February 3, 2008

Pride goeth....

No, this is not a post about the whole Microsoft/Yahoo thing, which, by the way, seems to be a plot by those two companies to double the kilobytes coming into my email box. This is instead a glorified link to a terrific article about the recent problems at Société Générale. This writeup in the wall street journal is full of terrific and quite personal details and gets right to the root of the problem, that this was a trader who was insufficiently observed and was given a remarkable amount of power, little oversight and was driven by insecurity and pride.

That said, I'm not sure that I buy that he did anything illegal... maybe the faked emails and hedges looks like fraud, but it might just be a violation of corporate policy, and you know, one that failed to respond to its compliance desks concerns about the trader anyhow.

If he had made money, he'd have been celebrated as a hero, frankly, and that's probably why the bank ignored their compliance desk's many warnings. Anyhow, read that and then read this great book about the unravelling of long term capital management.

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