MENAFN - Arab News
Christine Lagarde gets tough on Wall Street
(MENAFN - Arab News) Watch out Wall Street and look sharp, City of London - one of the sheriffs of global capitalism is riding into town.
An elegant Frenchwoman with a shiny silver bob and the smooth manners of a veteran Cabinet minister and white-shoe lawyer, Christine Largarde, the managing director of the International Monetary Fund, doesn't conform to the most common stereotypes of a tough law enforcer.
But, on the eve of the World Economic Forum - the chummy annual gathering of the world's business elites in Davos, Switzerland - Lagarde delivered a strong call for firmer financial regulation around the world.
Speaking at a news conference, Lagarde decried the "waning commitment" to tighter financial regulations and said that finishing the post-2008 effort to fix the world's banks should be one of the three economic priorities in 2013.
In an interview afterward, Lagarde elaborated on the theme, warning that robust lobbying threatened to weaken the efforts by regulators and legislators to force banks to hold more and better capital against their loans and to be more transparent.
"I see a lot of pressure coming out of the industry," she said.
A former corporate lawyer, Lagarde isn't naive about that muscular lobbying, or unsympathetic to its motivations. It is, she said, "clearly part of their jobs. They will naturally lobby to support more flexible, more accommodating regulations."
But because of the special role of finance in the economy - including the special support the state gives banks in times of trouble - the "sector warrants stronger regulation and stronger buffers against potential risks and regular tests of their capacity to resist shocks."
"We believe," Lagarde said at her news conference, "that it is important for regulators, for supervisors, for authorities to resist aggressive industry pushback."
In our conversation, Lagarde was quick to rebuff some of the bankers' arguments against stronger financial regulation. When I asked her whether the weak world economy was a reason to delay tougher rules, she was uncompromising, repeating her point twice for emphasis: "It's always the wrong time here. It's always the wrong time."
She was equally firm when I ventured the complaint of some US banks that the contested Basel III regulations that set rules for banks around the world were anti-American and placed an unfair burden on US companies.
"You know, when I was sitting on the other side of the pond, I heard exactly the same story from the European banks, that it was anti-European and overly pro-American," Lagarde said. "So I'm sure there must be something right about it. I think the Basel committee is trying to do as good a job as it can and is trying to resist the pressure. I certainly hope that it continues doing so."
It is just a little more than four years since a financial crisis ripped apart the world economy, destroying millions of jobs and stunting millions of lives.
Those wounds are still so fresh that you may be surprised to learn that banks, whose risky behavior caused the crash in the first place, would be putting up much of a fight at all against tighter rules.
"It's human nature," Lagarde told me. "The moment the situation improves, you tend to forget about the hard times. And on this occasion, I think it is the job of policymakers, of supervisors, of regulators to constantly have that in the back of their mind and as an objective to avoid a relapse of what happened back in 2008."
The major current battle is about capital - how much banks should hold and how liquid it should be. Lagarde sees two other big fights in the offing.
One is the regulation of so-called shadow banking, the vast world of financial transactions that are done outside open exchanges, hidden from public balance sheets or conducted by nonbank financial institutions.
"Shadow banking is clearly developing at a steady pace," Lagarde warned in our interview, and "currently escapes a degree of regulation and supervision."
Lagarde's second worry is what she called "forum shopping" or "fragmentation."
This is the Gerard Depardieu story on an institutional level. Just as today's globalized world allows the French actor to cross borders and trade passports to escape high French taxes, global financial institutions can "shop" for the national home base that provides the lightest regulation. But while that may be good for individual bankers and their firms, it is dangerous for the world economy.
This distinction between what is in the interest of the banks and what is in the public interest was at the heart of Lagarde's comments.
Before 2008, a lot of people - politicians, journalists, regulators - conflated the two.
Particularly in the US and in Britain, General Motors chief Charlie Wilson's argument that what was good for GM was good for America started to feel true about the economic powerhouses on Wall Street and in the City of London.
Lagarde runs the world's most important public global financial institution. When most of us think of the IMF at all, it is usually as the stern enforcer of the sometimes harsh rules of international capitalism. That's why we should take Lagarde's call for tougher financial regulation particularly seriously.
"My hope is that it's improved for the public interest, not for the banks' interests," she told me.
"And those are not necessarily one and the same?" I asked. She responded definitively and with a warm laugh: "Of course not!"
- Chrystia Freeland is a Reuters columnist. Any opinions expressed are her own.
MENA News Headlines
|Mar 15 2014||Oman's budget surplus down to USD700m in Jan ,MENAFN|
|(MENAFN) Official data by the Omani government show that the country's budget surplus shrank in January, Arabian Business reported.
