SG's Jerome Kerviel is now the most notorious trader in the world, under investigation for deceiving his superiors and losing his employer €4.9 billion in a single month...
Hang on, surely I mean his former employer? No. Because, as the Wall Street Journal explains, he still works for SG - and he can't be fired.

French law stipulates that to do that, the bank must first call him in for a sit-down meeting and explain its dissatisfaction. He has the right to bring along a trade-union official, a lawyer or anyone else he'd like.
That will be complicated: A pair of Paris judges this week released Mr. Kerviel from custody but forbade him to have contact with the bank...

Fascinating. (Apart from anything else, that's one review meeting I'd really like to sit in on. "So, Jerome. How do you think the last year has gone for you?")

Ill-hidden pique from the French finance ministry today. Turned out that the AMF and the Banque de France never got around to telling them about the SG losses until it was almost all over - they were worried that the ministry would leak it to the market and make matters worse. (See the ministry's report). "It would be desirable", the report says, for the ministry to be informed rather sooner in future, if that is all right with everyone.

They finally told the minister on the Wednesday. Sure enough, somehow it leaked out into the market the same day.

"The ship of state," as Bernard Woolley remarked, "is the only ship that leaks from the top."

Both Fitch and Moody's are considering changing their rating criteria.

Just to note that the third shoe has dropped - Standard & Poor's has also announced a swathe of (rather vague) changes to its rating methods. (The full list is here). Remains to be seen if this will be enough to avert the wrath of IOSCO. (Fitch and Moody's announced theirs earlier this week.)

Excitement is growing over the prospect of a downgrade of one of the major monoline insurers. Well, 'excitement' is probably not the right word. 'Dread', maybe. 'Horrendous, paralysing dread'. Yes, that sounds about right.

The WSJ reports today that a second suspect is under investigation - the broker, reportedly one Moussa Bakir, worked at Fimat, through which Kerviel apparently channelled many of his trades. Interesting. Bloomberg has more.

"He's fainted," says the villainous Hercules Grytpype-Thynne, in one episode of the 1950s Goon Show. "Open his jacket and take the weight of his wallet off his chest."
In this evening's performance, the part of Grytpype-Thynne will be played by Warren Buffett, who announced a monoline rescue bid on CNBC recently. Here's a link to the interview and a transcript.

AIG admitted that an external audit revealed its writedowns should have been three times as big. Heads have, one hopes, rolled by now.

Risk's recent coverage of monolines:

US regulators reveal plan to split monolines - Monoline insurers could be split into two separate entities under plans being considered to stave off further credit rating downgrades of the troubled municipal bond guarantors...


Monolines show no appetite for Buffett - Warren Buffett’s plan to reinsure wrapped municipal bonds has been given short shrift by monoline bond insurers...

And coverage elsewhere this morning:

Much, much more information on the Kerviel business - the SG investigating team has released its preliminary results. (pdf) Our take here. Extraordinary that Kerviel raised 93 separate alarms with three different departments with his trades and, every time, no further investigation resulted. Presumably he simply gazed into their eyes and intoned "You don't need to see my confirmation documents."

Via alea, this analysis from BarCap (pdf) highlights (p7) the degree to which spread prices have risen on CDS in the last 12 months - and predicts losses of $80 billion due to counterparty default over the next year.

Some rare good news for the monolines as S&P confirms their AAA ratings. Perhaps buoyed by this, the new MBIA chairman, Jay Brown, issues a letter discussing the plan to split the muni and structured finance businesses, and suggesting the company could move offshore, before launching into an extraordinary monologue:

FSA head Hector Sants joined in the criticism of bankers' pay structures this morning in a BBC interview (summarised here). He predicted a tighter credit environment, made more severe by "pressure" on the originate and distribute model of lending.

We cover the ARS market here - auctions have been failing at unprecedented speed and the SEC is getting involved. Yves Smith suggests that the market has been - and always has been - getting close to the edge of permissible market action...