Nice quote, Quis custodiet ipsos custodes?
SocGen chief Bouton seen fighting for his future: AFP
By Sandrine Pittaluga
Last update: 9:30 a.m. EST Jan. 27, 2008
PARIS (AFP) -- A week from hell - when he had to admit that $7.1 billion dollars had gone missing and another $3.5 billion was lost on the U.S. subprime market - has tested even the mettle of crisis veteran Daniel Bouton, Societe Generale's chief .
Many analysts say the bank chairman, who has accused a junior trader of causing the biggest fraudulent loss the finance industry has known, is now again fighting for his job and the future of his bank.
Shareholders have launched legal action demanding compensation, and Bouton is expected to be ordered before the French national assembly's finance commission this week. All of this comes on top of preparing for a corruption trial that starts in February.
Bouton told bank customers in a letter announcing the enormous losses that he was confident Societe Generale could "bounce back" and that he had a "deep sense of optimism" for its future.
One victory came when he offered his resignation to an emergency meeting of the Societe Generale board on Wednesday, four days after the EUR4.9 billion of losses blamed on young trader Jerome Kerviel came to light, but this was rejected.
(My comment, his resignation would have allowed him to take the "US 5th equivalent" in testimony if he was NOT the CEO I doubt that that resignation denial was a vote of confidence, but instead a move to force accountability solely onto Bouton for his responsibility and other investigations)
The entire finance industry has expressed astonishment that one lower ranking trader could inflict such damage without being spotted. Bouton has been forced to deny putting losses from other bad deals on Kerviel's account.
(Interesting speculation, the testimony/reporting was that the rogue trader had used other employees accounts, Unless there is forensic proof that the trades were made by Kerviel in a court of law, the accusation in the press are unfounded, and the traders accounts whom were used are 'responsible.' The bank had better have the best in forensic analysis to back up that assertion.)
"What happened at Societe Generale is certainly not a disaster that resulted from our strategy. It is more like an accidental fire which destroys a large factory at an industrial plant," Bouton told Le Figaro newspaper.
(Oh don't you love it when the friction between a mortgage note and the property ignite into flame causing the insurance Co. to step in? Ok that was snide, but I found the comment interesting, my bet.. a charge that the forensic information is not available. Remember o'll Dee Illuminati is good at these predictions.)
Bouton, 57, who like most of the French elite passed through the National School of Administration, or ENA, describes himself as a "decision-making machine."
From a modest background, like many of the brilliant students who go through ENA, he quickly became a government inspector of finance - at only 23 years of age - and made an impact on future government leaders.
At 36, Bouton became head of Alain Juppe's office while he was minister in charge of the French budget.
But in 1991, Bouton opted for the glamor and risk of the private sector, taking over as head of the board of the recently privatized Societe Generale.
In 1997 he became chairman and chief executive, and his troubles started.
He annoyed the government when Societe Generale launched a legal challenge against state plans to bail out Credit Lyonnais from bankruptcy.
hmmmmmmmmmmm.. another Austrian model of fiscal due dilligence?
Societe Generale was badly exposed to the Asian financial crisis that erupted in 1997, and later the Russian debt crisis. In 1999, Bouton had to lead a desperate rearguard action against rival Banque Nationale de Paris, which wanted a forced merger of the two create a French mega-bank.
After that was defeated, Bouton faced pressure to make alliances but he insisted Societe Generale would 'stand alone'. Although he did buy into overseas banks, notably in the former Soviet Union.
Disaster struck again in January 2002, when Bouton was placed under judicial investigation for the attempted cover-up of a suspected money-laundering scheme between France and Israel.
Other Societe Generale executives and officials from other banks were also implicated. The trial opens in Paris in early February.
Ohhhh now we get to some interesting speculation, now the dog ate my homework and national security face saving gets involved. Now I'm eating popcorn and drinking the Kooliad. Quis custodiet ipsos custodes?
Bouton and other top Societe Generale executives said they would give up their salaries and bonuses until June because of the rogue trader scandal at the bank.
He has resources, however. Named one of the world's best-paid bosses by the French magazine Capital in 2005, thanks to stock-options that yielded him EUR4.5 million. Bouton is also a director of Total SA (TOT) and Veolia Environnement (VE).
Ethic, a business group that acts as a watchdog of French bosses, said that Bouton should have left over the trading catastrophe.
Quis custodiet ipsos custodes?
"For the honor of bosses, I would have been proud had he immediately resigned," Ethic's president, Sophie de Menthon, told AFP. The company chairman "is the guarantor of procedures and their regularity," she added.
Societe Generale's honor is also at stake.
Ohhh not so fast there, who else is gonna be the smartest guy in the room if he resigns?
When asked about the risks of a hostile takeover, Bouton's answer is invariably that "the best form of defense is one's stock market quotation."
Societe Generale's market value has lost more than 40% since last May. Many brokerages have put out warnings that it is now seriously at risk.
Can somebody please just eat the homework and make this all go away? Well not unless there is somebody to make a rational explanation for all of this. Now did I make any of this crap up? Did I misrepresent the facts? And I'll bet that there are people irritated that the reporting on this story is evolving the way it is.
But the red-herring here folks, the point that can't be missed, is that the supposition that a single trader does this by manipulating the bank's security, that referential integrity, verification of assets, and margin calls do not occur is frankly ludicrous!
