Thursday, January 31, 2008

Toujours de l'audace

I don't want to belabor the Société Générale affair, about which I'm sure we still have a lot to learn. But what we know already boggles the mind. Rue89 describes several alerts issued by Eurex to the bank as early as November of last year. These alerts allegedly triggered internal investigations, but investigators were put off the scent, they say, by e-mails fabricated by Kerviel. I don't think it takes an especially skeptical mind to wonder why the bank's investigators were fobbed off so easily. Presumably Eurex issued its queries because Kerviel had taken unusually large positions that seemed not to be covered by corresponding counter-positions. Presumably the e-mails he fabricated were intended to give the impression that counter-positions existed. Presumably there were counter-parties to those counter-positions who could have been contacted. After all, that is how his scheme was eventually unraveled. Presumably the effort to take this extra step was quite minimal. So why was it not taken, particularly after repeated warnings from Eurex? This story is close to impossible to believe, and in fact we know now that the bank itself doesn't believe it, because it fired five of Kerviel's superiors, presumably because they failed to follow up these warnings. Why is there not more clamor about this in France? It's all well and good to denounce "finance capitalism," that faceless bogeyman. It's a little more difficult when it comes to taking on old friends and colleagues. Pierre Moscovici alluded in his blog the other day to the fact that Daniel Bouton is an old acquaintance and teacher. Bouton may well be a perfectly decent gentleman and a victim in this affair, like so many others, but the fact remains that he is the man in charge and that thus far his answers have been infuriatingly vague for a man universally described as possessing a brilliant mind.

And then there is the matter of potential insider trading by Robert Day, also mentioned by Rue89. Day, an SG board member, heads the Trust Company of the West and is one of the "world's richest people." He is a "Bush Pioneer," having raised over $100,000 for W, as well as a friend of Warren Christopher's, and he once entertained Bill Clinton on his yacht. A well-connected individual indeed.


Quico said...

I'm sorry, but I find this story totally fascinating. The more I read the more I love it. How could this happen? Was this a bank or a criminal syndicate? I'm just baffled and enthralled...

One question: can you tell us a bit more about Rue89. What's the story with that site?

Unknown said...

Rue89 was founded by former journalists at Libération. It commenced publication on the day Sarko was elected, just before I launched this blog. See:

Anonymous said...

^^ nice blog!! ^@^

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