There's nothing that brightens the day of a battered banker like a rip-roaring financial scandal.
This is much-needed festive cheer, considering a quarter of bankers in Europe are set to get no Christmas bonus, while others face a 60% cut, according to recruitment expert Armstrong. Barclays, Goldman Sachs, Deutsche Bank and UBS are among those that will be paying zip to their executives.
Thank heavens for the timely arrest of Bernie Madoff, a 50-year veteran of the US investment industry and one-time chairman of the US's Nasdaq exchange.
The story began when Madoff summoned the staff of Madoff Investment Securities and told them his company had lost US$50bn over decades by running "one giant Ponzi scheme". A Ponzi scheme works by paying returns to investors out of money from new investors. It flops when you can't find enough new investors to pay returns to existing clients - as is the case in post sub prime America.
Madoff admitted he'd constructed "one big lie", and that his firm was basically insolvent. The Securities & Exchange Commission (SEC) said Madoff's staff took this to mean he had "been paying returns to certain investors out of the principal received from other, different investors" for years.
On Thursday last week, the 70-year-old Madoff can't have been too surprised to see the Federal Bureau of Investigation (FBI) at the door of his Manhattan apartment with a warrant for his arrest.
It's a big deal: the estimated $50bn fraud is said to be the largest ever involving a single individual. It makes the allegations against Fidentia architect J Arthur Brown seem about as serious as if Brown had diddled an expense claim to include a bottle of Moët.
But for bankers sulking about how they're going to afford that third mistress or apartment in Lyons, the Madoff soap opera will be the best entertainment since rogue trader Jerome Kerviel nearly sunk French bank SocGen this year. That is unless you work for one of the banks that lost billions working with Madoff, because if you do, you won't be getting a bonus.
This week, HSBC admitted a $1bn exposure, adding to a list of casualties that includes BNP Paribas (€350m exposure), Banco Santander (clients apparently have $2,3bn exposure) and Royal Bank of Scotland ($600m exposure).
In SA, the credit squeeze hasn't exposed any big-ticket fraud.
There was Dealstream, the derivatives broker specialising in contracts for difference (CFDs), that fell to its knees in September and brutalised JSE-listed investors like Vox Telecom and Control Instruments.
But there the total loss was small change of about R350m (R134m missing from client accounts, and another R220m loss for RMB).
Madoff's excesses underline the "go big" philosophy that underpinned the subprime fiasco.
For Wall Street's investment bankers who "went big" for so many years, it's difficult to feel much sympathy that they're now going home empty-handed.
Ranking the Analysts 2009
