The BBC reports that:
French bank Societe Generale says it has uncovered "massive" fraud by a Paris-based trader which resulted in a loss of 4.9bn euros ($7.1bn; £3.7bn).
This is four times the Barings loss that brought that bank down. Societe General will have to raise capital to make good the loss, which it claims was the work of one person over a period of time.
As one commentator said:
I am sorry but I have a hard time buying the fact that a trader was able to set up a 'secret trade' of 4.9 billion without anybody finding out
Me too.
And people wonder why we campaign for more corporate transparency.
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I have heard a suggestion that up till Christmas the position was a winning one – it was only the sudden market downturn which produced a loss.
Sounds all too believable, but it makes me think that maybe people HAD noticed the position, but while it was a winner they were happy to let it run. No matter that the man wasn’t authorised to do what he was doing. If money talks, the promise of a lot of money shouts down everyone else.
What is of greater significance here, in the wider world, is the possibillity that it was Soc Gen recently unloading the massive positions created by this guy that precipitated the stock market losses and that prompted the Fed to cut US interest rates – ie global effects. One man (and the systems of the bank for which he worked failing to block his trading) causing massive stock market and interest rate falls. Nick Leeson only brought down a bank, this guy caused worldwide damage.