Austrian Civil Servant Blows $440 Million In Taxpayer Funds On Risky Derivatives

Tyler Durden's picture

It is oddly ironic that on the day the US bailout of AIG is complete, and with a "profit" at that, the spin goes, even if the spin ignores that the "profit" was only purchased at the expense of trillions in sovereign debt issuance and near immediate monetization by the Fed, which has onboarded a mindbogling amount of duration risk (from under $500MM in DV01 in 2008 to over $2.5 billion currently, but nobody will discuss this issue as few if any grasp just how much risk exposure the Fed has shifted away from entities such as AIG), that we learn just how far the abuse of virtually free taxpayer funds goes. Only instead of some US government apparatchiks blowing through billions in some concrete government building in downtown D.C., we go to the birthplace of Mozart, in Salzburg, Austria to learn that a "civil servant gambled hundreds of millions of euros of taxpayers' money on high-risk derivatives."

While this is merely one incident in a faraway land, what it does show is that in an environment in which cheap money is handed out loosely by the government (of which the US government is most guilty) the opportunity cost for prudent, fiducariy responsibility is very low, and it is only a matter of time before the new normal moral hazard rears its ugly head, as one after another more such incidents will come to light. And just like housing could never go down in the credit bubble years, so the Fed is perceived as infallible in the current latest, greatest and luckily final, peak bubble. Just like housing, the Fed is infallible until it fails.

From Reuters:

Salzburg officials said last week they had sacked a finance director after determining she used doctored documents and false signatures to hide a trail of losses from deals that started more than a decade ago, causing a book loss of 340 million euros ($439 million).

 

The incident has sparked calls for fresh elections in Salzburg state and for regional financing rules to be reformed. Austrian states have 8.2 billion euros of debt, or 8.1 percent of the country's public debt.

 

"It can't go on that one keeps getting cheap money from the BFA and then starts gambling with it," Fekter told journalists, adding that the states could save 150 million euros per year by using the BFA for all their financing needs.

 

Foreign currency speculation and trading in derivatives without having underlying assets would be banned, and valuation of assets on the books would have to be updated every year.

 

Fekter said: "We will make the standards compulsory for everyone. How the states then implement the standards will of course remain a matter of regional autonomy."

 

The head of the BFA, Martha Oberndorfer, said she would welcome stricter governance and the BFA would give a more detailed statement later.

Uh, why was she fired: she should be promoted to running a derivatives desk at one of the TBTF banks (oh yes, remember how the TBTFs were supposed to be made smaller, nimbler and no longer systemically important - just like AIG - following Dodd-Frank? Oops...), and when she blows up and said bank is bailed out by the government, the government can proceed to issue another several trillion, with the fungible proceeds used to fund the bank's "profit" on the bailout, and the spin can go on that another bank was rescued at a profit to taxpayers.

Joking aside, was the punishment enough? Or will those who want to gamble with free taxpayer money merely find it elsewhere? And how long will the global sovereign regime tolerate such moral hazard which now is backstopped not by shareholders, but by all taxpayers? It appears that the answer, when the myth of the welfare state ending is the alternative, is a surprising "far longer than most had expected." Surprising, too, the ability and length of time people are willing to delude themsleves, and stick their head in the sand of complete denial.

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Boilermaker's picture

Pocket change.  Seriously.

ParkAveFlasher's picture

He totally should have bought lotto tickets with that money.

redpill's picture

I object to the thumbnail, the pass line on the craps table would have been far less risky.

idea_hamster's picture

Osterich -- für den Sieg!

MillionDollarBonus_'s picture

 

Interviews with average Americans 

What do average Americans want from their government?

Harry Ramiro, age 55, NJ

"I retired 3 years ago after 30 years as a public school teacher and proud union member. I am currently living on a reasonable pension of 100k plus benefits and social security. I am very happy with the way things are going in this country and I'm happy for things to stay just the way they are. However, I am shocked and terrified that there is talk in this country about cutting public sector pensions. As usual, the Koch Brothers funded right wingers aren’t happy with regular Americans getting paid for their contribution to society. As teachers, we expect our students to take personal responsibility for their actions, and we reward students according to their academic performance. Likewise public school teachers produce top quality high school graduates and we expect to be compensated accordingly. For christ’s sake, social security is running a surplus of IOUs. There is no need for cuts to public benefits, and people who tell you otherwise are lying little weasels."

