Dans La Merde, encore

Glad that I'm not working for a certain French bank right now.

French bank Societe Generale says it has uncovered "massive" fraud by a Paris-based trader which resulted in a loss of 4.9bn euros ($7.1bn; £3.7bn)

Ooopsie... that's going to result in a large number of very disappointed cheese-eating surrender monkeys come le jour de bonus

So what has our new Nicolas Leeson done to lose so much money? Well from what I can gather from the newswires pretty much the same thing as Nicky boy did in Singapore which brought Barings down and that is writing naked forward contracts. Basically (and simplifying a lot) what he's done is write a contract back in 2007 saying that he's going to buy 100,000 shares in Merde Inc from me at 5 Euros a share on settlement day, January 18th 2008. Now he's betting that the share price for Merde will be above that come the big day, we do our deal and he sells the shares for a profit. Now by writing the contract and selling it he makes a small premium but is now on the hook for a shitload of cash come expiry time. No problem if the stock markets are rising but then all those pesky yanks suddenly couldn't pay their mortgages any more and defaulted with the result that shares in Merde Inc were, well, down the toilette

Of course you would have thought that after the Leeson fiasco there would not be a single bank that would not have reviewed what happened, review and where necessary tightened processes and controls. I was working for a certain American investment bank at the time (the one with the biggest testicles in an organization's logo incidentally) and they sure as hell did; and very nicely I did out of it too with a big fat bonus for working on that project.

I guess over at Soc Gen they just did that stupid Gallic shoulder shrug and went off for a 3 hour lunch.

Won't be having Chateau Lafite with lunch tomorrow I'll wager.