Just a Sprinkling of Government Bailouts

This weekend was light on the government bailouts, indicating that strained credit conditions around the world are easing. The Dutch government injected $13.4 billion into ING Groep, the largest Dutch financial services firm and South Korea agreed to guarantee $130 billion in bank debt.  Meanwhile, Iceland is set to announce a $6 billion IMF Fund-led rescue package to help stabilize its beleaguered economy after a spectacular failure of its highly leveraged banks.  It's nice to know that even though the IMF chief is busy having an affair with one of his subordinates, he can fit in a bailout loan or two into his very busy schedule.  As I noted Friday afternoon, significant signs of improvement were evident in the money markets as three-month Libor dropped 36 basis points to 4.06% and overnight Libor fell 16 basis points to 1.51%.

Crazy volatility in financial markets always unveils a few rogue traders.  Both the Chinese and the French (once again) have been taken to the cleaners by traders executing "unauthorized" trades.  Citic Pacific announced a $1.89 billion losing currency bet that was discovered after an executive violated procedures.  The Jerome Kerviel award, however, goes to Groupe Caisse d'Epargne, a large French mutual bank that uncovered  an $800 million loss resulting from derivatives trades that were supposed to profit from stock market gains.  The losses were attributed to a group of around six traders, so really, it's nowhere near as impressive as Jerome's attempt to bankrupt Soc Gen by himself.  Still, "unauthorized" trading seems to occur a bit too frequently.  I wonder how often the losses are just small enough to be buried into an earnings report.