Bankers defiant at Davos World Economic Forum

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Bankers defiant at Davos World Economic Forum
4 February 2010

Two years on from the biggest financial crisis to strike world
capitalism since the 1930s, leading international bankers made clear
at last week’s World Economic Forum in Davos, Switzerland that they
will resist any attempts to reign in the speculative practices that
have led to governments running up unprecedented levels of debt and
the loss of tens of millions of jobs.

The warning signs of a “double-dip” recession, trade war and the
bankruptcy of entire countries formed the backdrop to the annual Davos
proceedings, where the world’s leading bankers and CEOs have discussed
their business strategies with top politicians and economists for the
past 40 years.

The fears of impending trade war between the US and China were stoked
by comments in Davos from Larry Summers, the chief economic adviser to
President Obama. In a panel discussion with Zhu Min, deputy minister
of China’s central bank, Summers attacked China’s trade and monetary
policies and warned that the US was prepared to respond by stepping up
its protectionist measures.

Pointing out the consequences of the huge sums of money pumped into
the economy by governments around the world, Harvard University
economics professor Kenneth Rogoff bluntly declared that for those in
their 30s, “It will be terrible for you.” Addressing the huge
indebtedness of the German economy, Rogoff told a young German at the
forum that Germany’s debt was exploding and there was no alternative
to austerity measures and significant tax increases. “It will be very,
very painful,” Rogoff added.

The reaction of bankers at the conference to the catastrophic results
of their own activities was to unite in defense of their profits and
multimillion-dollar bonuses. The most important lesson drawn by the
lords of international finance from the events of the past two years
is that they can rely on the unconditional support of their respective
governments to bail them out.

This was summed up in a debate between Carlyle Group LP co-founder
David Rubenstein and New York University Professor Nouriel Roubini.
Rubenstein said, “We’ve gone through a bit of a heart attack and heart
attacks are not fatal so much anymore, so we’ve learned a lot.”

The lesson for Rubenstein is that as a result of government backing,
speculative opportunities have never been so good. He declared that
now is a “pretty attractive” time to invest, and boasted that the
deals his investment group had sealed in 2009 “will prove to be the
best deals we have made this decade.”

One of the main points of discussion at the Davos meeting were
proposals to regulate certain activities of the banking sector, such
as those put forward recently by Obama. Bankers are well aware that
such proposals leave untouched whole areas of speculative trading and
are mainly for public consumption. As one US commentator noted, any
proposals for curbing the activities of the banks “have about as much
chance of getting through Congress as politicians have of getting into
heaven.”

The Davos conference began with a speech by French President Nicholas
Sarkozy, who raised the issue of international regulation of the
banks. Sarkozy criticised the greed of bankers, expressed agreement
with the Obama’s administration’s proposal to ban proprietary trading
by commercial banks, and called for a new Bretton Woods
system—referring to the international agreements that anchored US
economic supremacy at the end of the Second World War. Sarkozy was at
pains to stress that his priority was to save capitalism, not bury it.

The French president’s bluster is taken with a large grain of salt by
financial figures. When asked for his reaction to Sarkozy’s remarks
and Obama’s proposals, Jacko Maree, CEO of the US-based Standard Bank,
replied that “a lot of those proposals are politically appealing, but
practically unlikely to happen.”

The bankers’ offensive at Davos was led by Josef Ackermann, the chief
executive of Germany’s biggest bank, Deutsche Bank, and by Peter
Sands, CEO of Standard Chartered, one of Britain’s biggest banks.

Ackermann told the audience at a panel discussion that it was time to
stop playing “the blame game.” In a barely concealed threat that major
banks might further reduce their lending, Ackermann warned, “If you
don’t have a strong financial sector to support this recovery … you’re
making a huge mistake and you will regret it later on.”

Ackermann’s comments were echoed by Sands. When asked whether he
supported measures to break up banks that are currently deemed by
governments to be “too big to fail,” Sands responded, “The unambiguous
answer is no.”

During the conference, Ackermann took part in a meeting of bank CEOs
to discuss a common strategy to repulse any limits on their
activities. On Saturday, he and other leading bankers met for
confidential discussions with the finance ministers of France and
Britain, European Central Bank President Jean-Claude Trichet, and IMF
Managing Director Dominique Strauss-Kahn. Also present was US
Congressman Barney Frank, who heads the House Financial Services
Committee.

While refusing to reveal any details of the talks, Ackermann praised
the spirit of cooperation that prevailed, declaring, “There was better
dialogue between business leaders, political and regulatory leaders
than ever before.”

Two days after the Davos forum, the German Federal Financial
Supervisory Authority lifted the ban on short selling in Germany. This
particular form of speculation was banned by the German regulatory
authority in September 2008 following the outbreak of the
international financial crisis.

The level of arrogance displayed by the bankers in Davos is matched
only by their contempt for a political caste that is fully subservient
to their demands. The private discussions at Davos made clear that any
measures drawn up by capitalist governments to regulate banking
activities will be little more than window dressing.

The past two years have revealed the enormous political influence and
socially destructive role of the banks and major financial
institutions. A deepening social catastrophe can be prevented only by
the expropriation of the financial oligarchs and conversion of the
banks into public utilities, under the democratic control of the
working class, as part of the transformation of world economy on
socialist foundations.

Stefan Steinberg

http://wsws.org/articles/2010/feb2010/pers-f04.shtml

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