Opinion

James Saft

Banks 1, nation states nil

Apr 12, 2011 11:19 UTC

The battle between the banks and nation states is shaping up as something that lies between a phony war and a rout.

The bald facts are that three years after the crisis in which banking almost brought down the global economy, the biggest banks are bigger, more global and more entrenched in their positions courtesy of a now all-but-explicit government guarantee.

All three factors make large banks harder for individual nations to control, even the U.S., and even if the U.S. manifested the desire to pull out of its heads-you-win-tails-we-lose bargain.

“Too big to fail (banks) really creates a capture problem … They are now larger than single nations,” Andrew Sheng, chief adviser to the China Banking Regulatory Commission said on Saturday at a conference at Bretton Woods sponsored by the Institute for New Economic Thinking.

“The top 25 banks comprise 73 of global GDP and 45 percent of total assets of the banking system … They are so powerful they are essentially Godzillas.”

from Davos Notebook:

Overheard in Davos

Jan 30, 2009 08:11 UTC

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.:

from Davos Notebook:

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

Jan 29, 2009 15:33 UTC

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.

Stephen Roach – protectionism a threat

Jan 28, 2009 08:05 UTC

Stephen Roach of Morgan Stanley, who pretty much called it at last year’s Davos, when consensus was for no recession in the “real” economy and decoupling of emerging markets, is gloomy again. Speaking with him this morning after he did an interview with Reuters on Davos Today, Roach said that there was a real threat of protectionism as politicians come under pressure from rising unemployment. The U.S. and China relationship will be key, he said.

On U.S. real estate – a continuing issue for banks and the economy:

“The interplay between the property and financial sectors has been ground zero of this crisis.

The problem was the banks played the property bubble just like consumers did and so we are all in this together.”

Balance of power upended at Davos

Jan 23, 2009 12:35 UTC

So, back we go next week to Davos for the World Economic Forum 2009, titled this year “Shaping the post-crisis world.”

Except the crisis ain’t over yet and shaping the world while it is happening is proving to be about as easy as tying your shoes while riding a bicycle.

Let’s dial back briefly to those more innocent days in 2008 and remember what was being discussed at Davos then.

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