housing market situation. Mr. Kerviel is described by Société Générale as having "taken massive fraudulent directional positions in 2007 and 2008 far beyond his limited authority" - all resulting in this massive market failure. Daniel Bouton, chairman of Société Générale, has confirmed that these rogue actions will result in a ''considerable loss" in net terms. This incident, coming as it does in the midst of the subprime-related investment situation has raised questions as to the sufficiency and quality of regulation of the financial markets on Wall Street and in the other global financial centers.
Carly Fiorina - advisor to John McCain - recently confirmed in Michigan that the subprime mortgage crisis is deeply analagous to the Enron crisis with respect to the commonality of inadequate transparency of intra-corporate financial transactions for publicly traded corporations and banks. The 2002 Enron crisis occurred during a period of lean funding and lean staffing at the United States Securities & Exchange Commission. Since the end of Chairman Donaldson's tenure there, the SEC under C. Christopher Cox has faced lean staffing and lean resources in relation to its obligation to monitor what Chairman William H. Donaldson estimated in 2005 as US$11 TRILLION of securities. It will be interesting to discover whether the French Autorité des Marchés Financiers - currently led by Gérard Rameix - suffers from similar inadequacies.
This is a turbulent time for the markets. Thankfully, the retirement fortunes of 300 million Americans do not depend exclusively on such hiccups.
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Basketball practice with Coach Bouton!
I took the afternoon off from work and went to pick my 9 year old daughter up at basketball practice. As I sat down on the bench to watch, I was intrigued by the excercise that "Coach Bouton" was proposing. Each girl was given a jersey and was to tuck it in the back of her shorts, leaving a tail. The objective of the game was to run around and grab as many jersey's as possible over a period of time. As you grabbed more, you only needed to keep one hanging out as a tail and you could hold the others in your hand but as soon as your tail was taken you had to put another back out as a tail.
It was amazing to watch the different techniques used by the little girls! I found myself in the trading room of the Societe Generale! There were those that played the game fairly, getting their tail taken, grabbing another, getting it taken again. There were those that just weren't any good at the game, lazy, not very good runners or grabbers. There were also those whose objective was to finish with at least one. These girls stayed somewhat near the sidelines and took plenty of time to position their tail, standing there readjusting the tail as defense to avoid the others. All of this was perfectly normal. But what was not normal was the last group that "Coach Bouton" did not even notice as he was busy doing something on his computer!
What he did not see was the few little "jerome"ina's that had all kinds of tricky techniques from tucking the tail almost completely in their shorts so that only a little bit of color stood out making it impossible for the other girls to even attempt to get it out. As they ran around with no risk at all of having someone get their tail all they had to do was grab the other tails or if not better try to grab the ones in the hands of the other girls to acquire a quantity quicker.
When coach "Bouton" blew the whistle and divided the girls up by numbers of acquired jerseys, announced the winner and then sent them off for another round I could not help but suggest to him loudy that for the next round he should divide them up by "who played honestly" and "who didn't"! "Coach Bouton" realized immediately what had happened and even though he went back to his computer, he followed my lead and as he blew the whistle after round two, yelling out to the winner, that she had not really won as she had cheated. He was right. She had cheated. I had seen her. She had even improved her score by watching the others in the first round!
As I work in the financial markets, what I witnessed is proof that if you put even little girls in a competitive situation with no referees, there will be those that play tricks to win. In basketball practice, like in a trading room, all fingers point to "Coach Bouton"!
signed,
the only controler.
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