Societe Generale story

[Tulpen]

For those who have no heared: http://biz.yahoo.com/ap/080124/franc...ale_fraud.html


Am I the only one who finds this story lacking a bit of credibility?

[Rajiv]

Re: Societe Generale story

Scapegoats will be found -- and it is hoped that the story will go away

[Andreuccio]

Re: Societe Generale story

For those who have no heared: http://biz.yahoo.com/ap/080124/franc...ale_fraud.html


Am I the only one who finds this story lacking a bit of credibility?

Societe Generale filed a complaint Thursday with a court in Nanterre, west of Paris, accusing the trader of fraudulent falsification of banking records,

In related news, the Associated Press has sacked writer Emma Vandore for "redundant repetitions" in her story about the trader.

Until last year, the trader had been betting that markets would fall, but then changed his position at the start of this year to bet they would rise, said Kinner Lakhani, an analyst at ABN Amro in London who specializes in Societe Generale shares, citing the bank's management.

[Mega]

Re: Societe Generale story

If only he read Peter Schiffs book................he be the OWNER of the bank by now!
Mega

[blazespinnaker]

Re: Societe Generale story

For those who have no heared: http://biz.yahoo.com/ap/080124/franc...ale_fraud.html


Am I the only one who finds this story lacking a bit of credibility?

Pmarca finds the funniest things:

The Financial Times liveblogs the Societe Generale conference call; everything translated from French:

10.01 - “we’re all waiting,” explains one journo to two new arrivals to the conference call. No sign of any official/SocGen action just yet. Just half Europe’s financial media.

10.03 - very loud banging in the background. Someone makes a gag about a guillotine in action...

10.12 - the chaos continues. They’re looking for our correspondent apparently. Starting to see how this bank managed to let a plain vanilla futures trader build up sufficiently vast positions to lose €5bn. They don’t seem to have mastered the basics of telecommunications...

10.19 - the conference seems to be going on: “dealing with an extraordinarily exception….specific case”...

10.21 - there’s a forceful type online complaining that the bank must restart the conference call. In the background: “we are probably…nothing to do with the core activities….derivative product.” Hope you’re finding this as insightful as we are...

10.23 - We’re in!!!!!!

10.24 - It’s muffled. Someone called Frederic (?) is talking….about the writedowns related to subprime. Which wasn’t what we wanted at all...

10.33 - “We have just given you bad news. We have just shown you simultaneous that…the whole [company] was making quite good results... The strength of our business …and the skills of people working in the [company] is wonderful.”

10.36 - to conclude - “All my apologies for those awful events we uncovered last weekend.” Onto questions...

10.45 - motivations of fraudster are “totally irrational.” He didn’t directly benefit. Further investigations will be carried out to see if he indirectly benefited...

10.48 - bank had a “duty to cut off positions before disclosing the information.” “With the chance of good fortune, it was possible to liquidate these positions over three days which was quite exceptional...We discovered this at the same time as the market plummeting….we really had to settle those positions as fast as we could and we did so during the three day crisis which you all witnessed.” [Aha! Thus the massive worldwide equity market crash on Monday!]

“They could have turned into gains if the market had gone up.” [If I had wings, I could fly!]

10.55 - “the risk and control system is not faulty.” [Yes, clearly not.]

11.14 - the man was let go with his passport, it seems. “perhaps we made a mistake.”...

[*T*]

Re: Societe Generale story

The SogGen story is complete BS.
Look at the date on the job ad.

(courtesy macro man once again)

[dbarberic]

Re: Societe Generale story

Jim Sinclair is speculating that it was a non-performance of an over the counter derivative and that it is being covered up.

http://www.jsmineset.com/

The theme concerning the recent market drop and involving Monday morning’s Fed action is that the Federal Reserve cut rates significantly assuming a freefalling equity market to be a product of panic. This theme suggests panic is capable of producing more panic and therefore furthering the potential of the fall.
In the timeframe leading up to and during the freefall of equity values, a major French bank was having a just recently discovered significant problem liquidating a hidden position of equities in some form or another. This liquidation by the major French Bank, although unsaid, implied that action has taken the market down significantly in the week preceding the Fed action.
Consequently, there really is no economic or derivative problem that was at the heat of the extreme drop of equity values, nor does it mean anything that the major drop took place on the news of AMBAC bond downgrading, a major player in default derivatives.
As such, the Fed acted somewhat in error as a result of not knowing the French bank’s activity as the root of the plunging equity values. The assumption since the bank reported a complete loss is that the French bank has completed its liquidation, all is well and the future is rosy.
This really quite beautiful effort of plausible denial requires some critical examination:

Question: Could a junior trader have entered into a position of such magnitude that it could make or lose $7,000 million?
Answer: It is most unlikely as personalities making transactions of this proportion are few and far between. They know each other. At minimum, the other side or sides would have inquired with the Senior Trader if the Junior Traders knew what he was doing.

Question: Could a transaction of this magnitude be successfully hidden for months?
Answer: After the Warburg/Rogue trader experience, major trading entities have tightened up their accounting and audit processes to prevent just this type of act.

It is a strain on the imagination to think that this could have been accomplished as transactions are confirmed between trading houses electronically. That confirmation process then goes to the trading entity to again confirm. Risk control in major houses then factor that into overall positions.
How a junior trader could have short cut that procedure is hard to imagine.
The thesis that a junior trader hid a gargantuan trade confirmation under his desk or that a procedure missed it is extremely unlikely to be factual.

Question: What was the form of the transaction?
Answer: By not specifically stating the media and the public would assume the trader somehow held a long position of shares that were being liquidated into the market.

