Leeson's lesson.

• Author: Peters, Charles
• Position: TILTING at windmills - Brief article

As I was preparing this column, I saw Ben Bernanke on CNBC endorsing "proprietary trading by banks." That means that, in addition to accepting deposits and lending money as banks have traditionally done, they speculate on whether the price of a stock or a commodity or a currency or practically anything else will rise or fall. Remember Nick Leeson? He was the Barings Bank employee who provided an early warning of the trouble our own big banks would get into. He traded derivatives based on the Nikkei average. "What was a bank doing speculating on the Nikkei average?" we should have asked. Leeson made a series of bad bets and catastrophic losses quickly followed. And Wall Street...