The Everyman Economist

Who’s kidding who? Are we really to believe that a 31 year old Everyman trader with roots in the back office of the second largest bank in France is a ”rogue” culprit in a $7.1 billion trading loss?

Having traded myself for more than 25 years and having been in charge of hundreds of traders and their activities in both a British and French bank, I can tell you with authority that if the above is true, there aren’t enough people you can terminate for incompetence. And if the above isn’t true, terminations should be accompanied by prosecutions.

For starters, there has been overwhelming scrutiny over the past few years related to risk management at all financial institutions. A trader can hardly breathe without someone questioning the source of his oxygen. But apparently at one French bank, one lonely Everyman was able to put together a patchwork of transactions that quietly hid his journey into infamy. Furthermore, anyone who has ever traded in the financial markets will tell you that a $7.1 billion loss is just plain inconceivable. Some of the best traders in the history of Wall St folklore were known to have made or lost in the hundreds of millions on a specific trading move. I can think of only one trader, perhaps the best ever, who bet against the British Pound and profited by something more than $1 billion. But to lose more than $7 billion on a single trading foray is beyond human comprehension. And to have it go undiscovered is an absurdity wrapped in baloney.

No financial institution anywhere on our planet should be allowed to escape such lunacy. From the heirarchy on down, any person who is in some way responsible for the institution’s management of risk and/or trading activities, should be sent packing. There is no other way to convey the simple message in this type of debacle that it will NEVER happen again. The consequences must be consistent with the deed and that requires a housecleaning of historic proportions. If we were all French Everymen, we should demand no less.