That strains one’s imagination as well because such a position would be so visible that it would glow in the dark.
This leads one to assume the position was either a derivative on equity indices or mathematical equivalents derived by algorithms, not the world’s largest long position in US equities.
This leads one to assume that one side of the trade, the side which was called on to perform, could not or in the case of the bank in question selected not to perform.
As such, the loss was on a structured investment vehicle either structured by the bank in question or another.
Rarely do these special performance contracts called OVER THE COUNTER DERIVATIVES actually perform, but rather are bought out by the losing side when called to perform on.

Conclusion:
The USD $7,000 million loss reported as an action of a junior trader hiding a losing position for a considerable amount of time as stated is total bull.
You would have to be totally IGNORANT of market mechanics to buy that plausible denial.
The public and much of the media are.
The reported loss was a buyout of a failed to or chosen not to perform derivative.
The world’s equity markets broke for their own reasons and not because a large French bank was selling common shares into the marketplace as the newest and rather well done SPIN would have you think.

[Mega]

Re: Societe Generale story

I hear that the amout of loss has jumped, i agree NO WAY its one bloke. I just keep wondering what will break the camnels back?

I feel it will soon trigger, but how soon?
Mike

[Verrocchio]

Re: Societe Generale story

It seems hard to believe that Ben Bernanke was unaware of the French problem when he made his decision to drop 75 bps. Did he or didn't he?

[Jim Nickerson]

Re: Societe Generale story

Read John Mauldin's assessment of this past weeks. http://www.safehaven.com/article-9320.htm

[GRG55]

Re: SocGen - the inside story...

Sent to me by a European-based banker friend...

FRENCH TRADER WAS FORCED TO WORK 30 HOURS A WEEK

FRIENDS of rogue trader Jerome Kerviel last night blamed his $7 billion losses on unbearable levels of stress brought on by a punishing 30 hour week.

Kerviel hid his November losses in a batch of wonderfully fresh croissant

Kerviel was known to start work as early as nine in the morning and still be at his desk at five or even five-thirty, often with just an hour and a half for lunch.

One colleague said: "He was, how you say, une workaholique. I have a family and a mistress so I would leave the office at around 2pm at the latest, if I wasn't on strike.

"But Jerome was tied to that desk. One day I came back to the office at 3pm because I had forgotten my stupid little hat, and there he was, fast asleep on the photocopier.

"At first I assumed he had been having sex with it, but then I remembered he'd been working for almost six hours."

As the losses mounted, Kerviel tried to conceal his bad trades by covering them with an intense red wine sauce, later switching to delicate pastry horns.

At one point he managed to dispose of dozens of transactions by hiding them inside vol-au-vent cases and staging a fake reception.

Last night a spokesman for Sócíété Générálé denied that Kerviel was overworked, insisting he lost the money after betting that the French were about to stop being rude, lazy, arrogant bastards.

[The Outback Oracle]

Re: Societe Generale story

The info I am getting is that the original loss was about $1B. When SG tried to unwind the whole thing, various institutions got wind of it and knew SG had to liquidate. The losses were then driven another $7B before SG could get out of the mess. Someone will earn some nice bonuses in the process somewhere!

[jimmygu3]

Re: Societe Generale story

It seems hard to believe that Ben Bernanke was unaware of the French problem when he made his decision to drop 75 bps. Did he or didn't he?

FEMA head 'Brownie' didn't know there were Katrina victims at the Superdome for 2 or 3 days. Anything's possible.

Seriously, Ben's more plugged in and intelligent than Bush's FEMA crony. One would think that he knew. I tend to agree with the idea that he knows much more than we know about how serious the banking crisis is. I don't think he was "duped" as some have suggested. Action was required and the SG incident was merely a catalyst.

If you know that your house is structurally unsound and you feel a tremor in the ground, it's a wake up call to install the supports you should have installed already and make sure your family is safe. Regardless whether the tremor turns out to have been caused by a truck driving by or an earthquake, the action is warranted.

[c1ue]

Re: Societe Generale story

The info I am getting is that the original loss was about $1B.

That seems perfectly understandable.

The problem with derivatives is that you can never figure out the final losses until the position is fully exited.

Even Sir Warren could not put a figure on the derivatives positions he tried to close when he bought General Re...

[Gordo]

Re: SocGen - the inside story...

Sent to me by a European-based banker friend...

FRENCH TRADER WAS FORCED TO WORK 30 HOURS A WEEK

FRIENDS of rogue trader Jerome Kerviel last night blamed his $7 billion losses on unbearable levels of stress brought on by a punishing 30 hour week.

Kerviel hid his November losses in a batch of wonderfully fresh croissant

Kerviel was known to start work as early as nine in the morning and still be at his desk at five or even five-thirty, often with just an hour and a half for lunch.

One colleague said: "He was, how you say, une workaholique. I have a family and a mistress so I would leave the office at around 2pm at the latest, if I wasn't on strike.

"But Jerome was tied to that desk. One day I came back to the office at 3pm because I had forgotten my stupid little hat, and there he was, fast asleep on the photocopier.

"At first I assumed he had been having sex with it, but then I remembered he'd been working for almost six hours."

As the losses mounted, Kerviel tried to conceal his bad trades by covering them with an intense red wine sauce, later switching to delicate pastry horns.

At one point he managed to dispose of dozens of transactions by hiding them inside vol-au-vent cases and staging a fake reception.

Last night a spokesman for Sócíété Générálé denied that Kerviel was overworked, insisting he lost the money after betting that the French were about to stop being rude, lazy, arrogant bastards.

Great Story, GRG55.
One guy did the whole $7 Billion. Got to love the French. They're still blaming Waterloo on Napoleon's hemorrhoids.