GLOBAL FINANCIAL MANIPULATION

The Davos Man is back, back to his bad old ways

SUDESHNA SEN


WALL Street types, it seems, are back to their bad old ways. Hiring and poaching is back, astronomical salaries are being justified, bonuses have just been moved from one part of salary slips to another.
The word in the City is that most bankers are just sort of keeping their heads under the parapet, and planning to return to their profligate ways, sooner than later. Banking big shots are openly and actively pushing back against any attempt to regulate them, cut them down to size, or even change their compensation patterns. The same faces that were trashed last year, are popping up elsewhere, with mega salary deals.
Well. And nobody is noticing much, with everyone focused on every sign of economic recovery. Economists are busy squabbling about what shape the future is, and ever more obscure models, as if we care, tell us where the money and jobs are.
Meanwhile, theres a battle for world domination going on. This battle isnt about investment banks, or hedge funds, or economists or politicians. Its not even about the Swiss, Chinese or India. Its the battle between those who controlled the global economy, through the complex financial system, call him the Davos Man if you will, fighting for their survival if kings and Brahmins thought they had a divine right to rule, the Davos Man thinks so too.
From where I stand, looks like theyre winning, for now.
The unprecedented consensus forged among countries even as late as April at the G20 summit is slowly dissolving into various patterns of oblivion, like those funny screensavers.
The Davos Man isnt just a banker. Theyre the crony capitalists, with their insiders scattered through regulators, IMF, World Bank, investors, governments, economists, analysts, media in every country, including India. In India, its just that the status quo the privileged want to maintain is slightly different.
One banker (who hadnt lost his job) told me last winter, that after the shake-out , the financial services sector that emerged would not be stronger, more resilient, efficient or cleaner. It would just be dirtier, nastier and even greedier. Why, I asked. Because in the job purges that swept through the sector, many of the nicer , more ethical, less political people lost out. Theyre running ski resorts or pounding the streets now. The political animals survived, the ones, to quote another were, the worst sort of Hollywood villain types. And this time, they know that theres no penalty for failures, they can always fleece those taxpayer sheep any time. I didnt believe them then, but maybe the insiders had a point.
Take a look at where we are on various issues today. Global regulatory reforms. The opinion is split 20 different ways, not on how, but if at all. In UK, theres a strong lobby claiming that EU regulatory proposals are just some sort of continental land grab to topple Londons premier financial centre position. Theres no consensus within the EU itself. In the US, various lobbies are split right down the middle. Should banks be allowed to become too big to fail Should they be cut down to size The discussion has got bogged down in how to evaluate connectivity and risk taking. Not how to ensure that any corporate entity cannot, in future, hold an entire world to ransom.
Because thats precisely what happened.
The political class it seems, has been almost beaten into submission by a winter of, umm, blackmail. The financial sector just cut off global credit lines, choking the real economy, until first their own jobs, power bases, balance sheets and pay packets were saved. No politician , faced with monthly job loss figures and daily disasters, can withstand that kind of pressure for too long. Oh give em back their private jets, at least theyll start lending again. It is significant that the first rescue packages to have any immediate impact were the hugely complicated ones from Geithner that gave plenty of scope for private players to make money, in fees, commissions, deals.
Next, take compensation system. Even the Obama administration, after its initial ceiling on salaries, has backed down over executive pay. Investment banks and bankers, government funded or not, are back to the merry old bonus system. Its different, were told. Sure. This time its probably tax deductible.
Regulators, everywhere, are now divided, among themselves, on what needs to be done. Instead of getting on with the job, most central bankers and regulators are occupied in fighting off rising opposition from the lets not mess too much camp. A senior fellow, from London Business School no less, was actually quoted in public as saying the rush to do something is rather foolish. We have 59 years to get it right. Wow. In that time, lots of people will lose their homes, sink into poverty, lose their retirement nest eggs and suffer horribly and die, while we debate the zeros in a trillion. Thats the rush.
Were going through the same arguments again, after the financial sector has almost bankrupted economy after economy. Why bother with Da Vinci Codes , or Angels and Demons Real life is so much more sinister.