Rogue Traders

A French court passed sentence today on so-called rogue trader Jerome Kerviel, whose unauthorized trades supposedly put the august French financial institution Societe Generale (Soc Gen) in jeopardy of financial collapse. The former trader was convicted of forgery, breach of trust, and unauthorized use of computer systems. He received a prison sentence and a fine of nearly five billion Euros. That's right -- billion.

The sentence, the fine, the accusation should be considered in light of Soc Gen's reputation as masterful derivative traders, skilled risk takers, and core members of the French power structure. It is extremely unlikely that an institution with a disposition toward firm control, such as Soc Gen, would have let a rogue trader run wild for a couple of years. When things were good for Soc Gen and its rogue, the bank made billions from his trades. When events challenged Soc Gen's business, Kerviel became a convenient fall guy.

The severe fine was precisely levied to send a message to French society: the elite can pretty much get away with anything. This warped ethic is not unique to France. Recently, a judge in the United States (clearly a rogue in his own way) compelled a mortgage company to produce appropriate documentation relating to foreclosures. The firm couldn't do it. The case expanded, and we now understand that the American mortgage business, already battered from the subprime catastrophe, has again displayed a breathtaking embrace of corrupt practices. A significant number of homeowners were booted from their homes, while the court system provided easy, no-questions-asked process that essentially mocked the rights of those whose homes were being foreclosed. Now, thanks to a "rogue" judge, that process has been temporarily halted, with members of Congress now asking the Department of Justice to investigate "irregularities" committed by Ally, J.P. Morgan Chase, and other firms.

The American housing disaster includes many elite institutions where "the best and the brightest" work. The episode should be a source of shame for those trained to lead. Instead, they have been absolutely brilliant at shamelessly exploiting retail customers while arrogantly harming the financial fabric of our country. However, the American elite will soon show their French peers that they, too, can find fall guys for their fiscal folly and their degradation of even minimal moral business standards. After all, people need to get the message that crime doesn't pay.