The Swiss Cheese of Banks: Credit Suisse's Billion-Dollar Blunders
Let's talk for a moment about Credit Suisse, since the theme of the day seems to be corporate incompetence and malfeasance. he news and turns it on its head faster than a 5-year-old on three shots of coffee.
Now, before we dive into the deep end of this mess, let's get to know Credit Suisse - or as it's more commonly known, the Swiss Cheese of Banks - a little better. Founded in 1856, Credit Suisse has had plenty of time to perfect the art of banking. And by "perfect," I mean lose billions of dollars in shady deals and poor investments. It's the kind of bank that makes Enron look like an amateur.
But the real fun started in 2015 when the bank announced that it was going to focus on wealth management and cut back on its investment banking operations. This move was like a football coach deciding to focus on water polo. Sure, it might work out, but it's a big risk.
Fast forward to 2021, and Credit Suisse is in the news again for all the wrong reasons. It seems that the bank lost a few billion dollars on a little investment called Archegos Capital. Now, I know what you're thinking. "Archegos Capital? Sounds like something out of a sci-fi movie." And you're not wrong. Archegos Capital is like the Death Star of investment firms, and Credit Suisse was the planet Alderaan. Boom.
So, what happened? Well, it seems that Archegos Capital was playing a little game called "hide the losses," and Credit Suisse was more than happy to play along. You see, when you're dealing with billions of dollars, things can get a little messy. And by "messy," I mean illegal.
Credit Suisse was supposed to be monitoring the investments of Archegos Capital, but they didn't. They were supposed to be looking out for their clients, but they didn't. They were supposed to be responsible, but they weren't. Instead, they were too busy counting their own profits to care about the consequences.
And the consequences were dire. Credit Suisse lost over $5 billion dollars in the Archegos Capital fiasco. That's right, billion with a "B." To put that into perspective, $5 billion could buy you 500 million Big Macs or 10 million solid gold toilets. It's a lot of money.
But Credit Suisse wasn't done yet. Oh no, they had more tricks up their sleeve. In April of 2021, the bank announced that they had lost $4.7 billion dollars due to a little company called Greensill Capital. You know, the company that was founded by a guy who looks like he should be selling used cars on a street corner.
Now, I don't want to get too technical here, but Greensill Capital was in the business of buying invoices from small businesses and then selling them to investors. It's like if your uncle Bob bought your lemonade stand IOU for $5 and then sold it to your neighbor for $10. It's a shady business, and it didn't end well.
So, Credit Suisse invested billions of dollars into Greensill Capital, and surprise, surprise, they lost it all. The bank was so incompetent that they didn't even know what they were investing in. It's like buying a house and not knowing it's infested with termites. And speaking of termites, I'm pretty sure that's what's eating away at Credit Suisse's finances.
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But wait, there's more. In 2019, Credit Suisse was caught spying on two of its employees. That's right, the bank that's supposed to keep your money safe was spying on its own employees. It's like a doctor giving you a physical exam and then stealing your wallet. The bank hired private investigators to follow two top executives who were planning to leave the company. Credit Suisse said it was investigating concerns that the executives were trying to poach other employees, but it turns out that the bank just wanted to keep them from leaving.
Now, I don't know about you, but if I found out that my employer was spying on me, I'd be pretty ticked off. It's a major violation of privacy, and it shows a complete lack of trust. But apparently, Credit Suisse thinks that it's above the law.
Both Greesnill and Archegos are clear cases of negligence, or at least recklessness, on the part of Credit Suisse. The bank had a duty to protect its clients and their investments, but instead, it chose to prioritise its own profits. Instead, thousands of investors were left holding the bag, wondering how they're going to recoup their losses.
Add to this further scandals including being fined for making fraudulent loans dubbed "tuna bonds" to Mozambique's government between 2012 and 2016, tts chairman being forced to resign in January after an internal investigation found he violated COVID-19 quarantine rules to attend Wimbledon. Kind of make you wonder what hasn?t come to light!
But here's the real kicker. Despite all of these scandals and failures, Credit Suisse still managed to pay its CEO, Thomas Gottstein, over $10 million in 2020. That's right, the guy who oversaw the bank's disastrous investments and who failed to prevent the spying scandal was rewarded with a massive payout. It's like giving a trophy to the kid who came in last place. It's absurd. And it just shows how out of touch Credit Suisse is with reality. Fortunately for Credit Suisse (or not?), he resigned last year for personal reasons.
So, what's the solution? Well, it's simple. Credit Suisse needs to take responsibility for its actions and make things right for its clients. The bank needs to implement stronger oversight and transparency measures to prevent future scandals. And maybe, just maybe, it needs to reconsider its business model altogether. Or fold. That might just be what is left after this tumultuous week and its biggest investor, the Saudi National Bank, finally saying it has had enough of rescuing a recidivist institution.
Because let's face it, Credit Suisse has become a laughing-stock in the financial world. It's the kind of bank that you wouldn't trust with your monopoly money, let alone your life savings. And until it cleans up its act, it's not going to win back the trust of its clients, peers, or the public. It's a cautionary tale of greed, negligence, and incompetence. And it's a reminder that even the biggest and most powerful banks are not immune to failure. In Credit Suisse's case, scandalous failure seems to have been part of the business model.
It is also a bit of a lesson, without even receiving a public bailout (yet), of the sort of situation where there is a risk of a corporation too big to fail. While Credit Suisse have ruled out a public bailout, one wonders if that desire will hold by the end of next week as they stare into the oblivion that awaits them.