Nick Leeson Shrugged

Did SocGen trades trigger market rout, Fed cut?

LONDON/PARIS (Reuters) – Societe Generale’s shock disclosure of a fraud that lost it $7 billion has left investors wondering about a link between the fiasco and Monday’s European stock market rout.

The sharp fall, which was followed by an emergency U.S. rate cut, came as SocGen tried to close out positions built up by one of its traders.

SocGen, France’s second biggest bank, said on Thursday that it had been the victim of a massive and “exceptional” fraud by a junior trader resulting in losses of 4.9 billion euros, and announced a large capital increase.

SocGen said the trader, responsible for futures hedging on European equity market indexes, had taken massive fraudulent positions in 2007 and 2008 beyond his authority.

For those who don’t know: Nick Leeson wikipedia entry.

Also see: Ben Mezrich Knows How To Tell A Story

And: Revealed: ‘Invisible man’ rogue trader, 31, behind £3.7 BILLION bank fraud

The guy was 31:

Kerviel, who earned less than £75,000 per year – including bonus – was described as a “technical whizkid” loner who hacked in to the bank’s immensely sophisticated trading systems.

It will be interesting to see if he actually did “hack” or if this is a cover story to stifle future liability by SocGen. I expect it will come out that their trading system was sloppy, lacked any safeguards, and traders had no credible oversight.

And thus the Collapse Of All Things will happen. It won’t be solely widespread greed. It will be a single egomaniacal adrenaline-junkie jackass with an insanely-leveraged position that crashes the entire global financial system. And then all of the egomaniacal adrenaline-junkie jackasses who run things will destroy our confidence in everything else.

Welcome to your future.

Explore posts in the same categories: C.O.A.T. - Money

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