Wednesday, January 30, 2008

Prisa and Le Monde

Juan Luis Cebrian, the head of the Prisa group that publishes El Pais in Spain, offers his views on the financial situation of Le Monde, in which his group has an interest. He and Arnaud Lagardère have met with Le Monde's society of journalists (SRM) to try to work out a new management structure. Cebrian's view is that the journalists should indeed have the editorial independence they insist upon, but in return the stockholders should enjoy "managerial independence" to restructure and allocate resources as they see fit. Of course the idea that managerial decisions are neatly separable from editorial orientations is a fantasy and the root of the problem, but Cebrian evidently sees himself as a mediator of sorts, not being tainted, as Lagardère is, by a friendship with Sarkozy.

More from Philippe Cohen here.

Obama on Sarko


SR on SG

Ségolène Royal wants Société Générale to "reimburse families buried in debt" in the amount of 7 billion euros, the 5 billion it lost in the Kerviel speculation and the 2 billion it lost on subprimes. She doesn't explain how the bank is supposed to lay hold of the 7 billion it lost in order to rescue its debtors. Is she serious? Apparently she thinks that when a bank "loses" money, it goes into the pockets of the bank's directors.

Such empty verbiage is apparently intended to reinforce Royal's image as a compassionate friend of the little guy. Unfortunately it simultaneously undermines her claim to be a serious steward of the economy.

Vive la différence

Why writing books can be hazardous to your sanity: could two book reviews be more different than this and this? For the record, I agree with Laborde: Joan Scott has written an excellent book.

Financial Franglais

Surprisingly, I haven't seen any comment on the fact that the jargon of options trading seems to be entirely franglais, indeed a sort of financial pidgin all its own: le trader, le middle-office, le back-office, les stock-options. Surely the eternal pourfendeurs of Anglo-Saxon neo-liberalism will want to seize on this linguistic proof that the barbarians are inside the walls. Curiously, however, the word for a financial debacle is krach, pronounced "crack" and obviously derived from German rather than from the English "crash," though the onomatopoeic origin is the same in all three languages:

OED: An onomatop{oe}ic word having the same relation to crack that clash has to clack and clap: see CLASH, DASH. There are possible associations also with crase, craze (though here the a has been long, and the s pronounced as z prob. from the 14th c.). The mod.Scandinavian langs. show Icel. krassa ‘perfricare, dilacerare’ (Haldors.), Sw. krasa, Da. krase to crackle, and the phrases Sw. slå i kras, Da. gå i kras to dash in pieces, break to shivers; but these are app. only analogous formations.

On the caste system that exists in the world des traders, see here.

Shades of Difference

It has been interesting to watch fissures already evident in the Sarkozy team widening as the Société Générale affair evolves. Two days ago we had the president's own reaction, that such a colossal failure of oversight must not go "without consequences." Of course, the president, despite his past as finance minister and well-known affinity for billionaires and "bling-bling," is not, as I have several times had occasion to remark, a part of the elite business establishment, of the restricted group of énarques (for the most part) who shuffle back and forth between ministerial cabinets and corporate boardrooms in the venerable practice known in French as pantouflage. His friends are from a less discreet and staid group, the press barons, media moguls, construction tycoons, and corporate raiders, which may to some degree explain their taste for the flashy, tawdry m'as-tu vu style that Sarko has adopted and that seems no longer to be working its seductive magic on French voters, to judge by the polls.

Within his government, however, and within the UMP, there are others closer to the more buttoned-up business establishment. Christine Lagarde, a former corporate lawyer, is the most prominent of these. She has strayed off the reservation a number of times in the past: for instance, when she said that a policy of "austerity" would be required to remedy France's budget woes and was immediately rebuked by Sarkozy. Yesterday she said that, despite the president's call for "consequences," it didn't make sense to replace the "captain" of the ship (SG head Daniel Bouton) in the midst of a storm. Today, as the SG's board meets to consider Bouton's fate, Patrick Ollier, a UMP deputy and chair of the economic affairs committee, used the same metaphor, while Philippe Pruvost, a member of the board, gave it a more dire twist by saying that "when the ship is sinking, you don't throw the captain overboard."

