This feature is part of our FREE daily Money Morning email. If you'd like to sign up, please click here: Sign up for Money Morning Panic's over! It's OK, we can all stop worrying about the state of the financial markets and the global economy now. We've found the culprit. The recent carnage in the markets was all down to one man. No, not Alan Greenspan, but Jerome Kerviel, a trader at French bank Societe Generale. The short version is that Mr Kerviel managed to circumvent the bank's risk management systems, placing huge unauthorised bets on which direction markets would move in. He was discovered at the weekend, and the bank had to unwind the bets. Of course, when SocGen started to unwind these bets on Monday, all that activity panicked the markets, sending them to the depths we saw in the last few days. In the process, SocGen lost £3.7bn the biggest "rogue trader" loss ever seen.

It's an appealing idea. Now the markets have caught the wrong-doer, we can get back to business as usual. But it's also a complete fiction More than a few commentators are trying to push the idea that the recent market chaos was all down to bets made by the rogue trader' at Societe Generale being unwound. Where will the next rogue trader be found? Now I'm not saying it didn't have an impact. After all, as Edward Hadas points out on Breakingviews, "the bank must have sold something like 50bn euros worth of shares, the value of long positions required to lose [£3.7bn] in the first few weeks of 2008". But sadly, the theory that he was the sole cause of the market collapse doesn't stand up to scrutiny. Monday's market collapse began in Asia, where stocks sold off drastically overnight, before SocGen began its great sell-off. So while the idea that the Fed panicked and slashed interest rates solely because of the actions of a French Nick Leeson is quite amusing, it's also somewhat exaggerated. However, the story does flag up yet another reason for investors to be worried about what's lurking behind the faade of the recent boom times. Many wise investors have pointed out in the past, that fraud which goes unnoticed during the good times, rapidly becomes obvious when things start to turn bad. As Warren Buffett puts it, it's not until the tide goes out that you see who's been swimming without any trunks on. So one obvious concern is that if this chap could get away with it, who else is getting away with similar scams? It also shows just how much damage derivatives can do. Mr Buffett once called them "weapons of mass financial destruction" and SocGen, having been pushed into a multi-billion euro emergency rights issue, would have to agree with him.

These bets weren't even terribly complicated. They were straightforward bets on the market rising or falling. Nothing to do with sub-prime or mortgage-backed securities or any of the other buzzwords of 2007. In other words, not where we'd have been expecting the occasions of mass fraud to crop up. How you and I end up paying for banks' mistakes In many ways, SocGen and by extension, the financial system was lucky that Mr Kerviel slipped up when he did, or things could have become far worse. As Patrick Hoskings points out in The Times, having racked up billions in losses already, there's no reason he couldn't have racked up billions more. Instead of an emergency rights issue, SocGen could have been looking at outright bankruptcy. And if that had happened, we'd all have had to pay for it. As Hoskings says, some banks are deemed "too big to be allowed to fail Governments would undoubtedly be obliged to bail out any major bank in trouble. The squillions of dollars of bets placed every day in the wholesale money markets by such banks are underwritten by taxpayers." If you're in any doubt about that, just look at the panic our own government got into over Northern Rock. The Rock is a pretty unimportant bank even within Britain, let alone on a global scale. Yet it was deemed too big to fail and has now caused untold damage to an already ugly-looking public sector balance sheet. If nothing else, the first few weeks of 2008 have proved that we are in for a rough ride. In this week's MoneyWeek magazine (out today), our editor Merryn Somerset Webb picks out the best places to put your money now. If you're not already a subscriber, you can get your first three issues free by clicking here: 3-issues free trial.