If you ever thought Nick Leeson back in '95 could never be trumped in one person taking down the barings bank for billions.
Enter one unnamed futures trader who covered up 7.14 Billion worth of trading mistakes. That is rocking French bank Societe Generale Bank.
Several news links on it this morning, check it out…
Good God!!!
Kangi
Yeah it’s pretty awesome. I’m always surprised at how firms don’t have enough checks and balances in place to prevent something like this from happening. Same with all this subprime stuff - it was obvious there was a bubble already in the early 2000’s…what would make someone as respectable as UBS go so gung-ho about this? The only answer I can come up with is greed and a bunch of idiots leading…
If you ask me, I think those holes are intentionally open but they only come up in the news when they are found by someone who was not to know about them. That’s ok, it makes me feel good when I lose, knowing those big shot traders do lose, they just hide it. 
My first comment when I saw it on the news:
‘Even I could not have lost that much’!!!
On a serious note does anybody know EXACTLY what he was doing (as a matter of interest of course)??? I tried to ‘figure it out’ but the details given on CNN and Bloomberg and CNBC were ‘sketchy’ at best. I believe it had something to do with ‘false’ stops or something like that but that’s all I heard mentioned.
Details are pretty scant I expect while they try and figure it out too, but from what I can gather, he placed massive bets on the markets going up, and hedged it with a virtual position from a client that didn’t exist. So the overall risk exposure of the bank looked fine, which is why it didn’t raise any alarms. But it wasn’t OK, because one of those hedges was fictitious.
And that begs the question, how could he set up fictitious accounts like that without anyone noticing. On his own? For billions of pounds? Really? Hmmm…
Yeah the guy was back office then so he knows the holes in the process.
Subprime case is different because the strategy was sanctioned by the bosses. :rolleyes:
He was a stock index futures trader who blew up with massive positions - that we know - I suspect what happened was that he figured out a way to override the risk management parameters Societe Generale had in place - and was able to do this thanks to his back office experience and technical know how
Ok… But think about this…
If he was a rogue back office personnel, that knew the ends and outs of the bank, and was in a equities futures trader position…
What did he gain by trading fictitious accounts? He wouldn’t be able to just say, hey I deserve a raise, I used a loophole and made the bank billions.
He couldn’t just walk up to the teller and withdraw the billions.
My thinking is he is being made the scape goat for the bank, probably his idea, bank uppers liked it since he was probably their best at one time, but if it all blew up they would wash their hands of it and hang him out to dry…
To me this makes sense, but who really knows.
socgen really bears 99% of resposibility here it looks like -
[I]The Soci�t� G�n�rale affair descended deeper into the mire last night as investigating judges threw out the most serious accusation, attempted fraud, put forward by prosecutors against the trader behind the �4.9bn losses, J�r�me Kerviel.[/I]
This WSJ article is the most comprehensive I’ve seen yet:
How to Lose $7.2 Billion: A Trader’s Tale - WSJ.com
I didn’t realize that Kerviel was actually positive to the market in a huge way at several points - in December he was actually UP 1.4 billion Euros! Quel disastre…