Banking makes bankers stupid

“The bank (Bank Medici) — founded and largely owned by high-profile banker Sonja Kohn, whom media say has close ties to Madoff — said it would cooperate fully with the FMA.

“‘Bank Medici will in every way cooperate with the government supervisor and take all measures to ensure the most transparency and efficiency possible in solving the current challenges,’ it said in a statement.

“It said Medici, which is 25 percent owned by UniCredit’s (CRDI.MI) Bank Austria, remains sound, has good liquidity and will present a new business model in the coming weeks.

“It said clients’ assets were not at risk ‘because of its (Medici’s) strong capital base.'”

“Banks across the globe have unveiled billions of dollars in damage from the scandal, with a number of private banks catering to rich clients and fund-of-fund businesses particularly prominent victims.”
Madoff-exposed Medici under state supervision, by Christian Gutlederer, Reuters, January 2, 2009

Why would a bank, any bank, be this stupid? Bank Medici possibly has a $3B exposure. But why wouldn’t they, or other banks, figure Madoff out in due diligence? They’re banks, they’re supposed to be smarter than this. And if they’re not, then consumers and governments better wake up and get tough pdq.

And don’t blame it on Sonja Kohn. Unless she personally guaranteed the investment with Madoff, it was up to the bankers and lawyers at Bank Medici to see through Madoff before they went out on a $3B limb.

(More Madoff Madness from the NYT: Madoff Scheme Kept Rippling Outward, Across Borders, by Diana B. Henriques, December 20, 2008. Via Pen Elayne)
By DIANA B. HENRIQUES
Published: December 20, 2008

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