I was beginning to wonder whether this would be a week without any chutzpah worthy of a Chutzpah of the Week award. However, in the wake of the current investigation of Goldman Sachs, Jérôme Kerviel, the former trader at the heart of SocGen’s €50bn trading scandal, has just published his memoirs, presumably under the assumption that, whatever happens to him in court, he will have the revenue stream of a best-seller for support. The title of the book is Trapped in a Spiral: Memoirs of a Trader; and, like any author with a new book to flog, Kerviel is now making the interview circuit. To my good fortune his interview with Scheherazade Daneshkhu for the Financial Times seems to offer a promising lode of chutzpah.
We can begin, as Kerviel does, with his attempts to compare himself with ("Fabulous") Fabrice Tourre, whose appearance before the investigating Senate committee was, as P. T. Barnum would say, worth the price of admission. Kerviel is now trying to portray himself as a victim because, in his words:
Goldman Sachs supports him [Tourre], while Société Générale abandoned me.
We do not have to unpack this claim very far to find the chutzpah. At a corporate level Goldman Sachs was behind every individual, regardless of rank, who appeared in the Senate Committee Room. This is because everyone who testified argued from the same position: Everything was done according to the company's normative business practices. Goldman Sachs even reinforced that position after their day on Capitol Hill by announcing a plan to review those business practices. Had the company tried to turn on Tourre, he could have turned back on the company to produce evidence that he was doing nothing other than accepted business-as-usual.
Kerviel, on the other hand, admits freely that he broke internal rules. Here is the critical sentence from Daneshkhu's report:
But, unlike Mr Tourre, who does not appear to have broken internal rules, Mr Kerviel admits he bypassed SocGen’s trading limits and contrived fictitious trades to hide the massive bets he placed on futures markets.
I am reminded of the sentence I heard most frequently on the one day I spent in Traffic Court:
Guilty, Your Honor; but I have a good explanation.
Kerviel's "good explanation" amounts to (in Daneshkhu's words):
Mr Kerviel, who made SocGen a profit of €1.5bn in 2007, says he exceeded trading limits only to make more money for the bank, working 15-hours days, abandoning jogging and judo for cigarettes and coffee and was tied to SocGen by a "sort of umbilical cord".
Did he also consider selling the Brooklyn Bridge as part of his industrious strategy "to make more money for the bank?"
Is all this a matter of negotiating a fine line over the semantic infrastructure of chutzpah? I think not. Tourre was certainly arrogant; but, like it or not, his arrogance was grounded on a solid argument. If you want to attack the argument, you have to attack its premises; and that is what Goldman Sachs seems to be doing through internal action. Kerviel, on the other hand, has tried to justify his actions as "common practice on the trading floor;" but, by dumping him, Société Générale made it clear that, "common" or not, those practices were not part of their established norms. Kerviel's denial of this premise lies at the heart of his chutzpah, since it is tantamount to saying that, if faced with a similar situation, he would probably opt for the same strategy. After all, all the other kids on "the Street" are doing the same thing! He is the ultimate "true believer" in his own powers; and it takes chutzpah to hold to that belief when everyone else (including your imagined supporters) opposes it.