped them make money:
TRADER: What’s happening?
SECOND TRADER: There is a fire under the core line…
FIRST TRADER: Burn, baby burn.
SECOND TRADER: That’s a beautiful thing.
Finally, traders also laughed at the idea that grandmothers in California lost money because of their actions.
TRADER: All that money you guys stole from those poor grandmothers in California.
SECOND TRADER: Yeah, Grandma Millie, man.
SECOND TRADER: She’s the one who couldn’t figure out how to ******* vote on the butterfly ballot.
FIRST TRADER: Now she wants her ******* money back for all the power you’ve charged… (source)
In conclusion, let’s look at one of the most recent examples of egregious trader conversations from UBS.
When UBS was fined at the end of 2012 for manipulating interest rates, they were also forced to reveal documents showing conversations between their traders and brokers.
Here are four quotes from them that may seem fake because they are so stupid. But, in fact, they’re real quotes. (source)
“I need you to keep it as low as possible… if you do that…. I’ll pay you, you know, 50,000 dollars, 100,000 dollars… whatever you want…”
“as i said before – i dun mind helping on your fixings…”
“Anytime i can return the favour let me know…”
“JUST BE CAREFUL DUDE… i agree we shouldnt ve been talking about putting fixings for our positions on public chat…”
It’s amazing that these “dudes” are given millions of dollars to push around and speculate with, isn’t it?
According to a CFTC report, RBS placed derivatives traders on the same desk as the people submitting the Libor interest rate.
This setup allowed the traders to make a trade and then ask the submitters to manipulate the interest rate to their advantage (and to someone else’s—a competing hedge fund’s, for instance—disadvantage). Even after RBS placed the traders away from the submitters, however, the manipulation continued through instant messaging.
Here are some highlights from the messages. No corrections have been made to grammatical, syntax errors:
August 20th, 2007
Senior Yen Trader: its just amazing how libor fixing can make you that much money
Senior Yen Trader: its a cartel now in london
December 5, 2007
Yen Trader 2: FYI libors higher again today
Yen Trader 4: ‘ucksake. keep ours low if poss. don’t understand why needs to go up in yen
Yen Trader 2: no reason dude[,] [Bank C] and [Bank D] went high yest
Yen Trader 4: send the boys round
Yen Manager: pure manipulation going on
April 2, 2008
Senior Yen Trader: i am sure some HF [hedge fund] will complain tomorrow ..
Yen Trader 1: tough
Senior Yen Trader: we will say we lower every tenor ..1m 3m 6m ..we feel rbs name has very good credit ..no problem getting money in
Senior Yen Trader: good way to boost share price!
This sample gives a sense for what was going on. See the full CFTC report for more.
The point here isn’t that Wall Street traders are naughty alpha males (though many are). The point here is that these are some of the guys behind trades on Wall Street. This alpha male culture is embedded at least to some extent at all megabanks with trading floors: JPMorgan Chase, Citi, Bank of America, Goldman Sachs, Morgan Stanley.
These are some of the guys who are speculating in the market. These are some of the guys who have blown up firms over and over and over and over (see our derivatives timeline).
These are the firms people should boycott and support local lenders in their stead. People who have loans or deposits with these megabanks are casting their vote for this kind of a “value only equals money” culture.