penny wise, pound foolish?
According to this report from Derivatives Week, the guy who lost Allfirst $690 million tried to buy better risk management software over a year ago, but got vetoed by his bosses because of budgetary issues. Is this reflective of a guy trying to perpetrate a fraud? Or did he want this software because he thought he could fool it better than the old package the 25-year old risk analyst who was watching over him was using?
One thing seems obvious–Allfirst didn't put a lot of software in place that could have prevented the disaster because (1) they only had 2 people trading currency, who theoretically had a limit of $2.25 million in total trading exposure, and (2) they were cheap bastards who wanted to maximize their return to AIB, the corporate parents (and, consequently, their bonus checks).
One banking expert told me “Their management was so conservative; I'm really surprised this happened.” But it's because they were so conservative — and reluctant to change how the bank did business despite the desire to use foreign exchange hedging to push up their revenue line–that all this happened.