 

fonzannoon's picture

MDB please telll Hairy Ramiro he can take a 60k voluntary cut now or a 100% cut after the reset. His choice. Tell him to tell his friends.

francis_sawyer's picture

I can say 'HONESTLY' that what brought me to this thread was the foto of the new nerdy looking SNORG TEES blonde (with the knock kneed & JOMG look about her)... But while I'm here, on the subject of BLOWING (& the derivative perils)...

Ask yourself

~~~

Is the PROBLEM... the 'random-ality' of one stupid ass/socialist system ensconced/twerp MAKING BETS (with paper JOOBUX) the problem?

Or is it PAPER JOOBUX (and the greedily idiotic behavior that they elicit) the problem?

~~~

As always... the MEASURE (based on up & down arrows) that will be achieved by this proposition will have little to do with reality... Instead ~ it will have 100% to do with 10% of the jews (&/or idiots) out there, levering up their 10% voice into a squeaky 50-50 leverage...

Have fun & Happy Hannukah!

redpill's picture

short version:  

tits.

 

francis_sawyer's picture

Actually ~ I liked the sensuality of the 'Q~Angle'... You'll probably have to look that one up... Not many people know about it... Well ~ that + the 4 eyes... Tits were a bonus...

~~~

See... That's where women have it all wrong... They've allowed bullshit doctors & bullshit marketing into getting to spend hundreds of millions of dollars on their fucking tits... NO DOCTOR can make a 'Q-Angle' any better or worse... It's nature that you have to live with... It's as old as times...

