Why is there so much public sympathy for Jérôme
Kerviel, the rogue equity index futures trader who nearly
felled Société Générale?
Part of the reason surely lies in Kerviel himself. Leaving
aside his eccentric good looks, the inexplicability of his
crime lends it an air of glamour. Rather than being obviously
motivated by tawdry greed or desperate haste to cover up a
trading loss, he seems to have been following some inner
project of his own.
Kerviel claims this was to make money for the bank in a way
tacitly sanctioned by his bosses. It seems more likely that his
motivation was egotistical – like a computer hacker
(which in effect he was), he set out to circumvent the system,
either to damage it deliberately, or to prove his own
superiority, or just for the thrill of gambling with much
The frequent comparisons with Nick Leeson seem completely
wide of the mark. There was nothing mysterious about
Leeson’s behaviour – he was a greedy
trader who got into trouble and tried to cheat his way out of
it. Having served time he is completely contrite and clearly a
perfectly normal and likeable human being.
As Kerviel repeatedly outwitted controls, using a fiendish
combination of tricks, his pure skill attracts admiration. Even
Société Générale called him a
And the blank space of his motivation can be filled with
whatever artistic, vandalistic or hedonistic inspiration suits
the taste of the onlooker.
Villain with a fan club
Many commentators and members of the public outside the
financial world, therefore, have exonerated Kerviel and even
Yesterday Pierre Haski, a French journalist,
sympathised in The Guardian with what he believes
is the French public’s "outrage" at the
"ludicrous" verdict. "How can a €50bn risk and a €5bn
loss be blamed on just one man?" Haski asked, lamenting that no
one at SG had been sued.
If Haski is right about public opinion, another reason why
people are siding with Kerviel is that trust in banks is at an
all-time low. With good reason: the deliberate actions of many
of them have led to financial ruin around the world.
But in this case, the anti-bank sentiment is wrong.
Kerviel is nothing like as bad as Bernie Madoff, a highly
intelligent, successful man who shamefully and needlessly stole
from almost everyone he came in contact with.
But Kerviel is a selfish, immature vandal who has caused
financial harm to thousands and great personal distress to many
SG employees, including those who have lost their jobs, right
up to the chairman, Daniel Bouton.
The accusation that Kerviel’s bosses knew what
he was doing was always wildly implausible, not least because
of his tortuous efforts to cover his tracks.
Any line manager would have known that tolerating a trader
exceeding his limits was a crime that he or she would
inevitably be sacked for, or worse. No wonder
Kerviel’s lawyers failed to prove any complicity
by other SG staff.
It is an excellent thing that he has been fined €4.9bn
– it might just scare off a few more conventional
rogues from trying their hands at mischief.
It’s certainly true that SG’s risk
controls failed. They may also have been lax or careless. But
before anyone gets on their high horse, they should ask
themselves if they could design and run a watertight system
capable of keeping out a determined fraudster.
SG failed, but SG paid the price. In a similar way,
governments and taxpayers failed to stop the bank-induced
credit crisis, and have paid for it dearly. But the main blame
for these events lies with those that made them happen, not
with those who failed to stop them.
Less comfortingly for the derivatives industry, both the
Kerviel and Madoff episodes show that despite all the millions
spent on high technology, enormous holes can still be found in
the system – non-existent trades, for
Every effort should be put into creating systems that make
that kind of mismatch between different
institutions’ books as close to impossible as one
The other lesson is the same that so many banks learnt in
the credit crisis: the trap of the false hedge. One of
Kerviel’s dodges was to cover large positions with
hedges. Risk managers saw them as neutral. The only problem
was, the hedges were fake.
In the same way, the likes of UBS and Merrill Lynch hoarded
triple-A rated CDOs, sometimes insured by monoline insurers or
AIG. These assets were riskless, so why not stuff away $20bn of
Whether you’re hedged or not, size matters. The
bigger your position, the more you need to check your