After writing off nearly $38 billion of bone-headed investments since the subprime crisis began last year, more than any other lender, and destroying all the profit it had generated since 2004, troubled Swiss banker UBS has announced it will keep its investment bank under tight control, even shrinking it down, and that it has overhauled its leadership.

Still, appointing the bank's general counsel as chairman smacks of desperation and its not the smartest move. The question is whether an insider who helped stuff things up in the first place would be the ideal choice, a point taken up by some of its investors.

For a good summary of where the bank went wrong, particularly with its risk takers overlooking risk and its risk controllers miscalculating it, check The Economist. And the journal warns that it's a warning for other banks.

"The rest of the industry can hardly rest easy either. UBS got more things wrong than most but the traps it fell into will be familiar to its peers. Lots of other investment banks measure their status via league tables and seek to bulk up where they are weakest. Compensation and funding structures that fail to distinguish "alpha", or skill, from simple carry trades are widespread. The flaws in measuring risk, and the emphasis on net rather than notional exposures, are also known hazards."

This raises another more fundamental issue: the banks only have themselves to blame because of their flawed strategies. As strategic advisor Umair Haque writes in the Harvard Business Review, the banks have come to grief because they were following their flawed orthodox strategy.

"Competitive advantage is fundamentally about making markets work less efficiently," Haque writes. "One catastrophically effective way to do that is to hide and obscure information - to gain bargaining power relative to the guy on the other side of the table.

"In finance, those lessons achieved a profoundly perverse apotheosis: it was, ironically enough, Wall St itself that finally succeeded in making markets fail faster, harder, and more intensely than anyone dreamt possible.

"How? By building what Nouriel Roubini and Paul Krugman have aptly called a shadow financial system: a parallel value chain created to actively obscure and trap information.

"The shadow financial system reached its inevitable - and absurd - endgame with the rise of dark liquidity pools - trading networks set up to explicitly and actively hide information, and prevent true price discovery from taking place. A healthy financial system, of course, needs dark pools about as much as a fish needs a bicycle.

"Dark pools, the shadow system - all these elaborate ruses of orthodox strategy, of course, have gotten finance players nowhere but directly into deep losses and strategy decay. Witness a once-proud Bear Stearns catastrophically blown up with frightening speed and ruthless precision."