Meanwhile, journalists Laurent Joffrin and Sylvie Pierre-Brossolette debate the issue in similar terms, although now the suggestion is that Lagarde is the one to be thrown overboard: though not the captain, she is, for Joffrin, at least, the first mate who fell asleep on watch and allowed the ship of state to run aground, as it were.

Inconsequential debate of this sort is common when large systems go awry. The initial instinct is to find a culprit, as if eliminating the rotten apple will make the rest of the basket fresh again. More sober students of these kinds of crises are rightly suspicious of these simplifying metaphors, whether they involve storm-tossed schooners or putrifying fruit. I suggest that all French commentators read Peter Temin's study of the panic of 1837 in the United States. Writing a century and a half after the fact, Temin explains why all contemporary observers, misled by the protracted struggle between another president and another bank, got the story seriously wrong. A century and a half from now, we may understand more fully how the 1990s boom in high tech, the housing bubble, Fed policy under Greenspan, the American subprime crisis, the Asian miracle, the Maastricht treaty, and the securitization of everything initiated the decline of the West that Spengler thought he saw happening decades earlier. Or not. But make no mistake: the tectonic plates are in motion (to use yet another simplifying metaphor), and each new upheaval is but a manifestation of a situation still in flux and likely to remain so for quite some time to come.

Yet some contemporary observers seem to me to have a fairly lucid picture of at least the immediate changes ahead. For instance, there is this interesting analysis of the way in which global savings imbalances will work themselves out by a massive infusion of Asian reserves into western banks, which find themselves unable to "securitize" long-term debt in the wake of the subprime crisis and must therefore bring their loan portfolios back onto their balance sheets, which requires large amounts of new equity. And large amounts of new equity can no longer be raised at home.

LATE WORD: The "captain" has been asked to remain with the ship. Interestingly, Bouton, as well-connected an énarque as one can find in France, was the author of a report on corporate governance for the government.

Additional references: on public relations by SG, on committee to manage losses.

Life in the Sixteenth Becomes Intolerable

The financial system is crashing down, the president's approval rating is plummeting, the IMF has reduced its estimate of global economic growth by 20 percent for next year, but UMP deputy and Paris city councilor Claude Goasguen has bigger problems on his mind: the dog poop on the sidewalks of the 16th Arrondissement of Paris. In a stinging letter to deputy mayor Yves Contassot, Goasguen reveals the parlous state of life that reigns in les quartiers huppés, apparently reduced to a standard of living hitherto associated with the less developed nations of Africa or Latin America. Here is Goasguen's "J'accuse!"

The situation is becoming intolerable. The garbage is not picked up at regular times and in some cases remains on the sidewalk for a day or two, shedding quantities of detritus. Trash and cast-off items accumulate in certain places, and our streets are transformed into public dumps. The sidewalks are not cleaned regularly, and canine waste impedes pedestrians, at times causing unfortunate accidents. All this filth is insalubrious and may result in risks to health.

Imagine that. Insalubrious and may result in risks to health!! A double whammy.

Municipal elections ahead! Time to do some constituent service. "All politics is local." -- Tip O'Neill

A Third Way Avant la Lettre

La Vie des idées has a very interesting review-essay by Nicolas Delalande of Serge Audier's book on Léon Bourgeois, the founder of the social-liberal reformist movement known as Solidarism. His credo was, "The isolated individual does not exist." Bourgeois held several ministerial portfolios in the Third Republic and was the first president of the League of Nations. Audier's book is one of a number of recent works by French scholars exploring a reformist tradition in French politics that had previously been neglected. There are links to on-line versions of Bourgeois's works.