.... He is tough, towards the end of his piece, on countries that "intentionally breached European economic and monetary law." But what about banks that aid and abet countries that are trying to break the rules? Of course, governments can always massage their statistics unassisted. But when international banks help countries to disguise their true debt levels, through off-balance sheet transactions, what is the difference between that and what Merrill Lynch did for Enron regarding "Nigerian oil barges" (and more)? Technically, Greece's (and potentially other country's) debt deals may not have broken any laws - because the international space for these transactions is so anarchic. But Mr Schauble would be well within his rights to call for rogue investment banks - i.e., those that help break European rules in any fashion - to be banned from the highly lucrative market for European government new issues. Of course, if he is afraid to do this because the banks in question have great market power and a fearsome reputation for sharp elbows and exacting revenge, perhaps Mr. Schauble should consider referring the broader investment banking market (including over-the-counter derivatives) to the relevant anti-monopoly authorities within the European Commission.
He is tough, towards the end of his piece, on countries that "intentionally breached European economic and monetary law." But what about banks that aid and abet countries that are trying to break the rules?
Of course, governments can always massage their statistics unassisted. But when international banks help countries to disguise their true debt levels, through off-balance sheet transactions, what is the difference between that and what Merrill Lynch did for Enron regarding "Nigerian oil barges" (and more)?
Technically, Greece's (and potentially other country's) debt deals may not have broken any laws - because the international space for these transactions is so anarchic.
But Mr Schauble would be well within his rights to call for rogue investment banks - i.e., those that help break European rules in any fashion - to be banned from the highly lucrative market for European government new issues.
Of course, if he is afraid to do this because the banks in question have great market power and a fearsome reputation for sharp elbows and exacting revenge, perhaps Mr. Schauble should consider referring the broader investment banking market (including over-the-counter derivatives) to the relevant anti-monopoly authorities within the European Commission.
To my mind the most shocking thing about the Greek situation is the massive failure of governance - presumably fostered by an enormous civil-society deficit (which might count as the subject of another rant entirely).
Which of course in no way contradicts your point about the urgent need for regulating speculative instruments.
ARGeezer:
I was not of the impression that the banks had accomplished governmental capture on the continent.
I think that (at least in Germany) the norm for a long time was a symbiotic relationship that focused on long-term earnings and stability ("Rheinischer Kapitalismus"). Of course this was not (at least in Germany) entirely without its seamier sides (I would link to a bio of Hermann Josef Abs here, but a google yields nothing adequate in English; (suffice it to say that he was a banker who made his bones during the pre-war Nazi era, rose to the head of Deutsche Bank, managed to hold onto that role after the war and was a major figure of the Wirtschaftswunder.) The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
Still, it has occurred to me in light of Greece that we haven't discussed good governance and civil society much here as such, particularly under the aspect of their complementarity (though I think they are often implicit in comments). The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
ROFL - my comment above is already the no. 4 google hit for 'maxim tremendous but trite'. All hail ET's almighty page rank! En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Germany expects every nation to do its duty.
I have to go along with Schäuble to the extent that the bar is higher for nations
As for doing something about Deutsche Bank, how will it and other German banks fare if Greece is forced to default? I have gathered that many German banks have less capital reserves than do US banks. The approach by government authorities in both the US and Europe is similar: "Hide the debt!"; "Deny the debt"; and pray that time will cure all insolvencies. Hope that works out better for Europe than seems likely for the USA. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
In addition, the USA sent $20+ billion in bailout money for German banks last year, which included a couple billion for state-owned KfW.
Schäuble must be aware of these deals.
Not that it specifically concerns investment banks.
I am not sure Schaeuble can confront the American investment banks without also taking on Deutsche Bank. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
