I read the Economist every week with pleasure for its interesting analyses, but it isn't often that I get breaking news from it. I did today, though, because the Economist web site was where I first saw the financial scandal that is today's big business headline: the rogue trader at Société Générale who managed to blow $7.2 billion dollars gambling in stock market futures. They didn't call it "gambling." (Since the Economist quoted it in euros, where it's €4.2 billion, I didn't realize the full size until I saw it on Yahoo News. The Yahoo article has more detail.)
This is a 31 year old stock market futures trader, working for Société Générale, who essentially built his own "play" firm, inside the larger bank, and set out to make a big hit trading stock futures on his own account. He made a big hit, all right. And until last Saturday, nobody at SocGen realized he was doing it. He built a whole structure of faked transactions to cover what he was really doing, using the experience he got a few years ago when he worked in the section of the bank that monitors the trading floors for rogue operations.
Don't they supervise these people?? Does nobody have to sign off on these trades??
It's not as if it weren't a known risk, either. There've been other rogue traders. These guys are total cowboys, and they're convinced that it can't happen to them, and the next thing you know, a bank has gone out of business (see the 1995 affair when a rogue trader in Singapore bankrupted Barings Bank, a 250 year old British firm).
I wonder how long Société Générale will be around... Second biggest bank in France. Quite a coup to bring it down - if that's the way you want to keep score.