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Friday 28 January 2011
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Davos WEF 2011: Sarkozy vs Dimon highlights regulation fault lines Davos is surrounded by the evidence of orogeny and the tectonic plates of politics and banking came together in the Alpine ski resort on Thursday. Nicolas Sarkozy is fighting for the legitimacy of the G20 and the idea of global convergence and cooperation on a raft of measures from regulation to currencies By Damian Reece, in Davos 6:44PM GMT 27 Jan 2011Comments
Banking is trying to force down the level of regulation still being threatened. The tremors of discontent are getting louder from the banks that survived the crisis and, in their view, far from hindering it contributed to the stabilisation process. Politicians, however, are determined to stop another crisis erupting, even if that means wrapping good banks in tighter cords of supervision. The fault lines are obvious.
In the congress hall here in Davos the two sides came face to face - forces of nature, financial and political, momentarily coming into public view as the two sides proceed on their long collision course, a process generally submerged, hidden in meeting rooms of conferences, summits and civil service departments around the world.
The opposite forces that surfaced in Davos were Nicolas Sarkozy, French President but also the man holding the presidency of the G8 and G20, and Jamie Dimon, chief executive of JP Morgan and one of Wall Street's genuine big beasts.
Sarkozy was on stage, Dimon was in the audience waiting to ask his question or, more accurately, deliver a lecture on why good banks need politicians to deliver "good policies" when it comes to regulatory change.
Sarkozy is not a man given to being lectured to, especially by bankers. He retorted by asking if we had forgotten how the crisis began, reminded us of the public anger over the bailouts and questioned why so many bankers had their hands up high in the good times, demanding bonuses, but refused to be accountable when things went wrong.
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Sarkozy is fighting for the legitimacy of the G20 and the idea of global convergence and cooperation on a raft of measures from regulation to currencies. He, with Angela Merkel in Germany, is fighting for the legitimacy of the euro, too. He sees sovereign debt, monetary imbalances and commodity inflation of the speculative sort needing government intervention. He invoked the memory of Bretton Woods and called for discussion on a new currency system that would recognise the importance of the renminbi.
Bankers such as Dimon, however, feel it's time to re-establish the legitimacy of banks. Those that have survived this far without a direct capital injection from the taxpayer deserve better than the regulatory and public haranguing.
Of most immediate concern to Sarkozy is the legitimacy of the G20. And that is a big concern of Dimon's, too. The group has come under fire at Davos for being more like the G-Zero, lacking leadership and failing to engender the international cooperation needed to stop damaging beggar-thy-neighbour attitudes on currencies, regulation and tax.
Sarkozy knows the G20 stands or falls on its ability to take decisions that are then implemented. No politician can afford to look like a lame duck. There is a clear danger that in the face of rising scepticism about the G20's relevance its members will act to prove their political power as much as the power of their intellects.
Whether you have any sympathy for the banks or not, the global economy relies on their balance sheets to help ensure recovery. It would be foolish to undermine them by imposing restrictions born of political vanity rather than objectivity.
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