Regarding this past week:
Read at least the first 4 paragraphs from the wall street journal. The
whole article is an interesting read. The bank dumped many $billions
in positions in a 72 hour period.
"French Bank Rocked by Rogue Trader"
http://online.wsj.com/article/SB1201...ws_us_business

Remember the August downturn? Reuters also has an article about the
"rogue trader". What I found interesting in this article is a
reference to the August downturn towards the end of the article.
"The U.S. Federal Reserve cut its discount rate, or the rate at which
it lends directly to banks, in August, soon after BNP Paribas, another
French bank, spooked investors worldwide by freezing 1.6 billion euros
worth of funds due to problems in the U.S. subprime mortgage sector."
http://www.reuters.com/article/ousiv...nnel=0&sp=true

Damn those French bankers.

By Peter Robison
Jan. 25 (Bloomberg) -- A rogue trader on the run. A storied
bank in turmoil. Shareholders left to ask what happened.
More than a decade after former Barings Plc trader Nick
Leeson provoked a worldwide manhunt with $1.4 billion in losses,
the script has become familiar at modern financial institutions
where traders can make fortunes on complex instruments their
bosses may not understand.
Jerome Kerviel, 31, who was blamed by Societe Generale SA
yesterday for causing a 4.9 billion-euro ($7.2 billion) trading
loss, the largest in banking history, is at least the seventh
individual singled out for unauthorized trading since 1994. Some
hid, or obstructed investigators. Most were jailed.
``It's yet another argument why you want to have all
derivatives trading in standardized instruments that are
exchange-traded,'' said Martin Mayer, a guest scholar at the
Brookings Institution in Washington who has written more than a
dozen books on finance. ``Anything else is asking for a lot of
trouble, and it will keep coming back.''
When Leeson, then 28, went missing from Barings's Singapore
office in February 1995, the story of how a single trader
brought down a 233-year-old British merchant bank caused a
sensation. The memoir Leeson wrote while serving 3 1/2 years in
jail, ``Rogue Trader,'' was made into a film starring Ewan
McGregor.
Since then, financial institutions including Sumitomo
Corp., Daiwa Bank and Allied Irish Banks Plc have been burned by
unauthorized trading, causing billions of dollars in losses.
Trading blowups are so frequent that Leeson, who now lives in
Ireland, fields calls through an agent to dissect the latest
financial scandals.

Paid to Talk

He will conduct two paid-for interviews on the subject of
Societe Generale, a spokesman for Leeson told Agence France
Presse yesterday. Leeson also spoke with the British
Broadcasting Corp.
``I think rogue trading is probably a daily occurrence
amongst the financial markets,'' the BBC quoted Leeson as
saying. ``You're still looking at a situation where the systems
and controls aren't good enough.''
Paris-based Societe Generale, France's second-largest bank
by market value, said Kerviel set up secret positions that went
beyond permitted limits on futures linked to European stock
indexes. In a letter on the bank's Web site, Societe Generale
Chairman Daniel Bouton said the trades were hidden ``through
extremely sophisticated and varied techniques.''

Low Profile

Little is known yet about Kerviel. Management des
Operations de Marche, a business school in Lyon, lists him as a
2000 graduate. A photo in the bank's staff directory shows him
as dark-haired and clean-cut, with a somber expression.
``Very quiet and a loner,'' Yves Messarovitch, an external
spokesman for Societe Generale, said of Kerviel. ``He had made
his dream of becoming a trader come true.''
Bank of France Governor Christian Noyer told reporters at a
briefing in Paris that the trader suspected of causing the
losses had fled. Elisabeth Meyer, a lawyer for Kerviel, said he
didn't report for work after being dismissed by the bank but is
available to investigators, AFP reported.
The bank said Kerviel didn't enrich himself from the
trades, which began in early 2007. He began working at Societe
Generale in 2000 and made a salary and bonus of less than
100,000 euros a year, it said.
By its nature, trading tends to attract competitive people
who take risks and push limits, Mayer said.
``I didn't set out to rob a bank,'' former Daiwa trader
Toshihide Iguchi told Time magazine in a 1997 interview at a
prison in Pennsylvania, where he was serving a four-year
sentence for fraud and falsifying documents.

Closings in U.S.

Tokyo-based Daiwa in 1995 was forced to shut its U.S.
branches after disclosing a $1.1 billion loss from 11 years of
unauthorized trading by Iguchi, its chief New York government
bond trader. Iguchi, born in Kobe, Japan, had studied psychology
at Southwest Missouri State University in Springfield, Missouri,
and earlier worked in Daiwa's back office.
``To me, it was only a violation of internal rules,''
Iguchi told Time. ``I think all traders have a tendency to fall
into the same trap. You always have a way of recovering the
loss.''
A year later, Sumitomo disclosed a $2.6 billion loss on
unauthorized copper trades. The Japanese firm blamed its chief
copper trader, Yasuo Hamanaka, who was known as ``Mr. Copper''
in the markets because of his aggressive trading. Hamanaka was
sentenced to eight years in prison in 1998. He was released in
2005.
In an interview that year with Bloomberg News at his two-
story house in Kawasaki, near Tokyo, Hamanaka said he was
``amazed'' at today's high prices for copper and wanted to go
back to work.

