Something Fishy in French Bank Scandal

There's something fishy about the revelation today that a rogue trader, Jérôme Kerviel, had caused the French bank Société Générale, one of the largest in Europe, to lose $7 billion in the futures market. Kerviel was reported to be a "computer genius" who engineered a series of "elaborate, fictitious transactions."

What's fishy is that the bank, which has known about the fraud since the weekend and has dismissed his supervisors, had not, by late Thursday, filed a criminal complaint against the absconding officer himself. Nor has it said anything about how Kerviel financed the huge positions he took in the market -- it had to be a very considerable amount -- and how he could have done it alone. The International Herald Tribune quoted C. Ricardo Esteves, executive director of Banco Hipotecario of Argentina: "It is not credible. One person responsible for this? I just don't believe it."

The announcement of the loss ate up most of Société Générale's healthy pretax profit for 2007 of $8.07 billion, forcing it to seek a multi-billion infusion of new capital to avoid a collapse. In addition to the loss caused by the fraud, the bank announced that it was writing off another €2.05 billion in fourth quarter losses linked to exposure to the US housing market.

For Société Générale, the timing of the whole affair could not have been worse, coming as stock markets tanked around the world and then revived dramatically as the US Federal Reserve announced a surprise cut in interest rates.

It almost seems as if someone is deliberately pushing the world financial system towards a catastrophic collapse.