10/2/2023 0 Comments Kidder peabody paine webberThe process of stripping is known as coupon stripping.Īll STRIPS are traded over-the-counter (OTC), with the primary government securities dealers being the largest and most important market participants. ![]() Treasury created by physically separating the principal and interest cash flows. These are zero-coupon securities (zeros) of the U.S. STRIPS is the acronym for “Separate Trading of Registered Interest and Principal Securities”. His job was to make profits by stripping bonds. Jett joined the GE run Kidder Peabody government bond trading desk. If only to reiterate why these elements are not desirable in a good investment bank and its team it is important to go through the details of the Kidder Peabody case. ![]() The trading scandal at Kidder Peabody in 1994 has all the elements of most scandals in Wall Street – greed, projections, pointing fingers, value erosion, lack of processes and big losses. Big company owner of Kidder Peabody GE sells stake to Paine Webber for big bucks, who in turn decides to do away with the Peabody name. A career full of promise and opportunity goes down on the altar of high profit. A fine was slapped on Jett by the SEC for $8million. It turned out the Peabody management was not entirely blameless and were in the know. He is banned from trading in any form in the USA. Full of righteous anger they try to pin all the blame on Joseph Jett, the man in question. The scholarship student has been using his high-end mathematical skills to use a flaw in the system to book profits that never were. They call in the lawyers and try to nail him. Sadly and unfortunately for them the massive profits are fake and they are left staring at a big loss. The management higher up starts looking into these profits. By 1993, he was managing thirty billion dollars. He starts generating fabulous profits for his government bond desk (1991). To cut a long story short young man armed with an engineering degree from MIT and an MBA from Harvard Business School joins Kidder Peabody after working with Morgan Stanley and First Boston at age 33.
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