Just making sure.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

French Reflex

Anytime a business scandal erupts, politicians can't help but stick their noses in it. Think Enron, WorldCom and its regulatory offspring, Sarbanes-Oxley. This temptation is double dosed for French mandarins predisposed by long tradition to meddle in private affairs.

(...)

New details emerging about Mr. Kerviel's ability to run around SocGen's internal controls suggest the bank's senior managers deserve a lot of the blame for the mess. But to their credit, they moved to fix the immediate problem on their own without Mr. Sarkozy's assistance. And successfully. The French financial system was never in real danger. SocGen stayed on its feet. No one mooted a rescue à la the $21 billion bailout of Crédit Lyonnais a decade ago. The country's banking regulators were kept in the loop. So, as far as the larger French state should be concerned, SocGen's problems are mainly the responsibility of its management and shareholders. (Its customers aren't affected.)

Earlier this month, before SocGen erupted, Mr. Sarkozy said his goal was "defending and promoting the nation's primordial economic interests." But the state's intrusion in the SocGen and other cases involving big companies in play on the takeover market merely privileges Mr. Sarkozy's friends in the business establishment over shareholders and consumers who stands to benefit from open competition.

The banking industry as a whole would be wise to wake up to the rising political threat and improve internal controls and information-sharing on its own. "No regulation in the world could have foreseen what happened last week in France," points out the EU's internal markets chief, Charlie McCreevy, who writes nearby. In other words, the banks can best fix themselves.

(...)

SocGen is paying a high price for its follies -- as it should. A €5 billion capital injection will dilute its shares. Several senior managers have already lost their jobs, and the top brass may soon follow. That's the way the market is supposed to work.

They do have a point here: if you let the markets rule, you have to let markets solve these problems the way they are supposed to - and as the WSJ points, the only people hurt in that case are those that are supposed to in such circumstances.

Also, their criticism about insiders taking advantage of politicians is quite right. So their suggestion that we have the worst of both worlds is quite on target.

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Of course, the fact that cosiness between politicians and big business is an almost inevitable feature of financial capitalism (given the stakes, and the easy access and voice given to those with lots of money), and that proper regulation somehow never happens in such a context, is conveniently forgotten by the WSJ.

In the long run, we're all dead. John Maynard Keynes