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FRANCE:
Phony Banking Reform Sets Stage For Debate on a Real Glass-Steagall
29 December 2012
As scheduled, the French government, via of Economics and Finance Minister Pierre Moscovici, presented at the Dec. 19 Minister’s Council, its draft legislation for "banking reform." Presented as an hallmark in the banking business for at least 20 years, the proposal has been nicknamed after the tasteless French mineral water Volvic, a play on two other fake proposals, concocted by Paul Volcker forbidding banks from proprietary trading and Lord John Vickers recommendation to "ring-fence" banking activities (not banks) under the same roof. Visibly inspired by the methods of Obama when he rammed through the Dodd-Frank legislation, the draft law itself, as it stands today, offers no separation of speculative/investment from commercial banking, but only defines "a framework" which lawmakers still have to flesh out. Solidarité & Progrès, which is contacting dozens of key MPs, has drafted a special memo to the lawmakers exposing the fraud of the legislation and showing how to replace it with a real Glass-Steagall. Since everybody recognizes that Jacques Cheminade was the only candidate who raised this issue in real terms during the Presidential election, the response so far has been excellent and surprise moves are not to be excluded. While initially the issue was clearly to separate activities financing the real economy from insane speculation, the draft law now aims only to separate activities that are "useful to the economy" from those that are not. Of course any thief will honestly tell you that whenever he steals your wallet, it’s good for the economy. Under the draft law, banks will have to ringfence proprietary trading activities in separate, self-funded entities by 2015. These entities, in principle, will have no legal access to the deposits of the mother firm. Initially, the ringfenced [deposit and credit bank] entities were even supposed to be banned from high frequency trading (HFT) and commodity derivatives trading, but that turned out to be very much too complicated. Criticism is coming from two sides: from a groundswell of Socialists freaked out by the non-reform concocted by their party leaders, and an array of financial experts too smart to swallow the fraud and afraid the next crash will bring down the entire system. For the latter, the reform defines proprietary trading so narrowly that it leaves much of the riskiness of banks intact, such as sizeable derivatives portfolios and funding of risky investment vehicles. "It’s ultimately a minimal reform, without much impact on banking activities and without major upheaval in the way they’re operated," said Natixis analyst Alex Koagne. In an interview with Le Monde, Thierry Philipponnat, secretary general of NGO Finance Watch and also a former top banker, said the law proposal "emptied the banking reform" of its substance. "It is the implicit backing of the states that allowed market activities to prosper at unreasonable levels. Of the EU8 trillion of the added assets of the French banks, 22% are lent to the real economy, to firms and households. What are the remaining 78%? Market activities, loans to other financial institutions or investment for proprietary trading!." "This is worse than a backtrack," said Jerome Cazès, former head of Natixis credit-insurance unit Coface. "It is the minimum you can put in a law without blowing a raspberry [a Bronx cheer] on the public." The law will now go the Parliament and will be brought up for a vote in both houses in early February. Before that, the Finance Committees of the National Assembly and the Senate will each convene and are rumored to be organizing hearings on the draft legislation. |