Wall Street no doubt felt the reverberations from the massive unwinding of future positions taken by a runaway trader at France's second largest bank, Societe Generale. The bank lost 4.9 billion euros secretly closing out 40-50 billion in future contracts traded by Jerome Kerviel. The FTSE fell 5.5%, CAC fell 6.8%, and DAX dropped 7.2% on Monday. European Union regulators are investigating the aftermath of the dumping that may have been exacerbated by short sellers with inside information. Kerviel allegedly circumvented bank controls including stealing associates' passwords, creating fake accounts, and hacking computer programs. The fraud is the biggest in history, and there is speculation that the Federal Reserve was forced into increasing the size of its interest rate cut because of the panic created in European bourses. The Fed admitted it knew of the problem in Paris before cutting the discount rate. The French central bank, Banc de France was apparently complicit in the effort to close out the fraudulent positions. Nevertheless, French President Sarkozy was not told about the fraud for three days. Now that is bad for business. 
Update: Jerome Kerviel was taken into custody for questioning Saturday night in Paris. The thirty something trader was not a star but a quiet loner who had intimate knowledge of the trading computer system at Societe Generale. The CEO said the trades were straightforward positions linked to rising markets but were hidden in extremely sophisticated and varied ways. The trades were in the money in December, but when world markets started to drop, the margin calls probably became unsustainable
Update: Jerome Kerviel was taken into custody for questioning Saturday night in Paris. The thirty something trader was not a star but a quiet loner who had intimate knowledge of the trading computer system at Societe Generale. The CEO said the trades were straightforward positions linked to rising markets but were hidden in extremely sophisticated and varied ways. The trades were in the money in December, but when world markets started to drop, the margin calls probably became unsustainable