Well said! This has always been about the lenders and their governments attempting to deflect the cost of bad loans. As has been the case since the inception of the eurozone, national interests will trump regional ones. It does appear that the Germans hold the high cards in this game (he who has the gold rules).
A slow motion run on French banks is already underway. Large European and American companies (e.g. Siemens) are gradually removing deposits in French banks and money market funds in the North America and Asia are reducing their exposure to France. I recently read that Norges (the enormous sovereign wealth fund of Norway) is reducing its exposure to France.
If Merkel gets her way, it will be interesting to see what, if any, price is paid by German bankers. When the United States needed to save its banking industry the largest American banks were required to take money from the Fed whether they wanted to or not.
Leaders of the American financial industry paid no price for their irresponsible behavior that helped cause the American financial meltdown. No financial industry executive was indicted; no usurious terms (akin to what Warren Buffet extracted when he lent money to Goldman Sachs) were demanded; no extra tax burden was placed on financial companies as a penalty for their bad behavior and no limits were placed on the executive compensation of the “masters of the universe” who almost caused the American economy to collapse.
As a result, it’s back to business as usual for Wall Street; the bonuses are as large as ever while the rest of America continues to reel as a result, in part, of the misbehavior of the titans of finance.
Will Germany follow the American example or will it deal with its bankers more harshly?
This is the good news underlying last week’s market rallies: the German political establishment seems to have figured out a way to pry much more money out of German taxpayers to prevent a total European meltdown.
This is good news?
Only if one believes that the preservation of “Europe” is paramount. I frankly thought that Professor Mead was more sophisticated than this – that he recognized that Europe had overreached, and that it was time to reconsider whether or not a political and economic union of this sort still made any sense.
The Germans will also eventually come to their senses and realize that their banks are truly their government’s banks. The largest banks of the world are no longer independent organs of capitalist éclat – they have become instruments of national policy, tightly bound to their regulators, and rarely undertake any course not directly sanctioned by elected and unelected officials. This is true not only of Deutsche Bank and Commerzbank, but also of BNP Paribas, Barclays, ICBC, BTMU, and JPMorgan Chase.
Surely not all German citizens are as gullible as the children currently Occupying Wall Street.
Curious as to how much freedom financial institutions are going to have coming out of this.
On the one hand, governments like big healthy banks to lend them the big bucks governments have become accustom to. On the other hand, banks are the greatest instruments of mass wealth destruction we’ve seen since WWII.
National policy be damned, nations as well, although they certainly are preferable to any past, present, or plausible future international entity. Such as Europe. The banking system should be bailed out in such countries as can afford it; the other countries need to go into national bankruptcy, state, banks, people, the whole damn thing. Perhaps they ought to be sold literally into slavery but I doubt anyone cares enough to take the effort to do so. Pity. It might be educational, both for those so enslaved and for those waiting in line to join them, like the USA.
I could care less what happens to the bankers. They just did what their governments and people encouraged them to do, and probably would have happily done the same for far lower bribes. They are supposed to provide hedging and liquidity, not their opposites. Probably because all the national policy involved was asinine, and still is.
Maybe if all governments permanently lost these megabanks as instruments of policy, the policy would improve, or at least if not the perpetrators would have to come up with a more creative sort of Ponzi scheme. If the dummies could. We might get lucky and find them as stupid as they look, and unable to find another way to destroy so much wealth and hope of progress so quickly.
Where the resources exist to save banks, they ought to be split up and subject to market discipline, divorced from government oversight and from national policy. In fact if one could get rid of national policy entirely one would have a [darn] good start.