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Thursday, January 24, 2008

Societe Generale Visits the Confessional

by Calculated Risk on 1/24/2008 09:29:00 AM

This is an amazing story.

From the WSJ: Societe Generale Hit By Fraud, Write-Downs

Massive fraud by a rogue trader at Societe Generale SA has led to a €4.9 billion ($7.16 billion) write-down ...

The bank, France's second largest after BNP Paribas SA, revealed early Thursday that it had detected a case of "exceptional fraud" due to a single trader who had concealed enormous losses through a scheme of "elaborate fictitious transactions."

... that wasn't the only bad news Societe Generale announced Thursday. It also said it was taking additional €2.05 billion write down in assets related to subprime exposure, and it would launch a capital increase of €5.5 billion in the "following weeks."
What kind of controls can allow a trader to lose $7 billion? At least it makes the $3 billion in mortgage losses seem relatively small.