$72 billion isn't what it used to be.
Kerviel received a base pay for 2007 of $87,000 before tax and a $435,000 bonus, or half what he was asking for. In his testimony, he says he had actually made an $80 million profit for the bank last year, but couldn't tell anyone because that would have led to his unmasking.
His testimony is self-serving, of course, but what's striking is the disparity between the sums he was earning and the amounts he was allowed to play with in his job. He told prosecutors that his first big career win came early on as a trader, in 2005, when he shorted stock of German insurer Allianz (AZ) and earned the bank $720,000. Under such circumstances, it's easy to see how numbers become so abstract that they bear no relationship to reality.
The $72 billion position he amassed in the end is the equivalent to the gross domestic product of Tunisia. But to Kerviel the whole thing appears to have seemed more like a game. Proponents of financial market globalization like to talk about the huge advances that have been made by innovative financial engineering, such as the advent of exotic financial derivatives of the type SocGen packages, sells and trades.
But taken together with the U.S. subprime crisis - in which U.S. banks packaged thousands of deadbeat mortgage loans into leveraged securities that they then sold on to often unwitting investors - one of the big questions raised by the Kerviel affair is whether the world of finance has lost touch with the real world it's supposed to be financing, and what's needed to bring it back into line.
The total volume of financial derivatives of one sort or another floating around the world greatly exceeds the world's GDP. A scandal of this nature may be just what the doctor ordered to make regulators and the banks themselves ponder whether that's so smart.
