EVERYTHING DEPENDS ON WHAT
YOU MEAN BY NORMAL
Plus ça change, plus c’est la même chose.
Jean-Baptiste Alphonse Karr
Paris. June 26-30
Say what you will about the pasty-faced Bourbons – one of whose descendants sits on the Spanish throne these days – they knew how to build an impressive pile of bricks. The Palais du Quai d’Orsay on the left bank, the Hemicycle as the media like to call it, is where the Assemblée National, the French equivalent of the House of Representatives, meets.
Today is opening day for the new show in town, a socialist dominated National Assembly which will meet in session extraordinaire from July 3 to August 2 to consider a wide range of subjects, not least among them taxes and the structure of the French banking system. Much is expected.
I am not writing this from the immense marble bar in the Palais, where Jimmy Breslin knocked back a few during his infamous Tour de France and where the real business gets done, but from a bench fifty feet away. The action is better out here. There’s a small demo of several hundred people in this thumb-sized park, sponsored by Roosevelt 2012 (about whom more later) and CGT, the powerful labor union. There are speeches, books and brochures, a live band and plenty of young people disenchanted about their future. Who wouldn’t be? What separates the young here and their Occupy counterparts in Spain and the U.S. is France’s generous social safety net.
Various newly enshrined representatives are making their way across the street for some face time on camera, and the exchanges are robust. CGT wields a lot of power and Roosevelt 2012, some influence among the brainy class. The underlying point is to remind the Socialists that a never defined and never announced coalition of unions, intellectuals and disaffected youth overcame their objection to François Hollande’s clubby, insider status and helped him beat the odds and a sitting president in May’s election. They could easily have sat the election out or voted for Mélenchon, who had the mojo and the wit and they didn’t. What’s more, they resisted one of the deepest strains in the French psyche – the lure of the Noble Defeat – and pulled the levers for Hollande.
François Hollande ran as the sober, sane, even "normal" alternative to what seemed to the French to be a dizzying five-year term of controversial reforms, reverses, scandals, saber rattles and glitz, and he won. Truth be told, he ran for something far more important and grander: as a breath of fresh air for the disunited, dispirited states of Europe. What future for the young to look forward to with Merkel in power in Germany, Cameron in the U.K., Mariano Rajoy President of Spain (Mariano Rajoy… It hurts just to write the words), and conservatives in the ascendant practically everywhere else? The other leaders studiously avoided him. He ran a cautious, some would say vacuous, campaign and he won.
It has meant an immense change in Europe, with the endless talk of "austerity" now dead in the tracks and leaders being forced to propose changes they otherwise wouldn’t touch with a bullet proof majority.
The election was a Rohrsach test for France and for Europe.
And now Hollande, the legislative insider, the behind the scenes man, the politican of whom his ex, Ségolène Royale said in the early stages of the campaign, "Can anyone in France name a single thing this man has ever done?" must deliver. He got more than he hoped for, both publicly and privately, with a plummy majority in the Assembly and the conservatives in disarray. The fight now is over appointments, seats on committees, career advancement – but July looms.
So we will soon find out exactly what normal means, or what it’s like to live with President Normal. Temprament is certainly part of it: Hollande rarely missed an opportunity to mention the dignity of the office, clearly a jab at the frenzied, splenetic Sarkozy. I personally have found Hollande to be approachable, ready to discuss anything at the drop of a hat, considerate and full of ideas. But I am a foreign journalist and my impressions are not to be trusted. All well and good that he likes talking to citizens but there is important business at hand. Jacques Cheminade, wizened veteran of left wing politics and a perennial candidate himself, has placed Hollande "on probation," and I suspect many others have as well.
So what is normal exactly? Is it normal as in healthy, or normal as in average, non-descript? Or is it normal as in "business as usual"? The last of the three wouldn’t be a shock – in fact it would confirm most people’s suspicions about the man. Hollande has set the bar high. No one is going to let him forget the words from his speech in Le Bourget in late January.
"Mon veritable adversaire, il n’a pas de nom, pas de visage, pas de parti, il ne presentera jamais sa candidature, il ne sera jamais elu et pourtant il gouverne. Cet adversaire, c’est le monde de finance."
("My real adversary has no name, no face, no party. It will never run for office and it will never be elected, and nevertheless it is in power. That adversary is the world of finance.")
Elegant rhetoric – but now we shall see if it was a flourish or a home truth. If the latter, we have some lively days ahead.
There are a whole raft of pressing issues on the agenda for the new French government, ranging from gay marriage to nuclear power but none of them has the stature of financial reform and, to a lesser extent, taxation.
Like the song says, Something’s got to give, and apart from devout Tea Party members in the U.S., everyone in the world agrees that the Big Monkeys in the room are the banks – and they are tearing up the furniture just as fast as they can. But there isn’t a politican in sight who has the guts to stop them.
That isn’t just easy bravado from an ink-stained wretch. With a scandal a week at the going rate, the whole circus has gotten very far out of hand, and soon we will have a Monkey President in the States. Hello, Mitt!
