I react to this excellent article A2N , I am a regular reader. I also want to bounce it, because he said a lot of things I thought and that many close observers believe the markets.
I would add to his point of view from my analysis on the likely real scenario behind these events and the enormous loss of 7 billion euros announced yesterday.
The biggest scam in banking history
First, we must understand that this loss is enormous: several times those of Credit Lyonnais in the 90 who had brought shame on this bank, and had even led to questions about the possibility of putting the bank into bankruptcy. Finally it is the French taxpayer who paid the bill (including hundreds of millions of euros in fines claimed by the authority of the U.S. market several years after the French part of the case was closed).
is also 5-7 times more losses than the losses Baring's Bank, supposedly sunk by Nick Leeson, the trader mad Singapore.
Note that since the case of Leeson, banks have strengthened their control over the activities of traders.
It is extremely difficult for a trader to take positions as risky without the system knowing it.
I would add about Baring's, that malpractice Leeson was in fact a pretext, as it appeared at the end of this case that is $ 2 billion were evaporated without having knowledge of how and where this mass of dollars have apparently escaped Leeson. When you know that Leeson deceived the top executives of the bank by using a pair of scissors, glue and a photocopier to falsify documents and signatures, we can not help but think that his positions were in fact known and that some senior members of his bank took the opportunity to fiddle into believing that everything was the fault of Leeson. Leeson as a trader in the case of the SG, Krievel, had not taken these hyper risky speculative positions to enrich themselves, but because they were caught in a kind of casino player: I lose, and I want I repeat, So I bet more.
One man against a bank?
There are many similarities in the case of SG with that of Baring's particular level of improbabilities!
Already, the system of control of the purse as SG in all banks is extremely rigorous: several teams of auditors and inspectors monitor the operations and monitor each other, in competition and meeting each a separate branch. What makes that even assuming a trader with the complicity of the controllers fails.
Furthermore, transactions which were accounted the most basic trader. The kind of simple operations, which leaves a trader beginner, medium, as it seems that is the case Krievel, according to the communication of the SG.
To explain one man overcame control systems, we are told that this guy was a computer genius.
Problem: how an employee who is transferred from the Operations Control to the front office can maintain its access to the computer system? Lack of IT management? Lack of procedure? Incredible when you think of all the means for checking and sealing between market transactions and control of these operations!
In addition, the banking systems are complex: there have been little more than a computer genius to tamper with, but have a real background in IT, which was not If this trader.
A type unstable and fragile shelled trader with a bank yet hyper-selective?
Other retail ladle: the profusion of details on this type, whereas usually the markets are extremely modest for such cases. It is true that this guy is not Polytechnique and seems to be a trader of base! Indeed one wonders how he managed to become a trader when you know how the environment is closed and is dedicated to all father's son "out of the best schools (if you come from the suburbs and you finished Polytechnic Staff, you can forget to send your application: not even in dreams!).
We are told that this type was a fragile person who knew of family problems and tortured personality ... In short, a guy who would have been reset from the first interview with the SG, especially the recruitment to SG is quasi fascist: the candidates are scanned almost every angle, psychological profiles are drawn tight, all those who have been interviewed in various banks will argue that the most dismal interviews are those of the SG. It almost seems sometimes to be a guinea pig dissected by men in white coats ... It is hard to believe they missed such a profile. Unless of course assuming that this type is most likely only a son to his father who had already entered the bank. This explains that he could have a place to trade, despite the bump at these places, including for the Pistons ...
This wealth of detail expected to give credibility to the theory of solitary trader and crazy to the general public, in fact, this argument undermines the eyes of those who know something about markets.
The subprime crisis, the probable cause of all this hoax
It is in the public domain since this summer that markets are traversed by one of the worst housing crisis in the U.S., which spread into the world of finance worldwide. This is the subprime crisis. In two words: banks have lent money at variable rates to poor Americans to buy their house in a housing market spiraling. These loans helped to accelerate the increase in solvency a request insolvent, but also precipitated the fall: with the inevitable increases in interest rates (such loans having been made to historically low levels), hundreds of thousands of homeowners poor could not pay their credit. Seizure of their property and put up for auction. The problem: when 1 million homes are suddenly seized and put together almost all auctions, real estate prices collapsed. The panic spread to financial markets, as credit companies who lent money to insolvent people, were quick to get rid of their debts by selling them as securities markets. With the complacency of the U.S. rating companies that evaluated these securities as extremely safe, as they were worthless, the banks of the world bought whole, because as long as real estate went up, took the titles of value, and it was a convenient way to quickly boost its results.
Lots of banks obsessed with short-term investing so heavily in these securities, exposing inconsidéremment to a risk that had not been assessed.
These securities continue to fall today and entail the banks in turmoil.
But everyone knows that in France the outstanding results generated by the SG in recent years were linked to these titles: the French bank SG was the most at risk ...
The trap
We will now consider the likely scenario explaining the huge losses of SG.
Friday night closure of U.S. markets, and bad news raining down on procurement, including the plan that Bush has disappointed financiers. New fall at an opportune time: the Monday after U.S. stock markets are closed ...
result, the panic will be mainly in Asian markets and European, especially on Monday morning for Europe.
