European Regulators Contemplate Temporary Ban On Financial Fiction

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With half of Europe having banned short-selling and anything that might loosely resemble it, if you think that French banks are undercapitalized then you may be seeking less traditional ways to monetize that view. One approach that you might have considered is writing a fictional account of a near-future Eurozone meltdown with real names of banks and individuals and selling it pseudonymously to a major French newspaper to publish in a twelve-part serial. If you live in the U.S. that may not sound like such a great idea, since we don’t consume a lot of based-loosely-on-real-events financial fiction unless it stars Shia LeBoeuf.

But in France, where after all mime is considered a form of entertainment, there seems to be a big appetite for fictionalized financial markets, as Le Monde found out when they puplished "Terminus pour l’euro" this summer. But Le Monde's success may just have ruined it for the rest of you:

The series, “End of the Line for the Euro,” looked at how a collapse of the single currency might play out, against the backdrop of French presidential elections next year. While the 12-part story was clearly labeled as fiction, it named real banks, like Société Générale, whose shares plunged 15 percent last Wednesday, prompting the bank to deny speculation that it was in financial trouble. …

Readers of the fictional “End of the Line for the Euro” noticed that Société Générale and UniCredit were both named in the same passage in the series, in an imaginary conversation involving the hedge fund manager John Paulson, where he says that U.S. regulators have been raising concerns about the liquidity of the two banks.

Fictional John Paulson seems to have had more success moving markets than the real one, as “The Mail on Sunday, a tabloid newspaper, had published an article in which it said Société Générale was ‘on the brink of disaster,’” possibly after reading Le Monde’s story and not getting the joke.

Ha. Except that now French regulators are investigating Le Monde for sparking the panic against Soc Gen:

On Thursday, the news agency Agence France-Presse asserted, in an article that it later killed, that the Le Monde series “was the source of false information that has largely contributed to Société Générale’s stock market drop.”

On Friday, the French economy minister, François Baroin, discussed the possible connection in a radio interview.

By the weekend, the talk had grown so loud that Le Monde was moved to defend itself in a front-page editorial by Erik Izraelewicz, its top editorial executive.

“The reality is that our fiction had nothing to do with this crazy rumor,” Mr. Izraelewicz wrote in the Sunday-Monday edition of Le Monde. “The paradox is that this case has come to illustrate something that our series denounced: the unacceptable role played by rumors in determining the fate of nations and businesses.”

Ah, the unacceptable role of exchanges of views and information in determining market prices. If only there was a way to prevent markets from acting on views and information ...

Source Sought for False Story on French Bank

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