The Fable of the Rogue Trader
Is there a Rogue Trader in Your Bank?
There are a number of interesting posts about the alleged Rogue Trader at Societe Generale. Ed Dickson writes up about double books that the Rogue kept. Michael Thomas, of Daily Caveat, has a nice run down of various posts about the Rogue. Naked Shorts has their typical irreverent view of the Rogue. And financial fraud author, Tracy Coenen, writes:
"
Societe Generale says that the long positions were found and analyzed on January 19 and 20, and that all the positions have been liquidated. They also say that this loss doesnt mean that they have a bad risk-management process or poor controls over employees.
How could the situation say anything else? Of course an employee exceeding his authority at this high of a level exposes weaknesses in the banks systems!
Paul Kedrosky writes about the fraud:
"More broadly, I'm delighted to see the return of a rogue trader, even on this small scale. Capital markets work best when greedy and well-capitalized traders get to take absurd, inappropriate and unwarranted risks, so I'll take this as meaning we're on the path to relatively market normalcy, even if that future is one with far fewer banks playing hosts to knaves like Mr Kerviel and his like."
But, the best, in my opnion is the BBC reporting on SG's whine thatmarket culture 'at root of rogue trading'
"Societe Generale, nursing huge losses, is at pains to point out the trader who inflicted them was 'irrational' and acting alone.But banking industry experts say complacency and a market culture that rewards excessive risk-taking could also be at fault. "
Making a bet with house money that pays off insanely large, and losing is a couple of years in jail- if caught.
Hmm, now if the Mob was running the bank I could see that the bet was irrational. You would get whacked. But what is the actual downside to our Rogue?
Well, out after serving 3.5 years in Jail, what is Nick Lesson up to?
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.'
Sounds like good work to me.
Saying something is irrational, doesn't make it so.
