Thursday, October 06, 2011

ECOBATE 2011: European Conference on Banking and the Economy (3)

One of the fascinating things about ECOBATE at Winchester, England (29 Sept 2011) was the array of individuals and organisations taking part. There were pioneers into new economic and financial territory who proclaimed that the common good should be guiding light; and there were those who defended the existing paradigms, albeit acknowledging there were problems to be sorted.

One particularly interesting player in the Robin Hood camp was Theirry Philipponat of Finance Watch . He gave a master class on the wiles of the lobbies as they watch EU legislation forming in Brussels. His advice applies to any situation worldwide where vested interests have the power (i.e. usually the money backing) to get their way, so that life can continue as normal for them. 

He warned of the bamboozlements that lie around in the thickets of the finance forests ready to trap the unprepared as they wrestle with policy makers:
1. Complexity: When you are getting near the truth and starting to make them feel endangered you will be  belittled and told that the subject is too difficult for you to understand, you are not experienced enough, you are not a specialist. Theirry said that Basel III was an excellent example - it is full of calculus equations and the maths will cause non-specialist campaigners to give up.  
2. Distraction: You will be led away from their really dangerous area as they choose small technical details to absorb your attention and your time. They will point out the obvious marshy danger in one small part of the forest that they have a solution for, to make you forget that you are arguing about the state of the whole forest.
3. Flattery: They will try and reassure you that they 'really understand' what you are saying. But beware! It may be another subterfuge to detract from the big picture.
4. Disguise: Private interests may wear a disguise so that you don't recognise the dangers of the manipulated legislation they are aiming at. The Sheriff of Nottingham might use quite unexpected ways to weaken Robin Hood's Merry Men. You won't necessarily get a full frontal attack.      
5. Wrong facts: Thierry said that in defence of Sovereign CDS engineering, it is sometimes claimed that 'it helps lower the cost of funding for sovereign issuers'. TP said this assertion has no basis in fact. 
6. Doubtful facts as a cover for the real facts: Theirry quoted:  'Higher capital requirements prevent banks from funding the real economy'. This is probably untrue but what it most importantly means is that the measures will result in a lower equity return for banks. 
7. Sheer numbers: TP said that the financial  lobby is overwhelming, it totals 3000 people in the US (5 per member of Congress) and 700 in the EU in Brussels - that is one per MEP member and 15 for each member of the Economic & Monetary Affairs C'ttee.
8. Small details/big impact : TP said that a recent EU debate on the need for the disclosure of short positions - a mere two lines in the regulations - was forced out. It is important when formulating rules to know the extent of the impact. Here was one that should have stayed in due to its huge impact, but the lobby won, knowing its impact from the inside.  
9. Unhealthy proximity: The sad thing is that we have even to beware of 'friendly' human motives. The lobby is there to get close to you but it may mean you'll get neutered, or at least nobbled. Beware of  getting too involved with the very people who are probably diametrically opposed to what you are trying to achieve. Ask: On this issue is this person one of the Merry Men or are they in the pay of the Sheriff of Nottingham?  

In the Q&A session that followed TP's exposé, we were entertained to a cut and thrust dialogue between TP and a banker.  Point and riposte darted back and forth. You couldn't have made it up. In just the way that TP had said it happens, it happened. Very politely, of course.      

Posted by Charles Bazlinton. For clear unfudged statements about banks and banking see these interviews on YouTube with Richard Werner 

NOTE: LINK  The slides used by Lord Adair Turner in his keynote speech

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