Investment
Financial Services: Banks, Brokers, Money Managers, etc.
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Inya Ivkovic
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Inya Ivkovic
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Inya Ivkovic
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Inya Ivkovic
- The WSJ Online - Worse than Nick Lesson
Some 'Plain Vanilla' Fraud
To the Tune of $7.16 Billion
By JOSEPH SCHUMAN
THE WALL STREET JOURNAL ONLINE
Add to the uncertainties rattling today's financial world a good old-fashioned case of rogue trading that will cost France's second-largest bank some 4.9 billion euros, or $7.16 billion.
Societe Generale today said that over the weekend it discovered that last year and this month an individual trader "had taken massive fraudulent" positions "beyond his limited authority," and that by using his knowledge of the bank's security practices he "managed to conceal these positions through a scheme of elaborate fictitious transactions." The trader was only responsible for "plain vanilla futures hedging on European equity market indices," the bank said -- though that description seems like a contradiction in terms. SocGen said it decided to liquidate the unauthorized positions as quickly as practicable, and that the scale of the fraud, combined with the "very unfavorable market conditions" currently in play, translated into the 4.9 billion euros write-down it decided to take in its 2007 pre-tax income. All of this comes on top of what SocGen said would be 1.1 billion euros written off because of its bad bets related to U.S. mortgage debt, as well as 1.4 billion euros in other write-downs.
The SocGen announcement spoilt at least part of the stock-market remission today in Asia following yesterday's tumultuous trading on Wall Street that ended with a nearly 600-point ascension in the Dow Jones Industrial Average, allowing it to close up 298.98 points at 12270.17. While Japan's benchmark stock index closed up 2.1%, before the SocGen news, Hong Kong reacted to it by losing its early gains to close down 2.3%. European markets seemed to be treating it like the isolated incident SocGen said it was, with British stocks up nearly 3% at midday, German shares up 4.6%, and stocks in France up just over 4%.
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Inya Ivkovic
- The WSJ - "France Presses Bank to Dump CEO Over Trading"
http://online.wsj.com/article/SB12015972...
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