The Omen.

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 Societe Generale, 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.

The trader, a thirty-one-year-old Breton named Jerome Kerviel, became an instant and notorious celebrity. Because so little was known about him, speculation abounded: that he might be at risk of suicide; that he had abandoned his apartment in Neuilly-sur-Seine, an affluent Paris suburb close to Societe Generale's headquarters, and might have fled; that the police had discovered a Koran in his apartment, which suggested possible terrorist links.

Most baffling was the question of motive. There was no evidence that Kerviel had stolen anything, and he had none of the trappings of wealth. When the police went to his home, they found a sparsely furnished one-bedroom apartment; he didn't own a country house, or even a car. In interviews with the French police and a court-appointed psychologist, Kerviel claimed that his primary concern was to benefit the bank.

Societe Generale's top officers and directors and their colleagues in the French business establishment considered Kerviel's activities an isolated case of fraud, according to an internal report. Jerome Kerviel was a flambeur ("high roller"), a joueur ("gambler"). His ambition, greed, and, perhaps, even madness threatened not merely an august national institution but the entire international financial system. Moreover, as commentators in the press pointed out, the culprit was a graduate of a trade school rather than of a grande ecole. He had entered the bank through a side door--the "middle office"--and advanced beyond his station, affirming the practical wisdom of France's rigid educational system and its distrust of the dangerously romantic notion that anyone can reach the top.

But many French citizens saw the situation differently: Kerviel was the victim of a profit-obsessed bank, which largely existed to extract revenue from the struggling working and middle classes while enriching its top officers and shareholders. Surely Jerome Kerviel, the naive provincial, who was good-natured, hardworking, and handsome (his colleagues noted his resemblance to Tom Cruise), was manipulated and encouraged by his su-periors. How could one person have amassed an exposure, as Kerviel had, of fifty billion euros without his superiors at the bank knowing? After his photograph appeared in the press, strangers approached him on the street and in cafes, seeking autographs and offering encouragement. In a poll commissioned by Le Figaro a week after the bank's announcement of the loss, just thirteen per cent of the respondents blamed Kerviel for the scandal; fifty per cent blamed Societe Generale.

Now that the financial world is enduring its most serious turmoil since the Great Depression, and public outrage is focussed on financial chief executives and their multimillion-dollar incomes, Kerviel looks even less like an isolated rogue trader, and more like a harbinger of systemic failure: the intricate investing vehicles that few understood; the impotence of internal risk controls; the moral blindness in the face of mounting profits; and, above all, greed. The F.B.I. says that it is investigating twenty-six financial insti-tutions in the U.S.--they reportedly include Lehman Brothers, Fannie Mae, Freddie Mac, and A.I.G. Jerome Kerviel may be only the first of many traders to face the prospect of years in prison.