Posted on 01/24/2008 11:14:36 PM PST by BurbankKarl
“I don’t know where he is,” said Daniel Bouton, the long-standing chief executive and chairman of Société Générale, when he was asked on Thursday about the whereabouts of Jérôme Kerviel, the trader at the centre of one of the biggest frauds in banking history.
But while Mr Kerviel’s movements remained unknown, the sequence of events that led to the extraordinary writedown at SocGen was becoming clearer.
The trader joined the bank in 2000 and worked in Paris. The first three years of his career were spent in the bank’s so-called “back office” and “middle office”, where trades are settled and risk is managed. SocGen said he had never worked directly in its risk control section, but remained in contact with people in those areas so he could be updated with the bank’s risk controls.
“The reasons he could succeed was because the trader knew intimately the bank’s risk controls and swiftly shifted positions to evade detection at each level of control,” Bouton said.
The fraud was discovered after the trader made an error with a fictitious counterparty. Its extent became clear over the weekend, when the bank‘s management interviewed Mr Kerviel.
Jean-Pierre Mustier, head of investment banking who was among those present at an interview with the trader over the weekend, said: “I am convinced he worked alone.”
SocGen said that Mr Kerviel was responsible for trading futures on European equity market indices, and had taken “massive fraudulent directional positions” in 2007 and 2008, many of which had made a profit in 2007. It was positions he had taken since the start of the year that caused the losses.
(Excerpt) Read more at ft.com ...
SocGen, the world’s leading equity derivative trading house – it claims to have invented the instruments – quickly unwound the positions he had amassed, estimated at €40bn-€50bn. SocGen’s fire sale contributed to the heavy stock market falls on Monday that provoked the US Federal Reserve’s dramatic interest rate cut the following day. The Fed was informed of the SocGen problem on Wednesday by the Banque de France.
http://www.ft.com/cms/s/0/bd9f55d6-ca4b-11dc-a960-000077b07658.html
“I am convinced he worked alone.”
I’m not.
Who has all that money now?
In the futures markets, there is a winner for every loser, exactly. It is a zero sum poker game.
This dude made 100,000 Euros a year....hahaha
He must have had some other dough stashed though....top of the Interpol list no doubt...send Jason Bourne to get him.
That's patently NOT true, he didn't CAUSE the global market meltdown.
He traded way beyond his bounds and got in over his head and covered up his trades with ficticious activity.
When SG discovered what had happened, they had no option but to immediately unwind the positions, but it happened on Monday when the market WAS ALREADY TAKING A DIVE, hence the 7.1 billion dollar loss
He didn't cause the meltdown, the meltdown aggravated his losses, which in turn likely fueled further loss.
Had SG sat it out, they might have mitigated the loss, but I suspect they couldn't legally do that
NYSE was closed on Monday
Hmmm ... yawn .... more hmmm in am! ;-)
” SocGen: The trader vanishes (Caused global market meltdowns) “
That’s right — Pay No Attention To That Man Behind The Curtain!
Forget the systemic weakness and find a scapegoat to blame it on — and, in the meantime, hand out some ‘candy’ to distract the children....
Smoke & Mirrors obscuring the cliff-edge...
Keeping company with Jimmy Hoffa.:-)
“Mr Kerviel ... had taken “massive fraudulent directional positions” in 2007 and 2008, many of which had made a profit in 2007. It was positions he had taken since the start of the year that caused the losses.”
He bet on a European “January Effect”, which failed to materialize. I almost did the same thing, but not with the leverage that he could command. Fortunately for my portfolio I decided to take a pass this year. Unfortunately for his bank, he didn’t.
“Had SG sat it out, they might have mitigated the loss, but I suspect they couldn’t legally do that”
I don’t know about the legality of it, but it would have been imprudent. Once word leaked out (and it WOULD leak out) that they were sitting on this position, their counterparts in the market would move in for the kill, increasing the losses perhaps beyond their capacity to cover (think LTCM ). The possibility that the resulting collapse of the 2nd largest bank in France might spread and blow back on the initial winners might not occur to the participants until it was too late.
No, unwinding fast, before their problem was widely known, was the prudent thing to do.
Just convert and hide out in a muslim ghetto, Jérôme. The cops won’t go there.
I wonder if he is connected to Soros.
I'm sure many are happy that these idiots unwound those positions like that. They most likely would have lost less money had they just unwound those postions over the course of a week or two.
Perhaps he was a scapegoat for the bank’s actions. The loss was too much for the bank to accept responsibility for so they made a patsy agreement with the suspect and he went away.
So what?
The Bourse was open as was every other exchange in the world.
What makes you think that a French Bank does all it's trading on the NYSE?
they are the ones that piled up the future sell orders for Tuesday’s open.
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