Details, if that's what you call them, on the Societe General SA junior rogue trader continue to dribble out, in some cases raising more questions than they answer.
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Thursday's example:
The Wall Street Journal is reporting that our rogue trader made some 1.6 billion euros ($2.4 billion) in "locked-in gains" in 2006, essentially by faking his hedges and maxing out his positions. That amount, the paper blithely mentions, was one-third of SocGen's "net profit" for the year. Could that be? Now there may be a subtlety about the term "locked-in gains" that escapes me, but it's a little hard to believe that M. Kerveil generated that kind of profit and still only made $147,000 a year, appeared to be completely anonymous to top management and attracted no auditing attention to his positions for another year. At least give the man a watch! Something smells funny here, and it's not the camembert. -
Robert Teitelman
Comments
Agreed. I suspect that the positions in question were indeed hedged...offbooks, off balance sheet, and cross traded into an account with a number as it's only identity. Who knows if the young trader acted on behalf of his cohorts at Societe General or not, but one thing is certain; he must have had accomplices. My suspicion is that the banks losses have been there all along, hence the huge on-books trading profit in 2006 (and hedging huge offshore losses). Once a scapegoat emerged (sub-prime), the boxed contracts were reversed and the profits went where they must go - into the pockets of "the other side of the trade".
Trace these transactions, and you've found your culprits.
The so-called "sub-prime disaster" in the US mortgage industry has not only allowed unscrupulous entities a market in which to hide junk paper through securitization, but it's demise has afforded heretofore legitimate business entities the opportunity to sweep their accumulated quarry in through the front door and out through the toilet to a place far from the books - ala the Enron debacle.
Fraudulent bankruptcy remains a blight upon the capitalist system everywhere. Is it any surprise?
Heck, even Haliburton, the alma mater of the vice president of the united states has moved their headquarters to Dubai, where they will exist free from the discoveries of prying minds.