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The International Writers Magazine:Money: Too tight to mention

Soc Gen Scandal

Far be it from me to impugn the integrity of the French banking establishment, but something about the story of one trader single-handedly causing €5billion inlosses to Société Générale stinks like a Camembert cheese that was left out in the sun too long.

Jérôme Kerviel hero for our times?

I have some clerical experience working for banking houses, but my real experience in business derives from the many years that I worked as a designer for Fifth Avenue accessory houses. These companies were bloody, infected corpses of sloth and corruption in a dying industry, and it’s no surprise that the industry eventually went extinct in this country. Nevertheless, I was in the creative end of things, and I reveled in my job, which was as interesting as any job you could ever hope to get in New York.

My last job in accessories lasted 12 years, before the industry finally went belly-up. It was for a place I’ll call Wen-Dell Creations.Once there was a fire in the factory office, caused by a manager who was a chain smoker. He emptied his ashtray into a wastebasket and left for the night, leaving a smoldering cigarette in the rubbish.

When we arrived the next morning we found the door to the factory broken down by the fire department. The office was a waterlogged wreck. The bosses immediately sprang into action, dragging every piece of redundant overstock merchandise in the factory into the office and soaking it with buckets of water before the insurance adjuster arrived. They claimed that the merchandise had been damaged by the fire hoses and eventually collected full compensation for useless boxes of belts and racks of raggedy dresses. The manager who caused the fire even got a bonus out of the insurance proceeds ha-ha!

Now, if you believe that one trader, Jérôme Kerviel, could single-handedly lose €5billion, I salute you. But between the time that the initial trading irregularities were discovered and the time that French regulators were called in several days elapsed, including Black Monday, Jan. 21, when Société Générale liquidated a lot of the positions he had taken in equity based derivatives, in order to “stem the losses” they claim.

Would it be stretching the reader’s credulity too far to suggest that, knowing there was going to be a scandal involving losses in the billions anyway, the bank’s officers decided to throw in whatever sundry odds and ends happened to be laying about and then let Kerviel take the fall for the entire mess?

That is presumably the argument his lawyers will advance when the affair is eventually adjudicated in court. Kerviel is undoubtedly guilty of losing money in unauthorized trading, but when he receives his long jail term, he will most assuredly be taking the fall for every mistake the bank has made in the last few years, or I will eat my beret.

French banking is a wondrous process to behold, like the time the historic Crédit Lyonnais building in central Paris mysteriously burned to the ground, like the Reichstag, after it had been discovered that the government-owned bank was being used as a cash cow for establishment politicians, who had received massive “loans” which were then forgiven. Or Eurotunnel, whose investors have never received so much as a centime on their investment despite the fact that it has been operating at capacity for over ten years. (On the freight side)

I certainly would not have the audacity to compare SocGen board chairman Daniel Bouton, former ENArque and chef du cabinet of conservative prime minister Alain Juppé, to a sleazy New York garment industry company owner. But human nature being what it is, it’s entirely conceivable that when the opportunity presented itself to get rid of some dogs he was stuck with in the general hysteria of mass selling that took place last Monday, he possibly availed himself of it.

As for Mr. Kerviel, he can be glad that Devil’s Island no longer exists as a prison, and that the years he will spend breaking rocks while his former colleagues are discussing the comparatives merits of Bordeaux and Beaujolais wines will be spent in a more temperate climate.

Just what I said. The following is reprinted from Le Monde de Paris 1-27-08:
Les avocats de Jérôme Kerviel, Mes Elisabeth Meyer et Christian Charrière-Bournazel ont dénoncé "les conditions volontairement précipitées et tout à fait anormales" dans lesquelles la banque "a liquidé des positions qui auraient pu se redresser avec le temps". Parlant du "scandale de la Société Générale" et dénonçant le "lynchage médiatique" de leur client, les deux avocats ont accusé le PDG de la Société Générale Daniel Bouton d'avoir "taxé" Jérôme Kerviel "de fraude" et de l'avoir "livré aux chiens".
Selon eux, leur client "qui a été formé par la banque à faire du profit, n'a commis aucune malhonnêteté et n'a pas détourné un seul centime et n'a profité d'aucune manière des biens de la banque". "En s'acharnant sur Jérôme Kerviel, la banque croit pouvoir élever un écran de fumée qui détournerait l'attention du public de pertes beaucoup plus substantielles qu'elle a accumulées ces derniers mois, notamment dans l'invraisemblable équipée des subprimes", ont-ils encore déclaré.
Dean Borok Jan 28th 2008

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