French Bank Says Rogue Trader Lost $7 Billion
The bank [Société Genéralé] uncovered his scheme last weekend. It was selling off its positions during Monday’s market turmoil in Europe that led, in part, to the Federal Reserve’s history-making rate cut of three-quarters of a percentage points.
—The New York Times
That’s right: it turns out that at least a part of the reason Ben Bernanke’s Federal Reserve Board hit the panic button this week was the forced selling of shares by a bank closing out the positions of a single, errant, 31 year old trader.
So, you see, Citibank and Merrill combined can lose $20 billion in one quarter with no response from the Fed...but stocks start getting hit one weekend because a guy in France lost $7 billion over the course of a year's worth of bad trades, and Bernanke & Friends snap into action immediately.
Well then, now that the Fed appears to be responding strictly to stock market jitters as opposed to, oh, inflation and other monetary stuff, what’s next?
Will the Fed be cutting rates every time a trader loses money?
In order to be prepared for that eventuality, we here at NotMakingThisUp are happy to provide a handy set of headlines designed to make it easier for newspaper editors and fellow bloggers to respond to whatever move the Fed makes next.
Simply cut-and-paste according to the situation:
Rogue Trader Loses Billions on Market Open; Bernanke Cuts 75 Basis Points, Urges Calm; Stocks Firm
Rogue Trader Makes Billions Back in Early Trade; Bernanke “Not Sorry About, Won't Take Back” Rate Cut; Stocks Rally
Rogue Trader Losing Millions Again; Bernanke Cuts Another 5 Basis Points “Just in Case”; Stocks Steady
Rogue Trader Recovers Millions by Mid-Morning; Bernanke “Pleased”; Stocks Climb
Rogue Trader Now Down Slightly in Late-Morning Trading; Bernanke “Concerned”; Greenspan Consulted: Wall Street Cheers; Stocks Extend Gains
Rogue Trader Flattens His Book, Eats Lunch; Bernanke “Monitoring Situation”; Dow Steady
Rogue Trader Losing Again in Afternoon Trade; Bernanke “Anguished, Ponders Further Action”; Greenspan Pays Fed a Visit; Wall Street “Encouraged”
Rogue Trader Down $10 Billion into the Close; Bernanke Asks Greenspan to Assist, Weeps on Camera; Wall Street Elated: “Ben’s Found His Voice!” Stocks Soar
Rogue Trader Loses All; Bernanke Missing; Greenspan Declares “I’m In Charge Here”; Traders Hugging, Dancing in Wall Street, Say “We Knew It All Along!”; Stocks Up Limit
Greenspan Cuts Rates to Below Zero; Street Hails ‘No Rogue Trader Left Behind’ Policy; Errant Trader Makes All Back as Dow Jones Average Hits Infinity, Quits Bank to Start Hedge Fund; Bernanke, Britney Discovered in Vegas During ‘Lost Weekend’, Tells CNBC “I Can’t Believe How Much Things Cost.”
I Am Not Making This Up
© 2008 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. Anyone buying or selling stocks on the basis of this commentary is making a mistake. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.