The data reveals that the budget surplus went down to USD700.5 ...|
|Mar 15 2014||Al Hokair sets 2016 as completion date for Dubailand project ,MENAFN|
|(MENAFN) A senior executive at Saudi-based Al Hokair Group announced that its Al Sahara Kingdom hotel and entertainment project in Dubailand should open in "a couple of years", Arabian Business ...|
|Mar 15 2014||Fizzy to receive USD333m fund from UAE firm ,MENAFN|
|(MENAFN) UK-based Fizzy announced that it has received a new capital commitment of USD333 million from an Abu Dhabi-owned company, Arabian Business reported.
The company said the fund had come ...|
|Mar 15 2014||Dubai approves bridge to link Bluewaters, mainland ,MENAFN|
|(MENAFN) Dubai has approved plans to build a bridge linking the USD1.6 billion Bluewaters Island project with the mainland, Arabian Business reported.
The emirate's transport authority said the ...|
|Mar 15 2014||Six people dead, some 43 injured in Lebanese Tripoli clashes ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Six people were killed and 43 injured as armed clashes intensified in the Lebanese northern city of Tripoli on Friday.
An informed source told KUNA that ...|
|Mar 15 2014||Israel responsible for lives of Palestinian prisoners on hunger strike --minister ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Palestinian Minister of Prisoners and Detainees Issa Qaraqeh held Israeli authorities responsible for the lives of nine Palestinian prisoners who have been on a ...|
|Mar 15 2014||Pres. Abbas grants Al-Babtain Palestine Order of Merit ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Palestinian President Mahmoud Abbas granted here on Thursday the Palestine Order of Merit for culture, sciences and arts to Kuwaiti poet and literary man ...|
|Mar 15 2014||Kuwait participates in Greece Energy Conf. ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Kuwait took part in a two-day Greece Energy Conference which concluded in the capital Athens on Friday, where participants discussing ways to develop the energy ...|
|Mar 15 2014||Saudi Al-Ahli wins GCC Volleyball Clubs" title ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Saudi volleyball Al-Ahli team won the title of GCC Volleyball Clubs championship after defeating Qatari Al-Rayyan team three sets to one on Friday.
|Mar 15 2014||U.S.-Arab ties, Arab Spring feature high on 2nd U.S. Ambassadors Forum ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) The National U.S.-Arab Chamber of Commerce (NUSACC), in partnership with the U.S. Department of State hosted here Thursday night the Second Annual U.S. ...|
|Mar 15 2014||Kuwait Investment Forum kick-starts Saturday ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) The Kuwait Investment Forum is to be held here on Saturday, focusing on how to create an attractive investment atmosphere in the country.
Speakers at the ...|
|Mar 15 2014||Princess Astrid of Belgium leads large trade delegation to Saudi Arabia, Oman ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Princess Astrid, representing King Philippe of Belgium, will preside over a trade mission to Saudi Arabia and Oman from 15 to 21 March, the Royal Palace has ...|
|Mar 15 2014||Obama, Abbas to review progress in Israeli-Palestinian talks ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) President Barack Obama will welcome Palestinian Authority President Mahmoud Abbas to the White House on Monday, and Obama looks forward to reviewing with Abbas ...|
|Mar 15 2014||EU to bolster financial aid to Tunisia - EU official ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) European Commissioner for Enlargement and European Neighbourhood Policy Stefan Fule said Friday that the European Union (EU) will boost its financial aid for this ...|
|Mar 15 2014||Kuwait reaffirms keenness to fighting drugs ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Kuwait Friday welcomed the UN General Assembly's decision to hold a special session in 2016 regarding the problem of drugs in the world.
Kuwait is committed to ...|
|Mar 15 2014||Kuwait renews support for international efforts to aid Syrians ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) The State of Kuwait has renewed its support for the 2139 (2014) United Nations Resolution on Syria, which essentially calls on parties of the conflict to allow ...|
|Mar 15 2014||Lebanon"s March 14 Bloc marks 9th anniversary Independence Intifada ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) The Lebanese March 14 Bloc commemorated the ninth anniversary of the "Independence Intifada" at the Biel Center in Beirut on Friday.
Representatives of the ...|
|Mar 15 2014||EU, Kuwait begin discussions on Schengen visa waiver ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Senior officials from Kuwait's foreign and interior ministries have ended a two-day visit to Brussels after discussions and meetings with EU officials that ...|
|Mar 15 2014||Kuwaiti MP says visit to Japan to cement ties, achieve concrete outcomes ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) The visit of Kuwait-Japan Parliamentary Friendship League to Japan represented an opportunity to enhance relations between the two nations in all domains, head of ...|
|Mar 15 2014||Ban regrets no progress on Kuwaiti remains, archives ,Kuwait News Agency (KUNA)|
|(MENAFN - Kuwait News Agency (KUNA)) Secretary-General Ban Ki-moon expressed regret that no more remains of missing Kuwaiti nationals or Kuwaiti national archives have been found in Iraq, despite the ...|