The edges of any institutional massively liquidate positions which results in a crash.
Conveniently, and coincidentally, it was during the weekend that the SG had reported on the shenanigans of their trader. They decide to liquidate positions without waiting. Coincidentally this happens in a market where it was easy to predict the volatility seen the beginning of panic at the weekend on Asian bourses. The operations of the SG thus pass unnoticed in the flow of securities settlement early this week. What specifically avoids creating a wave of panic on the SG title. On the other hand, the crash pushed the ACC, so the trader's liquidation of positions resulting in a big loss.
This scenario is improbable!
Firstly, what a happy coincidence that the SG discovers the pot to the roses on the eve of a predictable crash, best time to place orders massive without being noticed.
Presumably, the SG was aware long before.
Then the decision was taken on Sunday saying by SG without waiting to liquidate the portfolio is pure madness! For if there had been no crash, movements of such magnitude as the SG have created a panic that would have completely destabilized the share price. Notwithstanding the crash Monday that helped hide the transactions, the logical reaction of SG have been liquidating their positions in a phased manner so as not to attract attention, and try to limit losses, see the clear advantage.
Either the chance is extremely good things, or the explanation lies elsewhere.
I think the explanation lies elsewhere. This trader would probably be a bit perilous positions. But I do not think he could jeopardize the bank or play beyond its means, especially in a market that was deemed simple. We could understand if it was a super market and hyper risky speculative, volatile and hyper! But in the event of a canard invented by SG, hide such large losses in super risky operations would have been less easy in the context of the crash, than to hide in thousands of more traditional operations. This requires better to smooth the losses of thousands of transactions that bullshit on a few large transactions risky especially in the context of a crash in which the securities traded heavily. It is more discreet. It melts in the bulk orders in a way.
In fact, the SG has certainly used this pretext, and especially foreseeable crash on Monday, to get rid of a bunch of crappy values.
Rather than go for incompetents who invested in securities inconsidéremment rotten, they preferred to invent this story and posing as victims.
What makes they herald as 2 billion euros for losses related to subprime, the remainder had to be priced at the most egregious bank fraud in history.
What about the trader in question? Or he is complicit and will accept a sentence of imprisonment in VIP area with private bedroom, TV, internet access and the whole shebang. With remission he was released after one year with a giant check that awaits him in a tax haven.
Either he is himself a victim of a plot: his incompetence was detected by management, it would be one who falsified the information systems and control systems for him to blame. This poor guy can not do that includes the case may very well believe he is guilty! Falsification of computer systems and control is more likely from those who have the burden from a former management control that we have not disabled the passwords.
In fact the risk if the trader is taking a lamplighter for others, it has already been liquidated itself: it would explain his disappearance at the time j am writing this text.
5 billion euros, it's enough gun down more than one man.
In this case we do ever find. I do not hope for him.
precedents in this kind of scheming to save face
SG invented the whole story to save face in the markets, and explain its enormous losses, especially on the eve of a capital increase. This is not to panic investors and that the title does not dive too. It has also not too morflé.
To clarify this matter, we will have the authority market analysis very carefully operations on the SG in recent weeks. I'm pretty convinced that there was insider trading and that just happened this bank leaders have played their stock options before all this broke.
Unfortunately, even if so I am under no illusions: I think at this level of scam, everyone is complicit and close your eyes. Including state and therefore even the chief of state: it is rumored that it has 2 million managed by the SG ...
Do not forget that Calyon had already fallen for the mad trader in August: another crazy trader shorting all control systems have scorched nearly one billion euros ...
This excuse right back!
All I can hope for is that at least this case precipitated the end of this trade reserved for son to dad, and all may be replaced by computer systems. 99% of traders are automated tasks by computer systems, traders themselves acknowledge elsewhere. Could be reduced by a factor 100 the number of son to father who gorge themselves on coke and whores trading floor. It would be of public health! Yet they could find to resettle elsewhere!
When you think there are lots of jobs that are replaced by minimum wage earners because of automation, especially in banks where all the little hands are making compulsory retirement (now Most documents are scanned using character recognition, so that nothing that the operation of endorsement of checks yesterday that employed thousands of workers, is almost completely automated now, and it is that a task among others) ... We can only find the unjust treatment meted out to kids, who barely out of school to take the kings of the world, earning 20 to 40 times the minimum wage, without being productive, and regularly fucking shit money the taxpayer that is used to offset their losses.
Also we must not forget that the SG and CEO Daniel Bouton, had originally sued in the case of the Trail. Billions of francs had been diverted to Israel via the operations of cavalry. Only part of the case had been tried, and the amounts were already enormous. But the French court in his clemency had decided to prosecute small traders of the trail hand, and the big banks on the other hand.
course after rogue traders have been condamnéss, the component of the banking business had been withdrawn to the investigating judge who had discovered the case, then the charges were buried. While all showed that the scam could not have happened without the involvement of French banks and Israeli ...
can therefore rightly be wary As this story abracabrantesque trader poor, unstable and fragile, which is still bright enough to outsmart all systems and all the checks and create the most gigantic loss in the history of the Exchange ...
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