Something has to change. Roosevelt 2012 argues that only decisive governmental intervention a la the 1930s will be sufficient, intervention in favor of growth and against unemployment; they have argued for a French version of Glass-Steagall, which would reorganize the banks. But even if Jean Marc Ayrault, Hollande’s number two, is a signatory to their most widely circulated petition, they are only a think tank, a public action group.
The crisis is pan-European, global. Which is why, at this moment, everyone’s eyes are on Hollande. (Obama’s "I trust Europe will do what’s necessary to get their house in order," was really risible. Et tu, Barack?)
Hollande must negotiate with Angela Merkel, who last week agreed to a very modest growth package but who is said to vehemently oppose the creation of Euro bonds. There were rumors after their first meeting in Berlin that a trade-off between a sharing of European debt and a more federated state had been reached; not exactly a fair exchange. Hollande has to put his house in order first. That will send a message that it can be done.
On financial reform, or What to Do About the Malicious Monkeys, Hollande has several choices and tremendous power to persuade and to enforce, presumably his forte as a backroom magistrate.
What follows is an extremely brief overview of Hollande’s options.
He can follow the lead advocated by the English economist John Vickers and partition the functions of the banks, separating commercial banking functions from investments and the risky business of derivatives, et al. This course of action has the approval of Nicholas Firzli of the World Pensions Council, who says it will allow "the strict compartmentalization of each banking function."
Or he can adopt what, in the United States, have come to be called the Volcker Rules, forbidding banks who handle savings and commercial transactions from speculating on the market. This too has received some support within the French financial community. "French banks are ready to adopt European regulations inspired by the Volcker Rule," according to Frédéric Oudéa, PDG of Société Générale and president of the French Banking Association. This is Glass-Steagall light.
The Volcker Rule will come into effect in the U.S. in July – which is to say, now. At last. Obama took office at the beginning of 2009.
These are the two choices, or some variation thereof, that are the Currently Accepted Wisdom.
The banks in the U.S. have done everything in their power to water down and evade the Volcker regulations. Jamie Dimon at Morgan Stanley, while stuffing Obama’s relection coffers with money, lost 2 billion dollars over a lovely weekend in May. The Senators were very polite and Dimon told them that it was a rogue operation of which he had no knowledge. A lesser figure on the totem pole was held responsible and given the axe.
His opposite number in the UK, Bob Diamond, the head of Barclays, is in a spot of trouble as we speak. His bank did their very best to manipulate interest rates world-wide over a number of years and just now got caught. How big are the numbers? The bank will pay fines of 290 million pounds. Not to worry, they can pay. Will he face criminal charges? Doubtful. The politicians in Old Blighty claim to be outraged. He and his underlings must be replaced.
As for the first choice, partitioning, I refer you to Matt Taibbi at Rolling Stone, where he published internal documents from Goldman Sachs detailing just how seriously they took the division between functions. They didn’t. They colluded on a regular basis.
In May, 2010, when Obama made a serious push for banking and regulatory reform, the markets responded with an immediate downturn. That was enough to scare Congress off. Congressmen and women correctly translated the banks’ action: try it at your own risk.
Adoption of either of the two measures above is simply putting off the inevitable. It will make everyone feel that something has been done. The world’s economy will meanwhile continue, in Ben Bernanke’s recent comment, to "careen straight for the Abyss."
There are always other options. We could, for a start, abolish banks entirely and replace them with a system of organized pubic credit, much as was done by Roosevelt in the early Thirties. Well, he didn’t abolish them, he just seized them outright – they were insolvent.
A world without big banks? Too radical to be discussed. But it could easily exist and for the vast majority of the earth’s inhabitants, it would be a blessing. What’s more, there’s plenty of historical precedent for it. Perhaps calling for an end to banks across the board is the only way to get the discussion off the schneid.
Or Hollande can, in the time honored tradition of normal politicians everywhere, put the whole thing off, order a study, concede that the issue is complex, and work instead on European issues – there are always better headlines there. The French banking system has been in place for fifty years without wrecking the havoc that the Cowboy Capitalists in the U.S. have given us since the 1980s. But that would mean he would have to go back to the Bastille and eat his words from Le Bourget like an old hat.
It really isn’t possible, is it? As Laurent Joffrin recently observed, "Everone knows that the important reforms that aren’t enacted at the beginning of [Hollande’s] term will never be."
Re-enactment of Glass Steagall, the regulatory relic of the New Deal dumped by Bill Clinton in 1999, is of course, rejected out of hand. It is hardly discussed. Glass Steagall required banks to be either one or the other, commercial or investment, without exceptions, without imaginary partitions down the middle of the corporate corridors.
It can’t be done, of course – the bankers assure us of that. Why? It would be too costly and the necessary restructuring of the banks would be too difficult. So whisper the insiders to their friends in the mainstream press. (For instance: Le Figaro, owned by a Sarkozy chum, June 11, 2012, Le modèle des banques françaises en question.)
There you have it.
Normal is whatever you say it is and all that is now up for grabs.
Next a look at taxation, tax havens, the little island of Jersey, Luxembourg and the other lovely places where the rich stash their loot. And sometime after that a talk with one of the honchos at Roosevelt 2012.
Iddhis Bing lives in Paris and must immodestly confess that he predicted all this in his novel, The Apartment Thief.