~~~

http://www.youtube.com/watch?v=sBfdl6hNZ9k

francis_sawyer's picture

Just think... If AIPAC keeps paying you (serial junker) to hang around ZH 24/7 clicking RED arrows... Maybe someday ~ you'll actually have an impact on public opinion... Here's a suggestion... Try NOT being a full fleged:

~~~

- Supporter of an APARTHEID state...

- Defender of worthless currency which befefits only who you believe to be your clan

- Basic nepotism advantaged jackoff

Maybe that will work... Maybe, FINALLY, someone or some culture in HISTORY will actually like you...

Terp's picture

Two questions:

 

Whats a snorg tee?

 

and

 

How does it relate to the worthless currency?

Pareto's picture

This is what I can't stand about coercive (union) public employees, they think their craft is sooooo much worth more than their equivalents in the market place yet they have no way of actually demonstrating it.  None. Absent of any economic calculus w.r.t his long term pension liabilities that are somehow my problem, Harry deserves fuck all, as far as I am concerned.  There are no gurantees in life, and the thought that if you work 30 years, you'll get a guranteed pension for life, irrespective of budgets, or, the market, is arrogant, greedy and self righteous.  Indeed, bring on the reset, the do over.  How's that for a reality check wake-up call Harry?"  Didn't anybody tell you along the way that if it sounds to good to be true, then it probably is?......$100K+.......fuck...........you.

Ghordius's picture

it's Oesterreich or Austria. literally: "the Eastern Duchy"

and the above a typical effect of a receding tide, you suddently notice who was swimming naked all the time

knukles's picture

Austria, America, public finance world wide is the same....
An absolute bonanza for the banksters upon whom to unload crap paper at amazing prices.

Priceless (customer base)

The trend is your friend's picture

i wonder if the squid was on the other side of that trade

economics9698's picture

Yes the squids are the masters of milking the public.

BlueCollaredOne's picture

He is a she in this case.  I just wanted to correct you because it seems so rare for women to engage in shit like this.  

Chicken or egg question. Is this because the financial industry isnt comprised of women?  Or do women have some trait that makes them less likely to fuck over people?

Joe moneybags's picture

We often hear of rogue traders, but hardly ever a rouge trader.

Matt's picture

Lower testosterone, more estrogen = lower risk as a general rule.

ParkAveFlasher's picture

"Lower risk?"  Who is on the other end of most "risky" male copulations?  Outside of Barney Frank's constituency, of course.

Ruffcut's picture

Yep, if only those few rogue employees would obey the rules. We would would be in grand shape. All those "ifs" and "buts" would be candy and nuts.

Merry clusterfuck to you, bitchezz.

Dick Darlington's picture

How abt the 20bn+ off balance sheet municipality debt discovered by the Austrian public sector auditors few months ago? FM Fekter has been very very quiet abt that...

AlaricBalth's picture

The civil servant, Monica Rathgeber, lost millions on Icelandic Sovereign bonds and then like a true gambler, went to another table and tried her hand at credit derivatives. Range accrual swaps to be exact. These trades also went against her (in favor of the counterparty who sold them to her of course) and then she covered up the losses.

Here she is: http://www.xing.com/pubimg/users/e/7/6/bddb95ebc.12027092,3.jpg

 

whotookmyalias's picture

I remember in school being told that the fall of the Roman Empire may have been caused in part by the lead pipes they used for plumbing.

Derivatives are to our society what lead plumbing was to the Romans.

Dr. Engali's picture

Or the fluoride in our water.

EscapeKey's picture

er yeah, joseph tainter does not agree

Dr. Engali's picture

"Civil servant blows" says it all.

EscapeKey's picture

"success has many fathers, failure is an orphan"

Caviar Emptor's picture

More regulations maybe? I think that's beyond cruel and unusual punishment for anyone in the financial services industry who loses other people's money on risky derivatives.

After all jail is for little people. What works for bankers and traders is verbal torture suggesting possible regulations in the future. The humanity!

EscapeKey's picture

more regulations for the common people, less for the financial sector monoliths

Caviar Emptor's picture

Totally agree!! It's just a silly little ole game we all play at this point: we tell a little fib about 'more regulation for banks and traders is coming' like we really, really mean it and then we all crack up and have a good little laugh over it! Helps keep everyone happy since, for a moment, even bankers can laugh with EBT card holders. And we all bask in the glow of that precious moment before going back to our roles....really very Hallmark

michiganmaven's picture

In other news Draghi has now announced that these obligations are actually AAA rated and available to be used for ECB loan requests.... see 15 mins later problem solved.. so easy in this farce of a global banking system !

BlueCollaredOne's picture

She should use this article to apply to JPM or Goldman.  They are always on the lookout for new talent that has no moral compass.  They want the type of person that wouldn't hesisate to play a game of russian roullette, you know, a real risk taker.  They like people who don't follow things like "compulsory standards"  That's why you pay congressman!  

Look out all you people who have just graduated with a PHD from columbia business, this girl will be serious competition. 

fonzannoon's picture

what kind of roulette is it when you spin the chamber and then shoot someone else in the head....Polish roulette?

Its_the_economy_stupid's picture

yeah, russian rouletter with the gun against the public's head.....certainly not her own. BTW, where's the criminal charges? No-o-o-o-o-o-o-o-, can't do that. It might open the door to crominal charges among the banking set. No, can't have that.

LawsofPhysics's picture

Return all her private wealth as well as the stolen monies to the taxpayers and execute her publically.  Then watch as the market rally.

Spastica Rex's picture

Austrian? Impossible.

hannah's picture

a billion here and a billion there or a trillion...?!...what does it matter aas long as i get my welfare check and food stamp debit card i could care less. waiting for my new obamaphone also. screw you tax payers...hahahahaha!

buzzsaw99's picture

again no mention of the bookie/bank that ended up with all the money

Caviar Emptor's picture

Austerity for Austrians? Nein, mein leiber herr.

Caviar Emptor's picture

But but I heard we made a BIG profit on AIG! I was hoping Benny would take us all out for a beer and make us laugh.....ah well

lunaticfringe's picture

440 million? Shit man fuck. I got that much on my Home Depot card.

XitSam's picture

McMansion or Fuhrer Bunker?

But seriously, am I the only person with no personal debt?

Canucklehead's picture

I think Gulnara Karimova has no personal debt, but it's hard to get a straight answer.

http://en.wikipedia.org/wiki/Gulnara_Karimova