Michael Alix was chief risk officer for Bear Stearns.
It’s one of those titles that raise eyebrows, or even provoke smirks, like “captain of the Exxon Valdez” or “head of safety and engineering at Chernobyl.”
When Bear Stearns promoted Alix in February 2006, it issued a press release saying, “Mr. Alix’s primary responsibilities will include credit, market and operational risk management firm-wide.”
Bear Stearns chairman James Cayne himself weighed in on Alix’s promotion, as well as the appointment of a new deputy chief risk officer to help Alix.
“These new positions reflect the importance Bear Stearns places on creating best-in-class processes in analyzing and managing the firm’s risk,” Cayne said. “This change also recognizes the increasing interaction of credit, trading and operational risks in our global, diverse and complex businesses.”
We all know how the story turned out. Bear Stearns took on so much risk, its extinction became the most probable risk-management outcome.
Cayne was forced to resign just before the bank’s fire sale to JPMorgan Chase & Co.
Separately, Ralph Cioffi and Matthew Tannin, who had managed funds laden with risky debt securities, soon became the first Wall Street executives to take the perp walk in the subprime debacle.
Alix, meanwhile, is moving on. He just landed a job at the Federal Reserve Bank of New York as senior vice president in the Bank Supervision Group.
See, sometimes everything on Wall Street can work out for the best:
Manage risk at one of the world’s biggest investment banks as it blows up. Then get a job telling smaller banks what to do.
Miss a looming credit crisis. Then run to the Fed for billions of dollars in aid, and then have the temerity to say, “Oh, and by the way, can I have the job too?”
Alix started his new job on Monday. The New York Fed slipped out a short press release announcing the move on Halloween, when everybody was distracted eating candy.
I wish this announcement had come out sooner because it gave me an idea for a Halloween costume.
Dress in tattered suit. Roll around in chimney soot. Smear black greasepaint on face and hands. And when people ask: What are you supposed to be? Answer: chief risk officer for Bear Stearns.
Initial media reports on the announcement drew the obvious conclusions and even allusions to the old “fox in charge of the henhouse.”
I called Mac Clouse, a finance professor at the University of Denver’s Daniels College of Business, for further reaction, but he couldn’t escape the obvious conclusions either.
“Bear Stearns obviously didn’t understand, nor did it manage, its own credit risk,” he said. “Why would we think (Alix) is the best person to regulate other banking institutions?”
“Does he have inside information about Bear Stearns that the Fed wants?” Clouse continued. “And was this the only way to get him to talk?”
Surely, there is a better explanation. Surely, this can’t be as stupid as it appears on its face.
I called Andrew Williams, a spokesman for the New York Fed. But he declined to comment or make Alix available.
So I guess that leaves us to speculate in a continuing vacuum of information. And I, for one, would like to try to view this rather unusual announcement in the best possible light.
Maybe Alix is working for just $1 a year.
Maybe he’s showing the Fed where all the subprime bodies are buried.
Maybe he feels terrible about all the money he made managing unmanageable risks, and just wants to be a good comrade in the new socialist banking order.
Here’s another thought: Perhaps managing risk at one of the world’s largest financial implosions is one of the best credentials a chief risk officer can have on his resume. It’s like sticking your tongue on a frosty metal pole. You do it only once.
Maybe Alix isn’t as bad a risk manager as he currently appears on paper.
Maybe he deserves another chance.
Besides, what kind of risk officer would he be if he couldn’t manage the risk of his own career?
Al Lewis: 201-938-5266 or al.lewis@dowjones.com
