Davos Notebook

The Pepsi challenge: avoiding guilt by association

One theme emerging out of this year’s Davos meeting is the corporate world’s annoyance with bankers. They feel that they have been brought low not by their own sins but by an out of control finance industry beset by greed and skewed incentives.

Not only are they struggling to access the money necessary to keep their operations going, as banks withdraw lending facilities and refuse to provide reasonably priced trade finance. But they have been dragged into a supposed crisis of capitalism not of their own making.

Take Indra Nooyi, CEO of PepsiCo. The first thing she did when speaking on a panel entitled “the values behind capitalism” yesterday was to distance herself, her company and the rest of the corporate world from the financiers. The capitalism of “main street”, she said, was being declared guilty by association “with the other street” – Wall Street. Clearly, she felt that was an uncomfortable – and unfair ¬ place to be.

That is perhaps a little rich. The corporate world has provided its fair share of scandals – and is doing so at the moment – but the obvious anger of Nooyi and her counterparts might help explain the distinct shortage of bankers at Davos.

Clearly the financial folk want to avoid the perception of taxpayer-funded extravagance that turning up at Davos might give rise to. Just as importantly, perhaps, they don’t want to get stuck up a Swiss mountain surrounded by enraged clients.

For some, the show must go on

Just as interesting as the absence of many of the bankers who would normally be expected to be at the WEF meeting in Davos is those who are here.

Leaving aside the home team of Credit Suisse (which has maintained a relatively high-profile) and UBS (which hasn’t), the most senior bankers in town – at least the ones still putting on a show – are Jamie Dimon, CEO of JP Morgan Chase, and Stephen Green, chairman of HSBC Group.

Both are among the very few bankers who have appeared on panels at the event.

It should be no surprise that the Jamie and Steve show has gone on. Their institutions are perhaps the two best placed survivors of the mess that is the global financial system and their high-profile attendance in Davos sends out a particular message: “for us, it’s business as usual”.

You’ve heard of the G20 – now get ready for the B20

Speaking today at the WEF meeting in Davos, HSBC Group chairman Stephen Green called for the setting up of a “Business 20″ – or B20 – forum comprised of the world’s largest companies, including those in the developing world, with a focus on those with international operations.

 

The body, which would mirror the G20 group of the world’s largest economies, would not be a lobby group but would provide a forum to “help inform policy and create more a stable global economy,” Green said. “It will be non-partisan. It will promote open markets. It will be the voice of sustainable business.”

 

Green added that the proposal has the support of the current chair of the G20, the UK government.

Banks to be disintermediated? or is that just replaced?

Is it actually distintermediation if the thing being disintermediated has ceased to function?

Henry Kravis of Kohlberg Kravis Roberts said in Davos that, as in essence banks aren’t playing their role of intermediating debt capital for buyouts, he would be going straight to the source, doing deals directly with investors who want to fund debt for deals.

Of course many of the institutions that used to fund buyouts, CLOs and CDOs for example, no longer exist and many like hedge funds have lower appetite. He acknowledged that leverage has “come down tremendously,” which might get the prize for biggest understatement of the week.

Overheard in Davos

One of the best things about Davos is the conversations you overhear. It’s like no place else.

Sitting minding my own business, typing away I became aware of a central banker from a medium sized emerging market sitting nearby. He was joined by a gentleman from a bank in his home country. After a few muffled preliminaries the central banks said:

“So, how much trouble are you in?”

The banker responded in what sounded like soothing tones but I couldn’t make out exactly what he was saying. The only other line that came through clearly was that after a long speech the banker said to the central banker, with an air of exasperation.:

Davos Today – 30th January

Watch interviews with top business and world leaders including the following:

    Stephen Green Jeroen Van Der Veer Simon Crean Kris Gopalakrishnan John Chidsey Steve Pagliuca
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For whom the bell tolls

Attendees are pictured during a pause at the World Economic Forum (WEF) in Davos January 28, 2009.

Government in the driver’s seat, putting the brakes on unbridled capitalism, might be the theme at Davos this year. But the New York Stock Exchange is undeterred. It will ring the opening bell of the storied stock exchange on Friday from this snowy mountaintop.

This will “emphasize the spirit of the gathering and highlight the global markets of NYSE Euronext” it said in a press release. If the NYSE truly wants this to reflect the business atmosphere here, then the bell will have to be rung very slowly and in somber tones.

For full coverage of Davos 2009, click here.

London — warmer and cheaper

London is cheaper and warmer, at least compared with Davos, says London Mayor Boris Johnson.

“The fall in the pound is of huge value to London’s exports and all sterling-denominated assets. We’re seeing a very impressive effect here. We take advantage of the upside and the upside is that the pound is competitive,” Johnson told Reuters.

“And everybody in Davos, once they finish this massive negotiation of egos, this complete vanity, should come to London. It’s considerably cheaper and considerably warmer.”

Hank Paulson is not Gavrilo Princip, Lehman is not the Archduke Franz Ferdinand

Was letting Lehman go down the biggest mistake of the crisis? Many, including George Soros in the Financial Times, have argued that letting Lehman go down sowed panic to markets, consumers and businesses.

Not so fast, says Harvard historian Niall Ferguson, in an interview in Davos:

“My position is this is a typical error of historical understanding in which a single event is blamed for much more than it can possibly have caused. You can say ‘Hank Paulson is to blame for my troubles’ and if you can change one thing in the story it would have a happy ending.

It’s like saying if only Princip had not shot the Archduke Franz Ferdinand in 1914 there wouldn’t have been a First World War.

Reality bites in Davos dramatization

“Oh! Can I cover this story?!”

I ran over to my assignment editor and thrust the press release under her nose.

“A refugee camp simulation? Full of CEOs? Great idea for pictures. Go for it,” she said.

“Great, I’m going to cover a war zone,” I thought. “They’ll dress me up in combat gear and I can make my name as one of those cool reporters that covers the World Economic Forum in Davos each year.”

According to António Guterres, the U.N. high commissioner for refugees, the financial crisis is really making it hard for humanitarian causes.