Is Nick Leeson their role model?

It's thirteen years since Nick Leeson became the most notorious banker in the world by managing to lose £862 million through a series of risky financial manoeuvres. The consequences for Barings Bank - his employers - were enormous... they collapsed. The consequences for Leeson were pretty dire too... he was sentenced to six years in a Singaporean prison (he was released after four when it was discovered he was suffering from colon cancer).

While in prison, Leeson wrote an account of the affair which was entitled 'Rogue Trader' which The New York Times described as "a dreary book, written by a young man very taken with himself, but it ought to be read by banking managers and auditors everywhere."

Looking at the current crisis, it's hard to avoid the conclusion that the banking managers and auditors who read the book believe that Leeson's only mistake was to get caught.

No-one appears to have regarded Leeson's story as a portent of what could happen if the regulations were loosened so much that it was no longer necessary to commit fraud in order to take enormous risks. Consequently, Leeson's wildly speculative approach has gone from being exceptional to being the norm... indeed, it seems to be institutionalised.

It's hard for many of us to even understand the core purpose of the stock market. The trading of stocks and shares operates in a sphere whose aims seem murky... we are constantly assured that they are oiling the wheels of capitalism but the motivations are so obviously self-serving that it's impossible to see any of the practices as necessary... and even harder to see how anyone outside the circle of greed can benefit from their machinations.

The most disturbing aspect of the current financial crisis has been the tacit acceptance by governments that it’s perfectly acceptable for trading institutions to invent ever more risky ways of seeking profit. Not content with speculating on the vacillations of publicly-traded shares, traders have found ways of gambling on ever more risky propositions. The danger this created was that these speculations would become more important to the market than the activities of the companies themselves.

Yesterday, for example, the share price of Volkswagen rose by 500% and for a few minutes the German car manufacturer became the biggest company in the world. Was this because they had announced a new model which ran on fresh air and produced no emissions? No, it came about because a huge number of stock market gamblers speculated that the value of Volkswagen’s shares was bound to fall and they were dramatically wrong.

How did the value of shares in a company become so disconnected from the financial health of the company itself? And who does this benefit other than those gambling on the huge swings in share price that the speculation itself generates?

The bankers and stock market traders are, like Nick Leeson, architects of their own destruction. But unlike Nick Leeson, they will not be made to pay the price. Already they are being bailed out of their predicament by governments using our money and there is every indication that governments are willing to continue doing this until there is no money left and we appear powerless to prevent them.

The price of not bailing out the bankers, we are told, is a risk that the whole financial system will collapse. But hasn’t it already collapsed? It isn’t being kept afloat... our governments are face down over its bloated corpse desperately trying to revive it with mouth-to-mouth resuscitation. As they say in the medical dramas, it's time to “call it”... that variety of capitalism is dead and it’s time we moved on and learned to live without it.