Rogue traders are nothing more than lovable rogues

In the days since Jerome Kerviel was hauled before his bosses at Societe Generale SA to explain his trading positions, he must have had some dark moments of the soul.

After all, losing 4.9 billion euros is hardly the kind of achievement that makes your CV glitter. And 31 is a young age at which to face a lifetime of idleness and ignominy.

And yet, Kerviel can console himself with this thought. Sometime around 2020, he will be popping up on our television screens, dispensing genial, avuncular advice after some other young trader racks up losses of 80 billion euros, or whatever sum is needed to make a headline in that decade.

Nick Leeson, the man who brought down Barings Plc in 1995, was the original rogue trader. He has managed to turn himself into an expert on financial affairs and was on hand last week to explain where it had all gone wrong for Kerviel.

There is an interesting point in there, one easily overlooked in the rush to condemn Kerviel. Rogue traders have become a convenient fiction.

They help the banks to conceal their dependency on a bunch of employees who can't always be controlled. And they allow staff to indulge in the fantasy of hoodwinking their employers and then destroying them. We are fascinated by these corporate villains because we need them or admire them.

Kerviel is taking the rap for now. Chairman Daniel Bouton was quick to pin the blame on a single individual. He hasn't resigned, nor has any member of the Societe Generale board, even though losses on that scale might suggest a degree of negligence on the part of management somewhere along the line.

Societe Generale's rogue trader has played the part to perfection, going into hiding before being arrested on the weekend.

The might of the French establishment has come down on him. He must now know exactly how Leeson felt.

And yet the Barings trader survived the ordeal. In fact, he's now much in demand for his insights on trading. "He speaks everywhere, from Russia to New Zealand to the US," Chris Banks, Leeson's agent at London-based NMP Live Ltd, said in a telephone interview.

"He is very popular as an after-dinner speaker on the anecdotal side, but he also advises on issues like risk management."

Overall, he does more than 20 events a year, sometimes charging as much as 10,000 pounds. Even if most engagements pay half that amount, he's still earning six figures on his notoriety.

Kerviel may go the same way. He already has a growing fan base on Facebook. By last weekend, the Jerome Kerviel Fan Club had 649 members on the social-networking site, while 679 joined the group to recommend him for the Nobel Prize in Economics.

The truth is, we all secretly admire rogue traders.

They allow banks to avoid facing up to reality. Most bank boards have largely surrendered any knowledge of what is really happening in their organizations. They are like captains, steering the ship without ever going down on the decks.

There may well have been an element of fraud. A trader might have cooked the systems to disguise what he was doing. And yet, if the trades had gone the other way, it is hard to imagine that Societe Generale would have fired him.

The difference between a rogue trader and a star trader is a bit like the difference between a freedom fighter and a terrorist. It depends on whether you end up on the winning side.

If he had beaten the market, they would have given him a massive bonus and a promotion.

If the banks were serious about clamping down on rogue trading, they would stop trying to make money from massive bets on the market, with positions run by relatively junior staff.

For ordinary workers, there is a touch of heroism about them. Many of us like to imagine that we know more about how the system works than the people in charge, even if it's not the sort of thing we own up to during an annual review. Co-workers such as Kerviel and Leeson help fuel that belief.

Rogue traders aren't about to go away. The bankers need them to explain away disasters. The rest of us secretly admire them.

These may be dark days for Kerviel. But he'll be back. His career path will just take a different turn.

Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.

(China Daily 01/31/2008 page16)