A real mission impossible

By Finance Addict

When I worked in banking not so long ago, it was actually cool to be “old school”. It was just another way of saying that one would try to balance the bank’s interests with that of the corporate client’s. To make neither too little money off of them, nor too much. And to never, ever, ever give them the impression that the high fees they were paying would be used to pay for something like your next Ferrari.

Now I’m not in a position to comment on his choice of auto but Hilmar Kopper, the 76-year old who was the CEO of Deutsche Bank for most of the 1990s, is proud to describe himself as an old school banker during a recent interview with Der Spiegel. And while one might be piqued by his tendency to absolve his fellow bankers a bit too readily, (plus the fact that he’s a steering committee member of the much-whispered about Bilderberg Conference), it’s worth noting his point on a seismic shift in today’s world of finance. The emphasis is mine.

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Kopper: I’m old school, so to speak. Often, when people are berating “the banks,” they’re really talking about completely different things: derivatives, commodities trading, foreign currency.

SPIEGEL: These are all businesses in which banks are involved.

Kopper: But usually just on behalf of pension funds, very large hedge and sovereign funds and wealthy investors. Never in the history of mankind has there been so much money in circulation, and never before was it possible to trade with it so quickly. And never before has this money used the entire planet as a playing field, as is the case today in the era of globalization. That’s the way it is and the way it will remain. There can be no turning back the clock. How shortsighted people must be when they hold bankers responsible for this development!

Think about all the manifestations of this. China with its massive savings. Petrodollars from the Gulf countries and Russia. Commodity-rich countries in Latin America and Africa. Multi-national corporations sitting on huge war chests of dough. Cashed-up hedge funds. The family offices managing the money of the wealthiest families from all over the world. Internet billionaires. C-suite executives. Old money, new money — gobs of it, a tsunami even, sloshing around the world like Jonah sloshed around the guts of the whale.

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And then I read quaint bits of news like the following, from American Banker:

The Treasury Department would begin to collect fees from large banks on July 20 to fund the Office of Financial Research and Financial Stability Oversight Council under a proposal published Tuesday.

And my first reaction is to want to pat little Timmy Geithner on the head. Awwww. How sweet. How charming that Dodd, Frank, Geithner — any of them, any of us, think that there’s a chance that one person or team of people anywhere in the world can have anything approaching a complete understanding of what’s really going on in the Fourth Circle of Hell that we call global finance today. Seriously? We can’t even say with much confidence how much real exposure these same banks have to, say, the$708 trillion in gross derivatives outstanding. Maybe they’d better hang on to their cash — they’ll need it when the inevitable even-bigger crisis comes along.

However. There does exist someone more optimistic than I on this topic. Writing in Foreign Policy on how to save the global economy, Paul Saffo suggests that there is a way to get better data on this “tectonic force”.

Imagine instead an institution with the analytic resources of Wall Street players, the reach of Google, and the openness of Wikipedia. Such an observatory would leverage the capacities of cyberspace to become a global (and cost-effective) clearinghouse for economic information. Its scope would extend far beyond the data collected by established entities today, for example probing deep into the world’s illicit economies and exploring the market implications of rapidly spreading social media. And unlike those institutions, it would serve a purely informational role with no policy responsibilities.

Above all, this economic observatory would be open and independent, inviting the participation of crowds and encouraging the broadest possible research access to its data in the service of rethinking our global economic architecture. Funding is less of a hurdle than one might think. Such an observatory could be operated on a fraction of the 342 million-euro annual budget of the Organization for Economic Cooperation and Development. Moreover, its smaller budget would provide the flexibility required to preserve both the appearance and actuality of independence. It might even be possible to crowdsource the bulk of its budget over the Internet.

What do you think, Internet? Could this work? Would you support it with either your money or your computing power? In fact, hivemind, do you think we could we find a way to do it ourselves?

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