stories filed under: "billions"
by Mike Masnick
Mon, Jan 28th 2008 6:21am
At the end of last week, the latest banking scandal started hitting the wires as news broke of a low level trader for the French bank Societe Generale was somehow able to lose the bank $7.2 billion by sneaking around various control and security systems to make a series of complex bets, well beyond what he should have been allowed to do. Many people are comparing it to the case of Nick Leeson, who brought down Barings bank over a decade ago -- though, with Leeson, it only took a little over a $1 billion. And, over the weekend, the details got worse. That $7.2 billion loss came on bets up to $73 billion. It certainly raises plenty of questions about the controls that are in place. No matter how sneaky you are, you would think that $73 billion would be pretty hard to trade without anyone noticing. Apparently not. The trader in this case, Jerome Kerviel, supposedly had a detailed understanding of the security systems thanks to an earlier job at the bank, that involved monitoring the trading systems and then used other people's accounts and falsified documents to hide his tracks. Even so, you would think that someone would have taken notice of $73 billion moving around. Societe Generale claims that, unlike Barings, it can easily survive this fraud and will even turn a profit. Of course, at the same time, it also announced it needs to raise $8 billion -- and given the size of the loss, that certainly makes it sound like the bank needs to replace that money pretty quickly.