Memo to Europe: Next Fraud Please Call the Fed! (Hint: Their number is in the DC phonebook).
(Or Fraud by a Single French Trader Proves that Markets need a mandatory international advisory connection to Minimize Future Global Meltdowns to protect American/International investors).
Memo to Europe’s financial markets: The next time you discover a billion dollar fraud in the middle of a falling market, please call the U.S. Fed. Knowing that could have averted a global stock market panic. Their number is in the phone book!
It has come out that some of our wild 600-point “Whiplash on Wall Street” was the result of one trader in France who was hiding a multi-billion shortfall that was discovered in the recent meltdown, and covered by his employer, France’s Societe General, which made a bad situation into a global near disaster, and prompted the Fed to make its largest one day interest rate cut in one day on an emergency basis.
No one in the European markets, who went into free fall after the Dow Jones, bothered to call the U.S. Federal reserve to advise them of the discovery of either the fraud or the panic dumping of the trader’s bad paper during that period.
That information would have given the U.S. Fed a clue that not all of the meltdown was real. They were left flying blind, like pilots without all their instruments working.
Had the Fed and U.S. financial media known that SG was dumping $7 billion (or more) in write-off’s that day would have made a significant difference in calming the panic. It would have made a big difference in the acts needed to be taken by the Fed to calm Wall Street and keep investors from panicking and making matters worse.
What will happen when (not if) this event occurs again – by another fraud by another institution anywhere in Europe? We need a solution and there is only one.
To avoid making future global meltdowns worse, Congress and the President should insist on implementing an international mandatory reporting system between Wall Street and the markets in Europe -- and Asia. Remember their meltdown and its impact on Wall Street, the DAX, etc?
Requiring each market to formally advise Wall Street (and vice versa) when a major fraud or other event is discovered -- like a rogue trader who has broken through the safeguards –will provide the accurate financial instrument readings that our Fed and markets need for stability decision-making.