Did SocGen trades trigger market rout, Fed cut?
By Sitaraman Shankar and Blaise Robinson2 hours, 35 minutes ago REUTERS. – Societe Generale’s shock disclosure of a fraud that lost it $7 billion has left investors wondering about a link between the fiasco and Monday’s European stock market rout. The sharp fall, which was followed by an emergency U.S. rate cut, came as SocGen tried to close out positions built up by one of its traders. SocGen, France’s second biggest bank, said on Thursday that it had been the victim of a massive and “exceptional” fraud by a junior trader resulting in losses of 4.9 billion euros, and announced a large capital increase. SocGen said the trader, responsible for futures hedging on European equity market indexes, had taken massive fraudulent positions in 2007 and 2008 beyond his authority. The bank said it had decided to close the positions as quickly as practicable after they were discovered on the weekend of Jan 19 and 20. This has brought under the microscope the massive declines in European shares on M
