I think this is kind of funny. This "plain-vanilla", low level, trader from France caused Bernanke to surprise us with a 75 bps cut. He ended up losing the bank about $7 Billion. Seems kind of fishy though, how this large bank let this go "unnoticed". I wonder if they decided to hide a bit of their sub-prime mess within this $7 Billion loss. Wonder if they'll cut the rates again so as to not look like they got fooled by one guy haha. http://abcnews.go.com/International/story?id=4183667&page=1
Do you have anything to support your claim that Bernake reduced rates as a reaction to this trader? It certainly did not come from that article.
Well for those of you who can't put two and two together here is a good summation: http://bigpicture.typepad.com/comments/2008/01/feds-folly-fool.html
Because the bank had to unwind his trade positions it lead to further instability in the market. It was mentioned in today’s Wall Street Journal.
I do not think it said the Fed acted in response to this trader. In fact, the Fed has said it was unaware of his actions at the time it made its rate cut. The fraud clearly had an impact on the market, I just dispute the title and implication that the Fed cut the rate in response to this trader. That is simply not what occurred. The timing bears that out. If the WSJ says the rate cut was caused by the rogue trader, I would love you to cite that. It is not my understanding of what happened.
Sorry if I may of worded that worng. You are correct the fed did not cut interest rates because of the trader, but the trader's action and later the banks need to unwind those trade lead to more negative market then it should of been and the Fed responded to the market.