Prison Term

John Rusnak, a Baltimore-based trader for Allied Irish
Banks, is serving 7 1/2 years in prison for his role in amassing
and hiding $691 million of losses over more than five years.
Allied Irish Banks discovered the losses in 2002, and sold the
Allfirst Financial unit where Rusnak worked to M&T Bank Corp. of
Buffalo, New York.
Leeson moved to Galway to live with his Irish wife five
years ago, after completing a degree in psychology in London. He
is now chief executive officer of Galway United football club,
which competes in Ireland's Premier Division.
Leeson supplements his income with dinner speeches and
conference appearances. He wrote a commentary for the Irish
Independent newspaper yesterday warning that the financial
meltdown triggered by the U.S. subprime crisis will spread.
``The really worrying fact is that we probably have not
seen the end of the carnage,'' Leeson wrote.

AN OLD line of Hank Paulson's has been dusted off since news broke of a €4.9 billion ($7.2 billion) trading loss at Société Générale, France's second-largest bank. “We will never eliminate people doing bad things,” the former head of Goldman Sachs, now America's treasury secretary, once said. “In a town of 20,000 people, there's a jail.” The question now being asked of SocGen is: shouldn't there also be a police force?

In fact, SocGen has plenty of internal cops at its high-security headquarters in the La Défense enclave of Paris. The bank's annual report for 2006 devotes 26 reassuring pages to its risk-management practices; more than 2,000 staff worked in the function that year, and lots more bodies were added in 2007. Yet none of them stopped Jérôme Kerviel, the trader accused of taking enormous unauthorised bets, from building an unhedged €50 billion exposure to European futures markets (Mr Kerviel reportedly alleges that his supervisors were aware of his activities).....

Societe Generale SA trader Jerome Kerviel said he won't become the ``scapegoat'' for the bank's 4.9 billion-euro ($7.2 billion) trading loss.

``I was singled out by Societe Generale,'' Kerviel told Agence-France Presse during a photo shoot today. ``I am taking my share of responsibility, but I will not be the scapegoat for Societe Generale.''

Kerviel has been charged with breach of trust, falsifying documents and hacking into the computer systems of France's second-largest bank. Kerviel, 31, amassed 50 billion euros in bets on European stock index futures, which led to the biggest trading loss in banking history.

``You lose sense of the amounts when you're involved in this type of work,'' the news agency cited Kerviel as saying. ``It's unreal. You let yourself get a bit carried away.''

Kerviel spoke in the office of his lawyer, Elisabeth Meyer, her spokesman said. In a white-checked button-down shirt and blue jeans, the trader told AFP he was ``neither suicidal nor depressed.''

He has had minimal contact with his family since the start of the investigation ``to protect them from the media,'' AFP cited him as saying. He said he was following the story ``in the newspapers and on line.'' Kerviel is staying with friends in the Paris region, after having spent ``a weekend in the country,'' AFP said, citing his lawyer.

Bank `Complacent'

Kerviel told prosecutors during 48 hours of interrogation on Jan. 26 and 27 that the bank had been ``complacent'' about his trades.....

For five days in January, as European markets began to slide, Jerome Kerviel lied, stalled and used jargon to keep colleagues from discovering the phony bets that eventually brought him down and led Societe Generale SA to post a record trading loss.

One employee was so confused by Kerviel's explanation about why his counterparty had such a high risk level that she didn't pursue it, according to the bank's internal probe published Feb. 20. She was one of four people from the back, middle and risk- management offices who initially questioned Kerviel on eight forward trades beginning Jan. 2.

The report censures the controls that Societe Generale, which helped create today's derivatives markets, says keep risk at an acceptable level. It shows that compliance officers went through the motions of carrying out controls without challenging Kerviel's explanations or probing further when he changed counterparties or canceled trades.

``It seems there was a consensual `laissez-faire' within the bank,'' said Pierre Flabbee, an analyst at Landsbanki Kepler in Paris who cut his rating on the stock to ``reduce'' this month. ``A trader wants to make money and can be intoxicated by success. There was apparently elasticity in the notion of limits.''

After winning by wagering on the market's decline, Kerviel had recently switched his positions to bet on a recovery of Germany's DAX Index and the pan-European Euro Stoxx Index, Societe Generale has said.....