Symbolic punishment? Fraudulent French trader ordered to pay $6.7 billion

The economic crisis has raised interesting questions about who is responsible. In the United States, much blame has been placed on the large financial institutions, investment firms and banks, who played a role (though others have also argued that the government and consumers share the blame).

But in the courts, blame could be assigned to any of these parties. In a recent decision in France, a trader who worked for France’s second largest bank was ordered to pay the bank $6.7 billion in damages for fradulent activity linked to the economic crisis. Here is a quick summary of the case’s outcome:

The court rejected defense arguments that the 33-year-old trader was a scapegoat for a financial system gone haywire with greed and the pursuit of profit at any cost — a decision sure to take some pressure off the beleaguered banking system overall.

By ordering a tough sentence for a lone trader, the ruling marked a startling departure from the general atmosphere of hostility and suspicion about big banks in an era of financial turmoil. It was a huge victory for Kerviel’s former employer Societe Generale SA, France’s second-biggest bank, which long had a reputation for cutting-edge financial engineering and has put in place tougher risk controls since the scandal broke in 2008.

Kerviel maintained that the bank and his bosses tolerated his massive risk-taking as long as it made money — a claim the bank strongly denied.

The story goes on to say that both sides, the trader and the bank, admitted to mistakes along the way. But the court ruling suggests that the trader was the culpable party.

The assignment of blame after large traumatic events is a fascinating phenomenon to observe. Who is eventually seen as the responsible party can depend on a number of factors including national culture, time in history, court cases, public opinion, and other particularities. Whoever becomes the scapegoat can often become the symbol of the traumatic incident, forever linking that person or party to phenomenon that are often quite complex.

World War I reparation payments from Germany to end soon

From the dustbins of history, CNN reports that Germany will on Sunday (October 3) make its last reparations payment from World War I. Here is a brief history of the payments:

The initial tally in 1919, according to the German magazine Der Spiegel, was 96,000 tons of gold but was slashed by 40 to 60 percent (sources vary) a few years later. The debt was crippling, just as French Premier Georges Clemenceau intended.

Germany went bankrupt in the 1920s, Der Spiegel explained, and issued bonds between 1924 and 1930 to pay off the towering debt laid on it by the Allied powers in 1919’s Treaty of Versailles…

Germany discontinued reparations in 1931 because of the global financial crisis, and Hitler declined to resume them when he took the nation’s helm in 1933, Der Spiegel reported.

After reaching an accord in London in 1953, West Germany paid off the principal on its bonds but was allowed to wait until Germany unified to pay about 125 million euros ($171 million) in interest it accrued on its foreign debt between 1945 and 1952, the magazine said.

In 1990, Germany began paying off that interest in annual installments, the last of which will be distributed Sunday.

I had no idea that these payments were still being made. I don’t know the answer to this: are reparation payments between nations still a common method for helping to rectifying the wrongs of war?

It is also a reminder of the major consequences of World War I, a war that gets a lot less attention in the United States due to a smaller US role and a majority of the fighting taking place away from American shores.