MOST NOTEWORTHY: Northrop Grumman, Groupe Danone and MercadoLibre were today's noteworthy upgrades:

• Oppenheimer upgraded shares of Northrop Grumman (NYSE: NOC) to Outperform from Perform after the Pentagon selected the company over Boeing (NYSE: BA) for the newly designated KC-45A Aerial Refueling Tanker with a potential value of $35B.
  
• Citigroup upgraded shares of Groupe Danone (OTC: GDNNY) to Buy from Hold on valuation, as they believe the sell-off on commodity cost concerns is overdone.
  
• MercadoLibre (NASDAQ: MELI) was raised to Outperform from Sector Perform at RBC Capital, as they believe MELI's long-term thesis is more compelling now vs. six months ago and notes favorable reaction to Mercado Pago v2.0.

OTHER UPGRADES:

• Goldman upgraded Societe Generale (OTC: SCGLY) to Neutral from Sell.
  
• Jefferies upgraded Exelon (NYSE: EXC) to Buy from Hold.
  
• Deutsche Telekom (NYSE: DT) was raised to Neutral from Underweight at JP Morgan.

MOST NOTEWORTHY: Pfizer, Dell, Quest Diagnostics, and Societe Generale were today's noteworthy upgrades:

• Lehman upgraded Pfizer (NYSE: PFE) to Equal Weight from Underweight on valuation.
  
• Friedman Billings raised Dell (NASDAQ: DELL) to Outperform from Market Perform, citing expectations for improved margins next quarter, and valuation.
  
• Quest Diagnostics (NYSE: DGX) was upgraded to Outperform from Neutral by Credit Suisse, which cited valuation.
  
• Lehman upgraded shares of Societe Generale (OTC: SCGLY) to Overweight from Underweight to reflect a potential takeover by BNP Paribas and limited downside.

OTHER UPGRADES:

• Bayer (OTC: BAYRY) was raised to Overweight from Equal Weight by Lehman.
• Deutsche Telekom (NYSE: DT) was upgraded to Hold from Sell by Citigroup.
• Public Storage (NYSE: PSA) was raised to Buy from Hold by Deutsche Bank.
• UBS raised Entergy (NYSE: ETR) to Buy from Neutral.

Societe Generale, in trouble because of losses suffered due to transactions by one trader, will raise almost $8 billion. The rights offering is at an astonishing 39% discount to the price as of the Friday close.

According to The Wall Street Journal, "the bank also said write-downs linked to fallout from the U.S. subprime-debt crisis would be €2.6 billion, compared with the €2.05 billion announced in January." In other words, it is in deep distress.

A sale of shares at a 39% discount raises a question about the valuation of US banks, should they be put in a position to raise more money due to larger subprime write-offs or write-downs in their LBO portfolios. American money center banks may have to take more losses in the early quarters of this year as a recession further devalues some of their assets.

To put it in stark relief, a rights offering at Citigroup (NYSE:C) at a 39% discount would price shares at $16 compared to their current $26 level which is down from a 52-week high of $55.55.

Douglas A. McIntyre is an editor at 247wallst.com.

Interesting article this week in the MIT Technology Review (OK, so I don't understand most of it, but I still aspire to be a geek) in the wake of the trading losses announced by Société Générale at the hands of rogue trader Jérôme Kerviel.

Last week, the French bank disclosed the $7.2 billion loss. In the wake of the disclosure, Bank of France chairman Christian Noyer declared to a French senate finance committee, "None of the controls within Societe Generale seem to have worked as they should have."

Interviewed in the article, MIT's Andrew Lo, head of the university's Laboratory of Financial Engineering, said that given the fact that all software systems have a human interface, "I would argue that it is impossible to prevent these disasters with 100 percent certainty."

While investors on the west side of the Atlantic lament the corruption in the U.S. banking system, it could be that the French system takes home the gold medal. Reports out of the Paris prosecutor's office indicate that rogue trader Jerome Kerviel told investigators, "I can't believe that my superiors were not aware of the amounts that I was committing, it is impossible to generate such profits with small positions."

If this is true, and SocGen knew what was happening all along, then former CEOs like Citigroup's (NYSE: C) Chuck Prince and E*Trade's (NASDAQ: ETFC) Mitch Kaplan will look like choir boys in comparison.

One company that has actually gained from all of this, especially on the heels of the SocGen announcement, is the Israeli security company NICE Systems (NASDAQ: NICE). They recently purchased a company called Actimize which has a anti-fraud product for banks, to help prevent situations like this recent debacle.

What to make of all of this? There will always be banks, and they will always get a little too piggy and screw things up. It's NICE to know that there are some company's out that can try and reign in these guys and save the investor some money.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has a position and is long NICE and ETFC. He has no positions in any other stock mentioned as of 1/29/08.

