Jérôme Kerviel, L’Engrenage, Mémoires d’un trader (French, 2010)
I’m not sure how famous (infamous) the name of Kerviel is overseas. But in France, he has become a generic name. He’s that guy who worked for the Société Générale bank and lost 5 billion euros (7b$) in 2008 at the start of the subprime crisis.
There was a lot of running jokes at the time (well, better laugh than cry, eh?) calling him the 5-Billion-Euro-Man in reference to the 1970s 6-Million-Dollar-Man, or even T-shirt announcing: “I’m Kerviel’s girlfriend”. But of course, it was no joke. The guy was accused by his employer of breach of trust, forgery and unauthorized use of the bank’s computers and arrested.
This book is his defense and memoir, published just before he was found guily and sentenced to 5 years in prison and to reimbursement of the €5b (on appeal, the prison sentence was confirmed but not the reimbursement).
A lot of people felt at the time and even now that his employer could not have been totally ignorant of Kerviel’s acts. In his book, he alleges that not only has he been tacitly authorized, but also encouraged by his managers. He was caught in a frenzy of speculation, totally disconnected from the reality of the amount he played with, and the management was okay with it as long as the bank could make a profit out of it. When the situation turned sour, everybody washed their hands of him and said that they didn’t know.
The book rather confirmed my previous opinion that Kerviel was not the only guilty party in this sad story, but it didn’t manage to convince me that Kerviel was completely innocent. It’s hard to sympathize with Kerviel upon reading his book. I don’t believe he’s a fraud, and he didn’t get rich with his extremely speculative operations. But I don’t buy his “look how normal I am” thing. He speaks a bit about the prejudices that people have against financial traders, as being greedy, workaholic sociopaths who earn millions each year, but the book didn’t manage to paint quite a different portrait.
Société Générale has been found guilty of lack of control by the banking authorities, but it’s rather light compared to Kerviel’s own fate. In French legal system, there is no legally binding wishful blindness. The company has since improved its control systems, but overall has recovered from the financial crisis unscathed, contrary to his one employee who is now in jail.
The best part of the book is to give us an insider look into the practices of these young men at the core of big banks, who are given the keys to international economy and stability, and who play with them carelessly. That alone is already frightening, validating the old movie Wall Street from the 1980s: nothing much seems to have changed since Michael Douglas played Gordon Gekko. Equally frightening are the chapters where Kerviel tells how police investigators and judges were out of their depth with financial techniques and so were fed arguments by SocGen’s legal team, rather than challenging their case.