The Fed's Move Benefits Mutual Funds

Move over Nick Leeson. There's a new rogue trader in town.

Sure you wiped out $1.8 billion and Barings Bank in 1995 with your fraudulent trading scheme. But that's petty cash compared to the $7.2 billion wallop to Société Générale. Jerome Kerviel, the new record holder for rogue trading, allegedly used fictitious transactions to balance out his unauthorized trading activities.

Ironically, this was a good week for banking stocks and the funds that hold them. This has everything to do with the Federal Reserve surprising the world with a three-quarters of a percentage point rate cut Tuesday morning and the expectation that at least another half of percentage point cut is coming Jan. 30.

Even though the Societe Generale fraud was discovered over the weekend, Bloomberg reported that the Fed may not have been notified prior to its Monday evening conference call, according to an unidentified Fed official. This meant the French banking regulator and Societe Gelerale were quickly closing out Kerviel's losing bullish bets on European stock index futures at the worst possible time of panic selling. ...