When a person loses $7.2 billion (Rs28,368 crore) of other people’s money, other people naturally want to know more about him. They badly want to believe that he is in some way unusual. To blow up $7 billion must require some kind of genius.
Trading Economics | Michael Lewis
But despite some seriously sweaty journalistic effort, all we know about 31-year-old Jerome Kerviel is that he was a mediocre student, a green belt in judo and unsatisfying to his wife.
Right up until 18 January, when his bosses discovered what he’d been doing with the bank’s money, no one thought of Kerviel as anything special. And he wasn’t.
As in most of the rogue-trader cases, the main character of the drama appears as flat as a character can be. The story of Kerviel is less a tale of an evil genius at work than of a dull young man being acted upon by events almost beyond his control. I may be wrong about this, but so long as everyone else is guessing I might as well, too.
And here’s my guess: Kerviel never imagined himself in anything like these circumstances. They just sort of happened to him in stages.
Stage 1 would have been his initial decision to be more like what he imagined a real trader to be than what he actually was, a functionary on a trading desk. His job was to arbitrage price differences between identical stock market indexes. In doing this he naturally developed a view of the stock market, just like a real trader. His view was that it was going up. Thus, one day, instead of buying one market and selling another, he buys one market—and then neglects to sell the other. It’s such a small act of rebellion that he barely bothers to hide what he’s done.
One of the striking things about rogue traders is that they always lose money. Perhaps they just are born with a knack for being wrong about future market direction.
Whatever the reason, they tend to be the people whose bets lose money pretty quickly. As I imagine it, young Kerviel pretty quickly finds himself staring at a shocking loss. Thus he enters Stage 2: doubling up and averaging down.
The market is falling but he’s buying it ever more cheaply and if he just keeps doing it the market will eventually rally, and he’ll make it all back. Now all of his day is spent frantically making bets and hiding them.
“If it rallies and I get back to even no one will ever know,” he thinks to himself. If he wasn’t a “quiet loner” before, he is one now. Who has time to talk? All he can think about is money, money, money. Deep down he knows he’s been a bad boy, and so he’s not sleeping.
He once thought of himself as having a way with the ladies but sex is the farthest thing from his mind. He’s ceasing to be French. He’s becoming American.
Now come these weird, false, fleeting sensations of total freedom. His ordinary mind cannot fully accept the reality of his situation and so it works overtime to generate fantasies. He fantasizes about dying before anyone finds out. He fantasizes that terrorists blow up Société Générale before anyone finds out.
Then, of course, he is caught. And as unreal as the past year has been, what happens next is even less real: All these total strangers writing and talking about him as if they know him. They call his mother, his aunt, his old schoolteachers. All these other people he barely knows discuss his character in detail—while the people who actually know him a bit and are qualified to comment keep mum. All these big shots in Davos stop worrying about the subprime collapse and started worrying about him—as if he is something more general than himself—A Problem.
But none of these people understand: This thing had nothing to do with him. It was all a big mistake. Or, rather, it was a small mistake that took on a life of its own. Now Kerviel feels not like a genius, or even a trader. He feels like the victim of an accident. And, in some weird way, he is.
Michael Lewis is an author, most recently of The Blind Side, and is a Bloomberg columnist. The opinions expressed are?his?own.?