Merrill trader: story of the world that led to 2008 crash

He worked for an Irish branch of Merrill Lynch. But he did his trades in London. Because he worked theoretically for an Irish entity, the FSA, the UK’s regulatory authority could take no action against him.

Even though he worked for this Irish entity, but did his trades in London, the Irish regulatory authority had no power to take action against him either.

An every day story of the complete Alice-in-Wonderland world in which the 2008 crash was engineered. Alexis Stenfors is a 39-year-old trader who lost Merrill Lynch millions and then tried to cover his tracks. The ultimate cost to his employers – $456 million.

Yesterday naughty Mr Stenfors was banned from working in British financial services for a whole five years. Yes, full stop. Mr Stenfors “offence” was to have, er, “mismarked” his positions during the financial crisis. He was good enough to admit that he had indeed “deliberately overvalued” his trading positions.

The FSA says it will consider letting him work again in five years time because he had “expressed remorse”. Oh, and he had “co-operated” with the authorities over their investigations.

So that’s all right then? Well believe it or not the FSA still has no power to fine him or to ask the Director of Public Prosecutions to cast his learned eye over the matter.

When I studied law at Liverpool University one of the cardinal foundations of the criminal law was the issue of whether an individual had the necessary “mens rea” – intent – to do what he did. Mr Stenfors told the FSA he did. He “deliberately” declared that he was $100 million better off in his trading situation than he really was. That was, by his own admission, at least a lie.

As the world reels from the revelations of the official US 2000 page investigation into the doings of Dick Fuld, the boss of failed Lehman Brothers in America, are we seriously on course for more or less no one going to jail for a single act however large or small in the course of the financial meltdown? (Bernie Madoff, was making off with his criminal takings long before the 2008 crisis dawned).

Somewhere in all this, our UK taxes have been stolen, stolen by the profligacy of the banking industry. When I use the word stolen, I use it in the “actus reus” sense. That is the active “fact” of what happened, whatever the “mens rea” of it all.

Those who worked in the banks and financial services knew they could “exaggerate”, “mismark”, “deliberately overstate”, because they knew we tax payers “stood behind them”.

I am indebted to Mr Stenfors’ lawyer for pointing out that for his fortunate client, “it was completely out of character. It was extraordinary market conditions, he hadn’t had a holiday in a year and a half, and he was working 18 hours days”. Poor boy. Poor us.

Is it wise to believe that it could not all happen again? How many more bankers today are trading in one jurisdiction, whilst their employers are registered in another? Has anyone yet joined any of this stuff up?