French President François Hollande should have been ecstatic when US Federal and New York State authorities slammed French megabank BNP Paribas with a slew of charges related to the bank’s dealings with Iran in violation of US sanctions. Under intense pressure, BNP agreed to pay a $8.9 billion penalty and plead guilty. It was the largest penalty for a European bank ever. Some heads rolled at the bank. But Hollande was not amused.
Yet it should have been the sweetest moment of his dreary Presidency. He should have relished that attack on the French monster bank, and he should have turned motorcade victory laps around rush-hour Paris.
Because on January 22, 2012, as Socialist presidential candidate, in a speech in Bourget that instantly went viral on a global scale, he’d pointed out, had dared to point out, the true nature of finance, not of the bank branch down the street, but that part of finance that had brought down the financial system and had triggered the great recession, a part of finance that is aided and abetted by central banks to this day:
“I’ll tell you who my opponent is, my true opponent,” he said at the time. “He has no name, no face, no party. He will never run for office. He will not be elected. And yet he governs. My opponent is the world of finance.”
He promised he’d rein in that world. He’d impose a tax on all its financial transactions, “a real tax,” and he’d eliminate stock options, and he’d curtail bonuses, and he’d do a million other things. And the huddled masses began to dream.
But soon after he was anointed President of France, nuances began to appear. In September 2013, his Industrial Renewal Minister, now re-baptized Economy Minister, Arnaud Montebourg explained it this way: “Finance is like cholesterol, there is the good and the bad.”
It was on the occasion when a factory was moved back from China to France. Not just any factory, but a Solex plant. The company has been making motorized bicycles since 1946. They have a small gasoline motor above the front wheel. The motor drives a roller that, when lowered on the tire, provides some additional oomph. When the auxiliary power is not needed, the motor can be turned off and the mechanism can be lifted to allow the wheel to turn freely. These contraptions are regularly passed by normal bicycles powered by normal people, but they allow older chain smokers to get up a hill if it’s not too steep. It’s a very French contraption, scorned and ridiculed and loved by many. So when production returned from China to France, well, politicians were making hay while they could. And for Montebourg, it was “good” finance that had brought the plant back.
Politicians to the left of Hollande regularly refer to the speech at Bourget in an effort to remind Hollande about his broken promises. But that daring speech that had sent bankers into panic mode, if only briefly, and that had resonated with so many people around the world, and that had instantly gone viral, has now, like so many things in Hollande’s presidency, officially been buried.
On Sunday, Finance Minister Michel Sapin, while speaking at a meeting of economists in Aix-en-Provence, declared that “finance, the good finance, is our friend.”
The about-face is now complete. No democratically elected entity can oppose the world of finance for long. There was some laughter in the audience. A bon mot that pleased. “We still need financial regulation,” Sapin went on. “As far as banks are concerned, we’ve made a lot of progress. But for everything outside banking, we still have some way to go.”
And he wasn’t worried about more investigations, costly penalties, and embarrassing guilty pleas for French banks. American authorities have been extracting their pound of flesh from banks while carefully tiptoeing around the idea of sending executives to jail. But they weren’t going after French banks any longer. Instead, “several other large European banks will face that risk,” he said….
Despite rumors that US authorities were targeting two additional French megabanks, Société Générale and Crédit Agricole, along with two German megabanks, Deutsche Bank – which is sinking deeper into just about every imaginable banking scandal – and Commerzbank.
The French government’s deal with megabanks has come full circle, from being a sacred relationship under President Nicholas Sarkozy to enmity during Hollande’s campaign and now back to sacred relationship. No democratically elected government in a major country – not in France, not in Germany, least of all in the US – is allowed to oppose the banks and the central banks that stand behind them, though extracting penalties to the tune of a few quarters worth of earnings – extracting them from stockholders – is now considered an easy price to pay, and part of the costs of doing business, to buy some protection from the restless populists.
Under the nimbus of its infamously illustrious performance, the European Banking Authority has reduced the world of money to just two abbreviations: VC and FC. And it has taken sides. Read (on my new website WOLF STREET)…. EU Regulator Warns Banks: Don’t ‘Buy, Hold, or Sell’ Virtual Currencies, Stick to ‘Fiat Currencies’