Traders, Betrayers and Taking Responsibility

jp morgan chase, The Myndset Thought Leadership

Getting chased...

Unless you live in a cave, you will have heard that JP Morgan has taken a (minor) hit to its balance sheet as well as its “balanced” management reputation.  As several articles have pointed out (I refer you to the Daily Beast), there have been three celebrated cases of “rogue” French traders causing substantial losses at three different banks.

First, there was the famed Jérôme Kerviel, who generated a 5B euro loss at  Société Générale in early 2008.  Then, in 2010, there was “Fabulous” Fabrice Tourre, whose employer, Goldman Sachs, had to pay out half a billion dollars in fines related to his “ingenuous” creation of the “Abacus synthetic collateralized debt obligation.”  Talk about a complex product.  And, then last week, we now have the third muskateer: Bruno Iksil, implicated in a $2B loss at JPMorgan Chase.  Known as “The Whale,” he seems to have been beached.

The outcome and who takes the blame?

For Kerviel, he has been sentenced to five years in prison and ordered to pay €4.9 billion ($6.7 billion) in restitution to the bank.  Good luck in getting that back.

According to Wikipedia, the outcome of the Tourre scandal was that “Goldman agreed to pay $550 million – $300 million to the U.S. government and $250 million to investors – in a settlement with the SEC. The company also agreed to change some of its business practices regarding mortgage investments, including the way it designs marketing materials….”  Goldman has not admitted wrongdoing.  Tourre’s future, meanwhile, is still hanging in the balance.

Who knows what the future holds for the London Whale?  But, already there has been a major fallout among the senior ranks who have been dismissed/resigned as a result.  Management has clearly been held responsible.

In what I found a brilliant summary, the way the banks, Société Général and JP Morgan,  handled their respective cases, led my brother to write the following comment to me:

“The difference is that in the French bank, it is the poor little trader that takes the hit and in American banks it is the management that takes its responsibility.”  I think that the Goldman case shows it is not quite as black and white.  But, the point is that upper management is and should be, by definition, held accountable even if one of its employees are guilty.

The sub plot of all three of these scandals is the French Connection, related to a strong educational system in France that focuses on mathematics and enables the French students to tackle and, indeed, invent such complex matters as derivatives.  The second thread is that, as in the case of Tourre and Iksil, there is an evident attraction by certain French young men to the Anglo-Saxon world (of banking) and an equally evident ability to tolerate risk — a characteristic not regularly attributed to the French.  A third point is the age of these men.  Kerviel and Tourre were both exactly 31 years old at the time of the ‘infraction.’  And, if you check out the other major recent rogue trading scandal (not involving a Frenchman) with UBS’ London-based Ghanian, Kweku Adoboli, who was nabbed for a £1.3billion loss, he too was 31 years old. Iksil is apparently “in his 30s.” (Anyone know his exact age, please comment!).

Some conclusions (and I’ll gladly look for yours!):

  • we need more mathematics in the English and American curriculum
  • management should always be held accountable, especially when such huge sums are involved
  • there is something about the testosterone-charged thirty-something men that creates an aura of invincibility?

The unfair weather knell of democratic politics

Water rain - The Myndset Brand StrategyWe are in changing times (once again) and I must say that the picture reminds me of the grey and rainy may day (ie. help!) we are having in London (au Secours #RadioLondres), on this Monday, May 7, 2012.

As of today, we now have:

  • Hollande in France, voted in by 51.7%
  • Samaris of the New Democracy party in Greece with 18.9% vote, introducing  a very new form of democracy
  • Putin of United Russia with 64% of the vote as the returning President in Russia, ushering back in an echo of Russian democracy
  • …not to mention the weekend’s local/regional elections in the UK, Germany and Italy, where the incumbents were regularly whipped or wiped out of office.

A major year for elections

These elections alone have been rather momentous.  And, ahead, there are many more parliamentary and presidential elections to which to look forward including Egypt in end of May, India (in July) and USA (in November)… [You can view the entire list of elections in the world in this Wikipedia entry.]

It was a busy week of voting for me, too.  I voted in the mayoral election in London as well as the Presidential election in France (via “procuration”).  I will also cast my vote in the US elections.

For what purpose?

But, with all these elections, it leads me to pose two questions:

  1. how much do people expect the world to change thanks to politicians?
  2. how much productivity is negatively impacted in a country during the year of elections?
On the first point, I have long been a proponent of the Ayn Rand determinist school of thought, so I would much rather take matters into my own hands, whenever possible.  If you are in business, then I think there is no better state of mind.  I am more likely to believe that democratically elected politicians can negatively impact business, rather than positively.
On the second question, if voters spent their time on constructive debate and pundits (and the media) provided more reasoned and well-researched arguments, perhaps an election would be grounds for real debate and progress.  But, between media airwaves that are spent on unsightly negative political (and personal) attacks, flaring emotions in bar rooms and pubs and vapid political debates, there seems to be too much wasted breath (and time) during political campaigns.

