Rogue trading, 1931-style

Rogue traders, like the poor, seem always to have been with us. Liaquat Ahamed, in his excellent “Lords of Finance” tells us on page 422 how the ┬áhead of Lazards, one of the City’s most illustrious banks at that time (and still pretty classy) visited the Governor of the Bank of England to tell him that a rogue trader had cost Lazards $30 million by betting on the collapse of the French Franc. The Franc became one of the strongest currencies during that period and the trader somehow covered up his consequent huge losses – almost double the bank’s capital – in the traditional way by fixing the back office. I must quote the rest:

“When confronted with the evidence, the trader in question, a Czech, confessed, then suddenly pulled out a gun and shot himself.”

At worst these days, rogue traders might go to prison. Lazards was bailed out by the Bank, so not much change there then.

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