Speculative trading done by Nick Leeson, a British trader working in Southeast Asia, caused a loss of $1.4 billion and the 1995 collapse of Barings Bank, the UK’s oldest investment bank. This event, however, does not come close to events earlier this week.
Jerome Kerviel, a trader working at Societe General, one of the oldest banks in France, manipulated the market by making large fraudulent trades and hiding his positions. These positions were discovered on January 19 by his managers; total losses for the bank are estimated at $7.1 billion. In the few days following, there was a large drop in equity indices (on January 21 and 22), and suggestions that the loss may be partially related to the Federal Reserve Bank’s decision (January 22) to slash interest rates by 0.75% - although the Feds deny this.
What’s also interesting is that Societe General says that it will still make a profit of about $1 billion despite the loss.
Image: Jerome Kerviel mugshot (Smile!)
Disclaimer: I am not a financial professional, economist, or related to Alan Greenspan. Any advice, insight, information, or misinformation on this blog should not be followed based solely on me saying so. Assume that I have no clue what I'm talking about. Do your own research and come to your own conclusions before doing anything with your money. I assume no responsibility for your financial failure or success. However, if you do have success, send a little my way. -Rich.
Speculative trading done by Nick Leeson, a British trader working in Southeast Asia, caused a loss of $1.4 billion and the 1995 collapse of Barings Bank, the 
3 Comments:
Brian Hunter's $4 B Loss at Amaranth forced it to BK!
Thanks for the comment about Amaranth. It's a little scary to think that one person can have so great an effect on millions of others and on financial instituions that we assume to be solid. It's also interesting to think that these are the bankers and professionals that so many rely on for financial guidance. They remind me of gamblers in Las Vegas!
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