There’s a large dollop of hypocrisy in much of the reporting about the losses at Societe Generale, the big French bank, because of unauthorised trading. Frenchman Jerome Kerviel is up there with the financial pariahs for his unauthorised trading losses at French banking giant, Societe Generale, but how major were his losses?
Newspaper official comments say his was the biggest “fraud” in financial history, and the sum is certainly staggering: over $A8 billion. But it wasn’t a fraud; he didn’t take any money.
Contrast his performance with that at some leading banks like UBS, Merrill Lynch and Citigroup where the losses from subprime mortgage related investments (and dud corporate deals) were much, much bigger.
Those responsible at the US banks (including UBS) have escaped unscathed, rewarded in the millions of dollars (tens of millions in some cases) and sacked in some circumstances, but are now apparently going on to bigger and better things.
The losses on Wall Street total more than $US100 billion and counting (and that’s not including the losses made by financial groups in Europe, Asia and Australia) and have involved some of the biggest names in finance: Citigroup, Merrill Lynch, UBS (Swiss, but bought Dillon Read), Bank of America, Washington Mutual, Countrywide Financial Services, JPMorgan Chase, Morgan Stanley. The list is extensive.
In the New York Times at the weekend there was an interesting juxtaposition of two reports which showed up the hypocrisy in the minds of many in the markets, especially on Wall Street.
There is the one about Kerviel; a mystery man, a “lone trader” etc. An early partial explanation from his bosses at the bank was that he spoke “very good English” (ie. he was tainted with the Anglo-Saxon approach to business).
Then there is one about two executives at Merrill Lynch and Citigroup, Dow Kim and Thomas G Maheras respectively, who are being allowed to rebuild their careers after playing a major part in crippling their banks to the point where they had to be bailed out by foreign and other investors after losses that have dwarfed what Societe Generale has had to endure.
Yes, what Kerviel did was wrong, but which was the greater crime? From all accounts Kerviel got in too deep and couldn’t extract himself at a profit. Yet we know that Dow and Maheras, as well as other senior officers at Bear Stearns, Morgan Stanley and Citigroup thought they knew what they doing, but they didn’t.
The result is the subprime crisis and credit crunch which has sent the US economy to the brink of recession and carved over $US8 trillion off stockmarket valuations since the peaks of late October/early November.
Yet Kerviel will be the “face” of this crisis and the real culprits, those on Wall Street, in London, Germany, Japan, China, Australia, Canada, will escape with fat wallets and all but unknown. And, they should have known better because they claimed to know what they were doing.
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