A Minor Scandal

OK, so as James says, £3.7 billion isn't exactly chump change. But I'm afraid this is still rather a minor scandal. For a start, as Felix Salmon points out, the bank almost certainly caused a lot of the loss themselves.

If I had to guess, I'd say that when Kerviel's position was discovered, he was maybe 1.5 billion or so euros underwater; the rest of SocGen's losses are just as much the bank's fault as they are Kerviel's. If they'd taken a deep breath and simply bid the position out to a big bank or hedge fund, I think they could have got away with much, much smaller losses.

The real point is that there's noting really to get the teeth into here in terms of scandal. Soc Gen lost money, certainly, but given that these markets are in fact zero sum, someone else out there made the same sum. What we need for a really good scandal is, well:

He takes his place with Sumitomo's "Mr 5pc" Hamanaka, who illegally cornered the copper market for 10 years, and Peter Young, who ran up huge losses at Morgan Grenfell before sweeping into City of London magistrates' court in a dress.

Peter Young makes the list of top 20 scandals, although I think he should be top for two reasons.

Deutsche Morgan Grenfell
1996 Fired fund manager Peter Young for unauthorized trading and paid $279 million to bail out investors

Firstly, not only did he start wearing dresses, just before trial he attempted to castrate himself. Secondly, I was involved in that scandal (you get a better class of scandal when there's a Worstall involved, let me tell you!). Not directly, I hasten to add, but one of the companies involved was our major competitor at the time in the scandium business (which of course makes the scandal even better! Mmmmm, scandium!). They raised £20 million in a bond issue which they then invested in a Prime Bank Guarantees fund: the 90's equivalent of lending your bank account to a nice man from Nigeria with cash to shift out.

So, I'm afraid I'm going to have to insist that this really isn't a very good scandal at all yet. Until you can tie me to it, get some mention of scandium into the narrative, add a decent dose of willful blind stupidity and get an autocastration attempt in there, I'm afraid it's simply not going to measure up to how scandals were in the good old days.