Prosecutors investigating the fraudulent trading scandal involving Jérôme Kerviel and his antics at French bank, Société Générale, have determined there is strong evidence that a crime has been committed and are asking for preliminary charges to be filed. The filing of preliminary charges by a judge would clear the way for investigators to dig deeper into the matter to determine if the case shall be dropped or continue on to trial.

Defense attorney Elisabeth Meyer, speaking on behalf of Kerviel stated that he is being "thrown to the lions before being able to explain himself." Defense attorneys believe that Kerviel is being made a scapegoat in the wake of losses tied to the U.S. sub-prime mortgage meltdown. They claim that Kervial was just trying to be an exceptional trader. Too bad he couldn't have accomplished that above board.

The bank's CEO, Daniel Bouton rejects the notion that Kerviel is being used for cover. He called the idea "stupid", declaring that you can't "hide a hole by another hole." I would tend to agree with that thinking. The judge's pending approval of the filing of charges could clear the way to proving that Kerviel did indeed act with fraudulent intent. It is of no consequence whether or not Kerviel sought personal gain through his alleged misdeeds. It is of no help to him if he thought his actions were noble. What matters here is that he seems to have acted independent of the rules and then sought to cover his tracks in doing so.

As criticism mounted Friday that the U.S Federal Reserve may have at least partially 'jumped the gun' with a large 75-basis-point rate increase after U.S. stock markets plunged early Tuesday, economists and analysts say the Fed is unlikely to deviate from its easing monetary policy path, even though some evidence suggests Societe Generale's unwinding of a rogue bank trader's unauthorized trades may have contributed to Tuesday's plunge.

The Dow plunged more than 400 points in the first hours of trading Tuesday, following massive sell-offs in Asia in Europe on Monday, and the Fed, concerned about the impact of potential market crash on an already weakened U.S. economy and financial system, responded with an emergency-meeting, 75-basis-point rate cut for both the Fed Funds rate, to 3.50%, and the discount rate, to 4%.

Societe Generale factor

However, on Thursday Societe Generale, France's second largest bank, announced that on Monday and Tuesday it had unwound trades of a rogue trader's unauthorized -- and losing -- trades, which cost the bank almost $7.2 billion, The Associated Press reported.

French bank Société Générale says that it has uncovered a "fraud" by a single trader which lost the bank $7.1 billion. According to MarketWatch, the fraudulent trades were made in 2007 and 2008. The trader, whose role at the bank was to make "plain vanilla" hedges on European stock-market indexes, used his knowledge of the bank's control procedures "to conceal these positions through a scheme of elaborate fictitious transactions."

Société Générale plans to raise €5.5 billion to help offset the loss.

The French bank did not disclose much about how the loss happened or what the trader's motivation might have been. Perhaps that does not matter. What does matter is the the actions get to the heart of risk management at big banks. At a number of U.S. financial companies, traders clearly took huge positions in subprime instruments. That has cost some of the largest banks in this country billions in write-offs. No one has offered an adequate explanation of who was minding the store when those risky decisions were made.

The Société Générale news is just more of the same. Managements at big banks have not learned the lesson.

Douglas A. McIntyre is an editor at 247wallst.com.

The Associated Press reports that France's second-largest bank by market capitalization, Societe Generale, has uncovered a rogue trader who reportedly stole $7.14 billion -- forcing the bank to raise $8.02 billion and suspending trading in its stock on the Paris stock exchange.

Details are sketchy. The bank discovered the fraud on January 19 and 20th. It said a trader at the futures desk had misled investors in 2007 and 2008 through a "scheme of elaborate fictitious transactions." The trader used his knowledge of the group's security systems to conceal his fraudulent positions. The unnamed trader beats Nicholas Leeson, whose 1995 $1.38 billion trading fraud in Singapore brought down Barings Bank and was made into a movie.

Societe General, whose stock has lost about half its value over the last six months, has already taken a $3 billion charge for bad subprime mortgages. No word on what happened to the trader's $7 billion -- or whether this discovery will have repercussions throughout the global financial markets.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

The proposed Super SIV may end up being considerably smaller than the original outline, as banks and other SIV-owning institutions either write-down or find other ways to dispose of problematic SIV assets, The New York Times reported Monday.

Conceptualized following a request from the U.S. Treasury, the Super SIV is designed to facilitate the orderly sale of high-risk packaged mortgage loans and assets held by SIVs, but not to rescue those SIVs.

As presently configured, beginning in January/February 2008 the Super SIV will lead a coordinated, gradual purchase-and-resale of these assets, which, officials say, will avoid a "mad rush to the door" of SIV asset sales. The latter would further depress prices, and create another round of credit market turmoil, with negative consequences for the U.S. economy. The Super SIV will raise money from financial institutions to fund itself.

A government bail-out of UK mortgage bank Northern Rock sent Europe banking shares sharply lower and set similar trouble for US bank shares. Northern Rock was down 27% on news that the Bank of England had to supply it emergency funding.

Barclays was off 3.2% Commerzbank fell almost 5%. BNP Paribas and Societe Generale were of about 3.5%.