The political cycle

The problem with democratically elected officials is that, by definition, they must over promise to get elected.  Yet, with clockwork predictability, unexpected events occur and plans are derailed.  By mid term, the electorate systematically becomes impatient and sanctions their elected leader, making the last half of the term a lame duck.  The arc of democracy consists of high expectations and dashed hopes.  Would that we all got down to the business of taking responsibility for ourselves rather than waiting for Godot.

Wave that [French] flag!

Is France doing some media marketing?

It seems that this week, France has managed to capture the bulk of the headlines in the press in the international section.  And there is a captivating, if not liberating theme!

  1. The liberation of the two French France Television journalists, cameraman Stéphane Taponier and reporter Hervé Ghesquière, after 18 months (547 days) in captivity at the hands of the Taliban
  2. The captivation of the world’s media with DSK scandal in NYC and his potential incarceration
  3. The nomination of Mrs. Christine Lagarde (N.B. her name = The Keeper), current Minister of Economy, as the first woman at the head of the IMF {BRAVA!}
  4. And, finally, Tsonga’s cuffing of the Feds in SW19.  A brilliant come from behind.  Roger looks like a prisoner of ghost’s past!

Is it just because I live here in France that I think that the French marketing machine was on overdrive?  If France were a brand, is this a good way to be top of mind on the world’s stage?  Your thoughts?

France loves to strike where you least expect

Got to love this. Pôle Emploi, the agency in charge of dealing with the unemployed (currently riding at 9.7% in France) is going on strike. Not enough resources to go around they claim, and now they are planning job cuts for 2011. Pole Emploi will, in effect, add to the ranks of the unemployed; a little ironic. It reminds me when the unemployed in France went on strike (actually they just manifested) saying they wanted more benefits.

The Greying of the World – Enough to make you go grey!

Not that it is supposed to be ironic, but below is a grey newspaper clipping with dark grey text, shaded columns and a light grey contour on a white background… Lots of nuances in those greys! Take a look at the graphic below, which is taken from the Herald Tribune of October 16, 2010 (source is the UN Population Division, assuming medium fertility in each of the countries).  It is perhaps a concept with which we are all familiar; but, a picture can tell a thousand words, literally. Continue reading

Coincidence or Purposeful Juxtaposition?

Sometimes, you do have to wonder if IT is on purpose.  I opened the Herald Tribune yesterday (Sept 15, 2010) and, as is my wont, turned to the world news section (page 4).  Below is the spread of the top of the page.

Take a look and see if you see what I saw!

International Herabld Tribune - International News

Continue reading

Lyon defeat PSG in Coupe de France

Olympique Lyonnais wins Coupe de France 2008, first time in 35 yearsPSG defeated by Lyon in Coupe de France 2008Olympique Lyonnais double up on PSG in the Coupe de France 2008, but is the French Ligue really competitive?

Having watched the Manchester United vs Chelsea in the European Champions Cup Final this week (prior post here), this Olympique Lyon (OL) v PSG Coupe de France final match was decidedly less attractive and fun to watch, although there was plenty of tension (to the extent any overtime match is tense). A goal-less regulation game which PSG dominated was not good enough to win. OL’s Sidney Govou scored in the 102nd minute to sink PSG with a 1-0 scoreline. Here is a quick writeup in The Sports Network. What was more interesting than this tail-ending match itself, was the tale of the season.

PSG spent the majority of the season around the bottom of the league (Ligue 1), threatening to be relegated for the first time in its history. However, they managed, not only not to be relegated, but to win the League Cup, for the first time in ten years. And, they also got into the finals of the Coupe de France, the French equivalent of the FA Cup (which PSG had won in 2004 and 2006 most recently). What an up and down season! Winning the League Cup means a qualification in the UEFA. So, when all’s said and down, they finished 16th (two away from the relegation zone) in the League and yet had two national cup final appearances. PSG would qualify as a team that plays well in the knockout tournaments…in France anyway. [They won the UEFA once in 1996].

And then there is the 7th consecutive Ligue 1 title for Olympique Lyonnais. That is an absolutely huge stint at the top… but also possibly proving the lack of solid competition? There have been several teams that have won 4 seasons in a row in France, but none has accomplished what Lyon did. A dynasty in the making. Congrats to my Lyonnais friends for yet another great year and their first double (odd stat since they had 6 other years to do so). It is the first time in 35 years that OL have won that cup. That said, when you see Manchester United which has won 10 of the last 16 Premiership titles (17 overall, 1 behind Liverpool I note) as well as three European Cup Championships (two in the last 10 years), THAT is a dynasty. And, curiously enough, the longest stretch of consecutive Premier titles in England is just three (done four times, once by Man U, Liverpool, Arsenal and Huddersfield[!]). So, I am going to have to argue that the English Premier league is significantly more competitive.

See here for some highlights of the Lyon-PSG game at FC Footbal Blog.