The Daily Beast
By Zachary Karabell
Aug 12, 2011
In case you stepped away for a few bucolic summer days, emulating Nicolas Sarkozy and much of France itself, you probably noticed that global markets swooned yet again on Tuesday to the tune of nearly 5 percent down before staging an equally impressive comeback on Wednesday. The latest precipitating cause of this yo-yo action was a rumor that Société Générale was on the verge of insolvency and about to implode.
The rumor was placed front and center by a story run in The Daily Mail in the U.K., which claimed that the French bank was in a perilous state because of its $4 billion exposure to Greek sovereign debt. That story was enough to ignite a new round of fear that the European Union was about to witness a financial meltdown and that France might soon be downgraded much as the United States was late last week.
The reaction to the story was swift. The bank’s CEO Frederic Oudea went on television to denounce the story as “stupid and unfounded rumors,” and the ratings agencies (including the much reviled and legitimately so S&P) said unequivocally that there was no imminent downgrade of France itself. Barraged with criticism for running a story with no hard facts or figures and no named sources, the Daily Mail then issued an apology, but not before global markets had lost trillions of dollars and shares of SocGen had plunged nearly 20 percent.