Posted on 01/25/2008 8:13:51 PM PST by GovernmentShrinker
Any possibility of complicity? The timing is suspicious.
The interesting question here, it what did Bernanke know, and when did he know it. Did he do what is a very very rare occurrence and that is an emergency rate cut, because of the bumbling criminality of some French bank? It is an information age, yet it is the nature of governments and bureaucrats to remain as clueless as they have always been. Too bad Peter Sellers is dead, there is a Peter Seller movie here, and just like in Dr Strangelove, Sellers could play multiple parts, including Bernanke.
It looks to me like Bernanke found out about the same time as Fillon and Sarkozy — maybe a bit sooner because he probably has better sources in the market than those two, and by the close of trading on Tuesday (Sarkozy and Fillon say they found out on Wednesday), the basics of the real story had to have been known to key traders; at least the fact that it was SG doing the dumping of Euro equity index futures, though perhaps not the fact that the Governor of the French central bank was in on the action. That last bit being really key, since the biggest shocker here isn’t “the bumbling criminality of some French bank” (i.e. SG), but rather the bumbling criminality of the head of the French central bank, which is a government entity, not a private business. This boils down to criminality on the part of a very, very senior market regulator. Reports that Noyer and Bouton are old pals from their business school days add plausibility to the idea that Noyer made his decisions based on a desire to help out his pal, without regard to the negative effects on the overall financial system. IMO, given what we know at this point, Noyer should be the last one out of prison, as he deserves the longest sentence.
The cynical/tinfoil side of me makes note that the way these theoretically-smart people tried to unwind their positions, seemed to be the way least likely to succeed, and most likely to throw the global financial system into chaos.
Who would benefit the most from such an event, and might they have more than enough cash to bribe senior French banking figures into doing just that?
I think the most likely scenario is the one that Southack has outlined (along with other denizens of the blogosphere), namely that Bouton and Noyer were trying to cover up something ELSE. Maybe they did or maybe they didn’t just discover Kerviel’s trading activities last Friday night. But there had to be something else that motivated them to conduct the huge sudden sell-off without notifying all the people who have a right to expect to be notified about this sort of thing. Maybe it was that they had actually known what Kerviel was doing for some time, and were happy to let it go on as long as he was “in the money” (which he reportedly was at least until sometime in December). Or maybe there was some unrelated wrongdoing that discovery of Kerviel’s activities provided a convenient opportunity to sweep under the rug. But doing what they did for the reasons they say they did it, simply doesn’t pass the sniff test.
Unfortunately, I doubt we’ll ever get the whole story, but I do think that Bouton’s and Noyer’s future involvement in the financial world is going to be limited to overseeing their personal investments — that is, if they have any left after the authorities and the movers-and-shakers are done with them.
Bernanke is not at fault here, though certain left-wingers would prefer the world to blame him rather than the key French players involved.
Bernanke saw what most of us saw Sunday night, that European index futures were tanking hard in overnight weekend trading.
Then on Monday (MLK day here), the global markets sold off, and because of time differences, they sold off again on Tuesday, but rallied when the Fed announced the emergency rate cut.
The “spin” up to that point was that the U.S. bond insurers were going belly up. Naturally, Bernanke and his Fed governors have feared that very thing. The Fed has been orchastrating a bailout of the bond insurers via private parties for several weeks now.
Moreover, the Fed has purposefully been playing brinksmanship in order to pop the housing bubble without destroying the rest of our economy.
So the global market rout while U.S. markets were closed for MLK day, combined with the “spin” that the rout was due to a U.S. bond insurer implosion, easily spooked the Fed.
And so the Fed moved.
But by Wednesday, traders were figuring out that the “spin” was a big lie. It wasn’t a U.S. bond insurer closing shop...it was a major French bank liquidating $75 Billion in stock index futures in a mere two days.
Frankly, every news media outlet that hawked the “U.S. bond insurer causes global rout” spin back on Monday and Tuesday...should be dipped in tar and hung from lampposts.
Especially by Tuesday, as traders had seen at that point that SG was a big seller.
For that matter, on Sunday night and Monday it made no sense that Europe would have known about a U.S. bond insurer going under (before the U.S. knew).
The same string he is going to pull to stop the Saudi's from bailing out Citicorp?
Why would he want to stop the Saudis from bailing out Citicorp?
You make that sound simple and black and white. For billions in potential gains, many might be willing to cross the line into "rogue" territory.
I don’t expect to see Bouton or Noyer facing charges (perhaps some of Bouton’s lieutenants, though). However, I do think their days as members of the Euro elite power structure are numbered. Not so much because their fellow European bigwigs won’t tolerate this sort of thing, but because these guys’ irresponsible handling of the situation had the effect of dragging the Fed into this. They have become liabilities for the Euro power elite, and are a lot more expendable than Bernanke and his circle of influence.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.