From the Annals of Time

I found this an amusing and timely story:

The Duc de Richelieu said in 1818 that there were six great powers in Europe — France, England, Prussia, Austria, Russia, and Baring Brothers. This reputation did not help in February 1995 when one single young trader lost $1.5 billion — two times the bank’s capital — in a few days on the Singapore derivatives market. The surprise must have been biggest inside the bank itself as Ron Baker, the head of the Financial Products Group of Baring Bank had made an enthusiastic assessment of the activities of Nick Leeson: “Nick had an amazing day on SIMEX…Baring Singapore was the market…Nick just sees opportunities that are phenomenal, and he just takes them.”[1]

There have been many institutions throughout history that have been badly burned without understanding what it was that hit them. This is the story of Barings Bank, a top London bank for 233 years, which went bankrupt in February, 1995.

Keep that story in mind every time you hear, “This time is different”; or, “We need to regulate the system right this time”.

[1]Grapper, John and Denton, Nicholas: All that Glitters.


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