French newspaper Le Monde has published the testimony given by SocGen's 'rogue trader' Jerome Kerviel to French investigators. Here's some extracts (translation courtesy of MarketWatch):
'I had no illusions. I knew very well that I would earn less than on the other desks and that I wouldn't be paid according to the standards of the markets. It didn't discourage me'.
'I realized during my first interview in 2005 that I wasn't as well regarded as the others because of my education, my professional and personal path. I didn't arrive directly on the front line, I went through the middle office and I was the only one in that situation'.
'In January 2007, I'm short on the (German) DAX, because I'm beginning to think there are signs of overheating in Asia and should that get confirmed I will lose on my position as the market will rise...In February, there's a mini crash in Asia and I reduce my position. At the end of February I don't have a position anymore, and with 28 million euros, I'm more than proud and satisfied'.
'Around that time the Asian crisis occurs and at the end of February / beginning of March, the first articles on subprime appear. I research a little and I read that, potentially, there's no risk to the wider economy. I then take the opposite bet and build a new small position in March'.
'From March to July, I lose, because the market keeps climbing. I keep reading up about subprime and I hold on to my position. At the end of July, the market collapses because of the subprime crisis, but they subsequently turn around. I unfold my position.... My result climbs: 500 million euros. I find myself in the same situation as before, on the plus side, and I don't declare this win, which doesn't show up in the books. I hide it with a fictitious operation... It's true that at this point I found myself quite intimidated by this 500 million-euro amount and how to announce it'.
'At Dec. 31, 2007, my coffers have risen to 1.4 billion euros and I haven't told the bank. At this stage, I'm totally overwhelmed by the situation and don't know how to present it to the bank. It's undeclared and no one has ever made such an amount, which represents about 50% of the total of the income of the division. I don't know how to deal with the situation. I'm happy, very proud of myself, but I don't know how to justify myself. So I decided not to tell the bank and to hide this sum through a reverse fictitious operation - via several fictitious trades, that appear to result in losses of 1.4 billion euros'.
The rest, as they say, is history.....................
Sources - Le Monde, www.marketwatch.com