Sunday, January 27, 2008

One Sentence, Again

"We have to put a stop to this financial system which is out of its mind and which has lost sight of its purpose", Sarkozy said on Saturday during a visit to India. He was reacting to the SocGen "rogue trader" loss. Bravo, Monsieur le President.

Or, as Obelix himself might have said, Ils sont fous ces Romains (they are crazy, those Romans).


  1. Well go ahead, Monsieur Sarkozy. I suggest you start the massive reforms by casting doubt on the assertion that one "rogue trader" had anything but the most superficial involvement in the Societe Generale debacle.

    Word has it that the aforementioned debacle is what prompted the Fed to make their emergency rate cut, (the temporal correlation between the bank fiasco and the Fed cut is too close to be a coincidence, and what's more, official denials of any connection between the two-remember Bismarck's dictum about official denials- give the game away) and now that the snookered Fed appear to be nothing so much as a bunch of rank amateurs they are none to happy about it.

    But what can they do? Yes, folks at the Fed can make life hell for SG when possible, but they can't take the rate cut back. I will say this though, unless my thesis is wrong, THERE WILL BE NO RATE CUT THIS COMING WEEK!

    In the meantime, Monsieur Sarkozy, you have a ton of work to do. Bonne chance!

  2. To me it was obvious that many of the participants in the world of investment banking had lost the plot as far back as 1995 when Barings collapsed after Leeson bet the pot and lost. I distinctly remember at that time that most of the banks Directors seemed more concerned that their annual bonuses based on Leeson's fraudulent profits would now not be paid rather than that a 200 year old financial institution together with the shareholders money had disappeared in a puff of smoke. This should have been a warning to all about the direction in which things were going.

  3. Edwardo, I'll bet the opposite, there will be a 50 BP decrease in interest rates, because the markets expect it. Hey its all entertainment anyway, right?

    The financial system is controlled by rumor and psychological trends because no transparency or rationality need apply.

    Exactly what is the purpose of our financial system? Preservation of W's "legacy"? Reward the compliant toadies and punish the non-believers?
    I don't know but what I do know it ain't to "promote the general welfare" of the US.

  4. And the "out of it's mind" financial system responds to Sarko in the words of another French head of state:

    "Apres moi, le deluge."

  5. Edwardo:
    I ask Monsieur Sarkozy, "How"? When he answers this question, I will take him seriously.
    As for the "rogue trader" story, I don't buy it. Most people I know don't buy it.

  6. ...lost sight of its purpose",...

    Its purpose has been to make money for those who pull the strings. And in that it has done quite well. All that 'financial engineering' wasn't for the betterment of mankind. I think they used to call that 'enlightened self-interest'. Or something like that.

  7. Regarding the Société Générale trader, just what was the fraud that he committed? I guess even I am not clear on that. Who did he commit the fraud against? Who benefited from his trades?

    The fact that he seems to have disappeared looks bad (in some instances such behavior can be used as evidence of a crime in American courts).

  8. I wonder if Sarkozy means he will nationalize SocGen?

    This "rogue trader" is accused of making false entries in SocGen's computer systems, representing nonexistent trades. Is that just behavior that got him fired, or is it fraud against his then-employer?

    Indeed the whole weight of this loss does not belong on the shoulders of a midlevel employee. His attorneys claim that SocGen lost money elsewhere and is wrapping that into this "bill" as well.

  9. We'll see Marcus, but there is also the issue of The Bond Market's likely reaction-very negative- to seeing the Fed administer another dose of crack for the market.

    Touche, independent accountant, until Sarkozy comes up with a real plan, it's just so much indignant gas from the French PM.

  10. Proud, for once, about what our president said. Not exactly a supporter of his economic stance by the way!

    Bull Well ...Just the right and sound words. This is not the first time that he mentionned his views on finance. Sound ones.

  11. Sarkozy is not new to apparently strong assertions: in the past few months he publicly repeatedly asked the ECB to drop rates to improve french exports...
    maybe he is missing something about finance, or maybe he just doesn't want to miss a chance to be quoted ;)
    Please, give us another "petit phrase" for the masses, Monsieur Napoleon!


    a french "cousin"

  12. artichoke: Sarkozy was close to then Econ Minister Edouard Balladur when SocGen was privatized in 1987...