Why Scapegoating SocGen "Rogue" Jerome Kerviel Won't Reform Wall Street
Jérôme Kerviel needs the mother of all payment plans. Along with sentencing the ex-Société Générale trader to three years in prison, a Paris judge on Tuesday ordered him to pay restitution of $6.7 billion, which is what he lost investing for the French bank in 2008.
Average life expectancy for men in France is 76 years. To make good his debt to Société, that means the 33-year-old Kerviel must pay... let's see... carry the one... roughly $156 million a year for the rest of his life. Hey, maybe Goldman Sachs (GS) is hiring. Alternatively, the WSJ calculates that at his final annual salary at SocGen of $137,000, it would take Jerome a measly 49,000 years to come good:
That would be a serious display of fortitude for a man Société Générale's co-CEO has called "mentally weak."A symbolic fine? Mais bien sur! This is, after all, the land of "symbolist" poetry and postmodern lit-crit theory, where meaning is meaningless, not to mention frequently incomprehensible.
Yet somehow it seems fitting for a crime that captured the sheer Looney Tunes weirdness of the times, when billion-dollar companies flickered out of existence quicker than you can say "Jacques Derrida" and investment bank CEOs justified their greed in the name of God.
At least Kerviel's lawyer is making sense:
This judgment is totally unreasonable. It suggests that the bank is not responsible for anything, that no system of control could have prevented this....That's half right. Kerviel does deserve punishment. And three years in a French slammer, where the food is surely better than what you get on the average commercial airline flight, doesn't seem excessive.[Kerviel] is revolted that those that created him put all responsibility on him. Prison is unacceptable for a man who didn't make a penny.
But the question at the bottom of this case has always been this: How deep is the rot? Were Kerviel's acts really those of a rogue trader, or did they emerge from a corporate and industry culture inclined to mess with reality, such as the notion that risk is contained and that no one saw the housing crash coming?
There's reason to be suspicious. SocGen is the company that got its derivative bets so wrong that it had to strong-arm AIG, otherwise known as the American taxpayer, into covering $11 billion in losses tied to the bank's purchase of credit default swaps. It's also the company that insists that it has lost not one Euro on swaps. Here's what a SocGen spokeswoman said earlier this year after rumors surfaced that the company recently took a hit on derivatives:
If we had something to say, we would have already communicated.Deconstruct that! Maybe it sounds better in French.
Then again, Kerviel, who as his lawyer says claims not to have made a centime from his transactions, concealed the fraudulent trades for nearly two years before SocGen says it caught on to his activities. Talk about an existential squeeze. SocGen executives were either incompetent or complicit. That says and communicates a lot.
Not coincidentally, the same questions plaguing SocGen -- what did they know, when did they know it, who's that guy flushing money down the bidet -- are the same ones facing global financial institutions everywhere. Take Goldman. It sought to pin the blame for the Abacus CDO scandal on another hapless Frenchman, Fabrice Tourre, who remains in legal limbo after the investment bank hung him out to dry like saucisson.
Meanwhile, not a single top banking executive is doing time for a caper that cost considerably more than $6.7 billion. Where's the meaning in that?
Image from Wikimedia Commons
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