Wags Weigh In on SocGen Scandal
News that a lone rogue trader had blown $7.1 billion at France's Société Générale (SOGN.PA) over the course of a few months (BusinessWeek.com, 1/24/08) stunned investors and pundits alike, and further riled bloggers and columnists already overwhelmed by global market gyrations earlier in the week. With little revealed by the bank about how the junior trader, 31-year-old Jerome Kerviel, could have lost such a hefty sum unbeknownst to his colleagues and bosses, speculation about the largest fraud in banking history runs the gamut.
Some, like the writers of the Ethics and Compliance Blog, blame French corporate culture. Reporting others' misconduct is un-French, the blog says, and thus the responsibility falls to higher-ups to weed out offenders.
Many bloggers blame SocGen, which says it discovered the fraud on Sunday, Jan. 20, for the market downturns the following day, and contend the Fed was tricked into making its emergency rate cut of 75 basis points. "They were sucker-punched," Barry Ritholtz, director of equity research at Fusion IQ, is quoted as saying in The Wall Street Journal blog Marketbeat.
Tough Luck for France
Still others say the bank's fate was written in the stars. "Like SocGen, Kerviel has a strong Saturn/Neptune alignment, making it easy for him to set up fictitious trades within the bank's boundaries," writes astrology-cum-investing site Wall Street Weather. "Kerviel's Mercury conjoins his Mars. He can act impulsively, trapping himself in his own web of deceit. With Mercury challenging Pluto, a lot of calculated thought went into how he would hide his transactions."
Despite denials of schadenfreude from leaders of other global banks, Financial Times columnist Andrew Hill writes, "But, for all the international solidarity, UK regulators, politicians, and bankers, with fingers firmly crossed, must be murmuring: 'Thank God he's not British.'" Another FT column questions whether SocGen will outlast the scandal, but notes potential buyers are few in light of the U.S. subprime crisis and ensuing global credit crunch.
The Times of London's Paris correspondent, Charles Bremner, blames the bank's leaders for seemingly embracing the French concept of responsible mais pas coupable, or, responsible but not guilty, while his colleague, business columnist Antonia Senior, urges banks to temper greed with "honesty, loyalty, and self-discipline."
Movie Deal in His Future?
In an editorial in Britain's Telegraph, Jeff Randall questions the propriety of punishing Kerviel while banking leaders responsible for the subprime "rubbish," such as Stan O'Neal, former chief executive of Merrill Lynch (MER), get off easy. "He got a $160 million payoff and early retirement," Randall writes. "If Kerviel were found guilty, he would not be so lucky."
Still others predict no matter the repercussions for Kerviel, he'll surely find a silver lining, just as Nick Leeson—the trader who brought down Barings Bank in 1995—did after he was freed from jail in 1999. Leeson, reportedly in Paris this weekend on vacation with his wife, was paid $700,000 for the rights to his book, Rogue Trader, which was made into a film, writes Art Goldhammer, chairman of the visiting scholars seminar at Harvard's Center for European Studies. Perhaps the previously anonymous Kervial will enjoy similar fortune in the future.
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