Word: kerviel
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...When his managers liquidated his positions, Kerviel held unhedged bets for over 60 billion dollars. Somehow, no one had noticed trades that exposed the bank for its entire market value. The managers silently sold Kerviel’s assets in a rapidly declining market amidst fears of global recession, and ended with over 7 billion dollars in red on their balance sheet...
...Overnight, everyone knew his name: Google searches for Kerviel exploded, as did news stories, and columns in the Financial Times. Everyone was covering the most spectacular rogue trader in financial history. Yet there is something even more surprising than the lack of controls that allowed for Kerviel’s scheme to work under the radar for over a year: the public’s reaction to the debacle...
...Today, several voices have called for more regulation of investment banks like Société Générale. Speaking at the Harvard Kennedy School, French Socialist leader Segoléne Royal cited the Kerviel case as an example of why a sort of global regulatory central bank is needed. Royal may be right: Regulation, like good risk management, may help curb moral hazard. But this is just part of the solution...
...According to recent polls, 77 percent of French people believe Kerviel is a “victim” of the system. Bruno Jeanbart, a French pollster, told Bloomberg, “French opinion perceives [Kerviel] as a man in the street, overtaken by the system.” That was just the tip of the iceberg. The popular French daily Le Monde addressed Kerviel as a “hero of our time” on February 2nd, and that same day, Le Figaro revealed that only 13 percent of people believed the trader was responsible for the scandal...
...Needless to say, those numbers traders seem to play with on their many computer screens every day from dawn to dusk are hard to conceive of as tangible funds. In his overwhelming desire to achieve upward social mobility, Kerviel forgot that it was real money – and that the more zeros, the more they matter. Rather than a “victim” of the system, he represents the system’s worst nightmare: uncalculated risk...