On Monday, January 21, 2008, concerns about deteriorating economic conditions in the United States caused a precipitous fall in the Asian markets. Investors in Hong Kong and Tokyo besieged brokerage firms. Markets in the United States happened to be closed, for the Martin Luther King, Jr., holiday, but U.S. stock-futures trading in foreign markets showed a sharp decline. In the press, the day was dubbed “Black Monday.” Fears of a worldwide financial collapse were so intense that the U.S. Federal Reserve held an extraordinary emergency meeting. Before trading began in New York that Tuesday, the Fed announced a three-quarter-point cut in the federal funds rate, the largest in more than two decades. The news initially caused U.S. markets to drop, but they soon stabilized.
Two days later, representatives of Société Générale, whose innovative and sophisticated trading operations had made it one of the world’s most admired financial institutions, asked that trading in its stock be halted. The bank had discovered that one of its traders had taken “massive fraudulent directional positions in 2007 and 2008,” and that he had concealed them “through a scheme of elaborate fictitious transactions.” The bank incurred a net loss of 4.9 billion euros—said to be the largest trading fraud in banking history.
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