The Fed's Secret Weapon

The story of Jérôme Kerviel becomes more fascinating by the day. Kerviel is the 31-year-old French trader for Société Générale who, it was first claimed, lost $6 billion through secret stock trades. Despite the knee-jerk reaction of some of the usual suspects on the US right claiming that "the French" were now trying to destroy the American economy, there's now talk of Kerviel actually helping to avert global recession.

Société Générale's chairman, Daniel Bouton, yesterday dismissed as "absurd" suggestions that his decision to dump more than €50bn in unauthorised trades by Mr Kerviel early last week had plunged European stock exchanges into a tailspin. Market experts pointed out, however, that heavy selling by SocGen on Monday – especially of German shares futures – reinforced a mood of panic and helped push all markets down.

This in turn jolted the US Federal Reserve into cutting its interest rates sharply on Tuesday, preventing a copycat crash on Wall Street and possibly also steering the world out of recession.

As a result, some respected US economists are now feting Mr Kerviel as an unwitting saviour. "Merci, Jérôme," said the influential economic analyst, Ed Yardeni, former head economist of Deutsche Bank Securities. "The recession is almost over, thanks to Jérôme Kerviel in Paris and the panic reaction [of the Fed] in Washington... I cannot remember any precedent for such strong support for the economy before the evidence of a recession became manifest."

Maybe. Who knows? But there is, of course, a downside.

A junior trader at his desk on the sixth floor of a building just west of Paris accidentally nudged the steering wheel of the entire world economy. What does that tell us about the uncontrolled might of the immense sums of "electronic" money now being traded on futures and hedge funds?

Shifting to a different story for a bit of perspective, we find the gleeful American celebration of greed even in the face of failure.

Under the stewardship of Dow Kim and Thomas Maheras, Merrill Lynch and Citigroup built positions in subprime-related securities that led to $34 billion in write-downs last year. The debacle cost chief executives their jobs and brought two of the world's premier financial institutions to their knees.

In any other industry, Kim and Maheras would be pariahs. But in the looking-glass world of Wall Street, they — and others like them — are hot properties. The two executives are well on their way to reviving their careers, even as global markets shudder at the prospect that Merrill and Citigroup may report further subprime losses in the coming months.