The Beautiful part of the story? Is that there is so much institutional credibility at stake, with so many institutions, that this explanation is accepted by so many people indifferent of the rationality of the assertions.
If that bank facilitated what was reported, then I believe that the system was intentionally designed to facilitate illegal trade and the money laudering accusations are true, if the money laudering accusations are false, then the rogue trader story must be so also.
My bet is on the ROGUE BANK theory, the proposition that the losses were not the work of 'Evil Kerviel' alone!
If your broker sells you the line that a lone rogue trader caused your 401 to drop, then get a better broker!
The story defies all the experience I have in selling naked PUTS and naked Calls, and I know damn well that the market makers were not continuing to trade without settlement, which leads me to inquire, where was the margin call before this went bust?
Yeah.. the dog ate the homework and another 'lone wolf' has been apprehended.
To much institutional credibility at stake, diplomatic considerations to ponder any other alternative.
Certainly 'Evil Kerviel' facilitated all the money laudering to Israel also.
This is the biggest story not being told this week.
Crisis grips European hedge funds (redemption suspended)
My Title worst economic suggestion and analysis of the week. These people will be wanting to gift Chavez with a 'pigs head' if he doesn't go long USD. I mean honestly folks, when Chavez makes a suggestion like this, he demonstrates that he must actually hate his people. When the United States gets the FLU the rest of the world gets Pneumonia. The coughing up of phlem over in the European Union will make the idea of having gone bourse with the ERU a political nightmare. Those same Asians who sold USD will come running back to the USD as haven, and the current momentum in FOREX the last ripples of a bubble gone bust from the 90's. As deflationary segments of the fallout occur the spot price of Gold will drop, and halting production will not keep the price at a high enough levels to support the 'financing' of metals extraction. Lower consumption will result in lower oil and Chavez will find himself along with Iran in a trap, not the dollar trap that they imagined, no instead the realities of 'unintended consequences' of an attack on the dollar, and the resulting consequence of the destruction of their alternatives. Watching the greater fool theory in Gold will be fun, cash assets USD will be key to buying depressed real property in stable economic zones. And China with it's pollution and challenges best recognized by Diamond in collapse, will demonstrate why they should have harmonized as well, and that deflation (or to many dollars chasing too many debts) will be the result of that unrestricted growth, and an inability to purchase 'real wealth.'
My bet.. get ready for the whiplash of the century, there is no market unless there is the opposite side of the trade. :)
A lawyer acting on behalf of small shareholders said it was impossible Kerviel could have acted without any trace of his activities being spotted. He accuses the bank of negligence.
"Traders' positions are limited according to seniority. He had a junior rank and every evening you have about 10 people involved in checking up everything that has happened," Frederik-Karel Canoy told Reuters.
Canoy said it was only a matter of time before more people were drawn into the police investigation.
"The investigators start with the little people and work their way up, that's how the financial police work," he said.
Bouton, 57, who has run the bank for more than a decade, offered his resignation to the SocGen board last week but was asked to stay on.
French bank Societe Generale have detailed how a trader evaded all its controls to bet some 50 billion (£37 billion) - more than the French bank's market worth ..............Jean-Pierre Mustier, chief executive of the bank's corporate and investment banking arm: "I cannot guarantee to you 100% that there was no complicity."
"For matters of confidentiality, when we found out about the transaction we just had one trader, just one trader, to unwind the transaction. If one trader could unwind the transaction, one trader could put on the transaction."
Jean-Michel Aldebert, chief of the financial section of the Paris prosecutor’s office, confirmed that others could be implicated.
The rogue trader accused of defrauding France's secondlargest bank out of £3.6billion is believed to have been part of a gang.
Executives at Societe Generale had originally insisted that 31-yearold Jerome Kerviel acted alone.
They compared him to a "lone arsonist who burnt down a big factory".
But yesterday they conceded that he was unlikely to have carried out his deception without accomplices.
LAWYERS for Jerome Kerviel, the French trader implicated in the Societe Generale scandal, said he has done nothing wrong and blames the bank for trying to divert attention from other losses.
Mr Kerviel, "who was trained by the bank to make profits, has committed no dishonest act, did not siphon off a single cent, and did not profit in any way from the assets of the bank", Elisabeth Meyer and Christian Charriere-Bournazel said.
They also accused the bank of trying to "create a smokescreen which would divert public attention from losses that were significantly more substantial than those it accumulated in recent months", notably in the midst of the US sub-prime mortgage crisis.
They went on to accuse Societe Generale of having liquidated with needless haste the positions - said by the bank to be in the vicinity of €50 billion ($83.96 billion) - that Mr Kerviel had taken.
"It itself provoked losses of about €4.5 billion ($7.56 billion)," the lawyers said.
Police were questioning Mr Kerviel today over the loss of €4.9 billion ($8.23 billion) by Societe Generale, and must decide tomorrow whether to release him or place him under further investigation.
The bank has filed a criminal complaint against the trader accusing him of using fraud to cover up failed deals worth billions.
Ms Meyer and Mr Charriere-Bournazel also denounced the "extraordinary media lynching" of their client over the case, and accused Societe General bank chairman Daniel Bouton of "feeding him to the wolves" through his public statements.