January 31, 2008

• "I was generating cash, so the signals were not very worrying for them. As long as we win and no one sees and everything is taken care of, they say nothing." Exactly. Do anyone really believe this guy acted undetected? 'Le fallguy', ha!
• I might not say 'undetected', but certainly a lot of wilful blindness going on. Particularly when (I'm guessing) his superiors took credit and bonuses for surpassing performance markers. Only when the entire market took a downturn did it become convenient to turn him into le fallguy.
• Jérôme Kerviel, The ballads tell, Worked at the Générale, And when the bank Lost all its francs, Jérôme, he took the fall. (Nothing rhymes with "euros" except "burros." And that's just silly.)
• Maybe he will have to... Monkeyfilter: euros and burros
• Edward R. Murrows
• Lou Rawls.
• duos
• Bureaus Coolios Su-su-sudios.
• As it passes through gloom, And occasional boom, Depicting the euro Takes chiaroscuro
• Thoreau.
• To some extent, I feel sorry for Jerome. He strikes me as a compulsive gambler who simply can't walk away from the table. He got himself in deep, and when faced with losses, he raised the stakes to try to claw back. He has committed multiple acts of fraud, though they don't seem to have been for direct personal gain, though we might expect that had things gone well, his end of year bonus would have been very good and he could have been promoted. Something that bugs a lot of people is how the bank's processes allowed Jerome to take positions in excess of the bank's capitalization (estimated 50 billion position versus 34 billion capitalization). This is a relatively junior guy who should never have been able to risk such large amounts of money. So apparently he knew how to game the system from having worked in the back office. He's alleged to have known necessary passwords and to have used other people's passwords. But what sort of a place is this that has no data security policy, or at least where nobody follows a data security policy? I'm obliged to change my password every three months, and any automation accounts I set up have to abide by the same policy. This is a pain because I have to remember to change all the passwords, but it's simple common sense. I trust my coworkers, or at least most of them, but I'd never give them my password to a critical system. I'm tempted to withdraw the entirety of my 75 euro from socgen and close the account.
• That might just force them under, roryk.
• Something else that's been raised is why wasn't this spotted outside of SocGen? All the transactions were public, and it would seem fairly simple to set up some trackers to make sure that a given institution's exposure doesn't exceed its ability to pay. Who watches the market watchers? Back to the question of le fallguy, maybe he's being scapegoated, but for what? The suggestion that SocGen is using him to cover up for losses in other areas seems suspect to me: 1. They've already copped to sizable losses on the subprime issue, but other banks have acknowledged even worse results. 2. The "rogue trader" story is really damaging to the bank's reputation. So much so, I think, that it would've been better to explain everything as losses related to subprime shenanigans. I think the next few years will be pretty grim for SocGen - they've lost public trust; they'll lose key staff because they'll be too cautious to take big risks and make big profits; losing their star performers will further reduce competitiveness; and so on.
• I so want out of the banking industry.
• I can't imagine that SocGen survives at all -- at least, not in the form it does now. Piecemeal sell-off, I'd expect, starting with the retail banking. Reputation is all, and it's totally shot -- as you say, the one rogue trader is one thing, but the subverting of controls or asleep-at-the-wheel quite another.
• Jerome est libre! At least for the time being...