Wednesday, January 30, 2008
I’ve been banking at SG for over 30 years and unlike many of the commentors I’ve been reading on various sites, I don’t have much to complain about. But then, I deal with my friendly, local branch where they offer me a cafÃ© whenever I come in to talk serious business (which admittedly, is quite close to never. But it’s happened a few times.).
But like everybody else on the planet, I don’t really believe what we’re hearing about the JÃ©rÃ´me Kerviel/SociÃ©tÃ© GÃ©nÃ©rale affair. At a primary level, there is sufficient bullshit in the way the French conduct business normally, that suspicion is a reasonable response to anything. I realize that this sounds trite, that people everywhere are suspicious of everyone who operate in the Halls of Power, but, hey, France has elites like no other, and as any mother knows, elites will be elites. It will be fun to see how this all plays out in the coming weeks.
One of the things I’m curious about is: if I understand correctly, JKerviel’s trading position was positive or close to it, up to the weekend before when things hit the fan.
The losses occurred subsequently, on the first 3 days of the week of january 21-5, when SG’s boss, Daniel Bouton panicked and unwound the position into (malheur!) the worst three market days of the last several years. It was this panic sale that concretized the huge losses.
I imagine this selling was motivated by the moral values (corporate responsibility, dread, shame, etcetc) of SGs top management. Because this is France, transparency was never an option. Resolution had to happen secretly. But did it have to happen under the sign of total panic?
Conversely, what would have happened if the markets were going up those three days instead of tanking? The shame would have been the same. The elitist secrecy also. So, would we have ever learned about the ’scandal’ of a rogue trader being responsable for 20 billion euros of illicit gains by the SG? I guess we would have, the day that SG announced record earnings for a bank of over 20 billion.