In retrospect, it did seem odd that Jérôme Kerviel hadn’t taken any holiday for a couple of years. But so what? The young trader was an affable colleague, diligent to the point of staying late and always courteous to the back-office staff. Being away from work forced him to confront the death of his father, he said. That’s why he came in at weekends, too. He had few friends. He wanted to do well. And so it was that a 31-year-old with a penchant for computing was given the time and freedom to gamble up to €50bn on the stock market. A few more weeks and Société Générale, his employer, might have gone bust.
The risk of an employee going rogue has existed ever since the owners of capital entrusted others with their money, either to safeguard or invest it. The most likely rogue, inevitably, is the one who absconds with funds before the investor realises there is no South Sea plantation, no patented miracle cure. But even more complicated swindles are nothing new.
John Kenneth Galbraith, whose treatise The Great Crash, 1929 is enjoying a depression-era revival, mused that embezzlement in banks and businesses was far more common than suspected. “At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s businesses and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars,” he wrote. In good times, Galbraith said, when people are more relaxed and money is plentiful, the bezzle grows. In a depression, it shrinks. As a financial system disintegrates, the capital cushions that mask the bezzle vanish. Or, in the words of Warren Buffett: “It’s only when the tide goes out, you find out who’s swimming naked.”
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