The West’s financial industry remains broken, and Western politicians continue to flail about in their halfhearted attempts to pretend that they’re confronting the problem. This week’s titan-turned-villain is Bob Diamond, until Tuesday the head of Britain’s Barclays Bank. The American-born Diamond ran the investment arm of the bank half a decade ago, when it consistently manipulated the London Interbank Offered Rate, better known as Libor—the interest rate that big banks report having to pay to borrow funds from global markets. If Libor is low, things are good; if Libor is high, things are bad. Libor helps determine the rate for $350 trillion in global bonds and loans, from floating-rate American mortgages to power-plant financing in Brazil.
Nobody ever checked if global banks were telling the truth about Libor. Barclay’s wasn’t. Now, American and British investigators have levied a $450 million fine against the bank for lying about the rate, starting in 2005, to increase its own trading profits and then, during the 2008 financial crisis, to avoid the scrutiny of a panicked financial system (when reporting a high rate indicated trouble). Diamond stepped down earlier this week. Investigators are assessing the extent to which other banks, alone or in collusion, manipulated Libor.
Does Diamond deserve to be glum and out of a job? Sure, and now he’s both—and, horror of horrors for one of the global elite, he also has to move back to America. But if fixing finance depended solely on purging or shaming bad people, finance would be in good shape by now. Just think back to January, when Sir Fred Goodwin, former head of the Royal Bank of Scotland, lost his honorific. The Queen, acting on government orders, snatched away Goodwin’s knighthood as belated punishment for having sent RBS into a massive tailspin that required a government bailout beginning in 2008 (taxpayers still own the bank).
Or think of Angelo Mozilo (Countrywide Financial), Richard Fuld (Lehman Brothers), E. Stanley O’Neal (Merrill Lynch), Charles Prince (Citigroup), Jon Corzine (Goldman Sachs, the State of New Jersey, and MF Global), and other former big shots who can’t show their faces in polite company these days. Jamie Dimon (JPMorgan Chase) and Lloyd Blankfein (Goldman) have kept their jobs and their cocktail-party status, but Congress periodically has hauled them before panels to serve as punching bags.
And yet the White House and 10 Downing Street still think that one more disgraced CEO will surely do the trick. Call it the “fat-cat” strategy of dealing with the financial crisis, after the terminology that President Obama used in 2009 to describe bankers. Wednesday, British chancellor of the exchequer George Osborne praised Diamond’s resignation, saying that the departure could be a “first step towards a new culture of British banking.” Last week, the Financial Times declared that “for there to be a real change of heart and expectation, it may therefore be necessary to retire this generation of flawed [bank] leaders.” London’s top financial regulator, Adair Turner, said the question was “how to purge the industry of the culture of cynical entitlement.”
Sorry, no. The harshest punishment for the bankers would be to leave their fate to the marketplace. If the West had let markets work in the years leading up to 2008 and beyond, there’d be no need to get rid of this crop of bad actors. When bubble-era banks went out of business because of their disastrous mistakes and mischief, they would have taken their failed leadership with them.
Yes, a few firms did fail, but not enough to change the institutional culture of Wall Street and the City (London’s financial district). Instead, institutions that should have gone under, including the Royal Bank of Scotland, have forged ahead, dragging problems that should have been solved by now into the future and harming economic growth. Why wouldn’t bankers feel entitled and cynical? The leaders of bad banks can see that the government desperately needs them to exist, and the leaders of “good” banks that didn’t need direct bailouts (including Barclays) understand that the playing field is not level…
Sarkozy’s Houdini Act: Is France’s embittered former president trying to hide from prosecution or quietly laying the groundwork for a big comeback?
July 9, 2012
When Nicolas Sarkozy was battling his way toward the presidency in 2007, he often seemed like the Energizer Bunny of French politics: frenetic, relentless, and troublingly ubiquitous. Like that deranged, effervescent, pink rabbit, he broke through barriers and intruded into the darnedest places
Long before he took office in the Élysée Palace, he had manufactured an image based on tough talk and hard-charging actions that could fill kiosks full of newsweekly covers and thus inspire the relentless dedication of legions of newspaper correspondents. (When he was a government minister under President Jacques Chirac, he would actually brag about his impact on magazine sales and television ratings.) The Sarko Show devolved into a national soap opera: His wife was his chief of staff, then left him for another man, but came back in time for his election to the presidency. Soon after, he gave France its first presidential divorce, speed-wooed former supermodel Carla Bruni, and provided the country with a rare presidential wedding and, better yet, its first presidential birth. In the end, it was hard to tell whether they were France’s Camelot, with Bruni as Jackie Kennedy, or its political Brangelina. Sarkozy’s jumpy voice seemed to play in a loop for years, accompanying people’s café and croissants over the morning radio, or barging in on family dinners during prime-time news broadcasts.
The country was so overwhelmed by his omnipresence (the media actually dubbed him the “omni-president”) that it began to suffer from what might be called Sarkozia — a mental disorder defined by the fraught disorientation of spending so much time around a politician who relishes destabilizing others.
And then, in little more than the time that it took for the electorate to reject him in May, Sarkozy was gone. The man who drove the French media insane for much of the last decade has tried to disappear like Houdini.
In the less than two months since the end of his presidency, France’s most notorious media-hound has gone silent. There have been no formal speeches and no comments on Europe’s tenuous economic situation (even as his former government has been blamed for a wide array of related problems). He has spent much of his time vacationing overseas, first in Morocco and more recently in Quebec. France hasn’t been entirely Sarko-free, but close. He made a silent and stately appearance at a memorial ceremony for four French soldiers who were killed in Afghanistan. His replacement, François Hollande, invited Sarkozy, partly out of respect but perhaps also to highlight who is really responsible for the unpopular war. But it was Hollande who gave the eulogy, as Sarkozy watched like a respectful scarecrow in the breeze. Or a ghost.
Is the notoriously competitive, insecure, and neurotic Frenchman feeling sorry for himself after failing to win reelection? Undoubtedly. Is the disappearing act a premeditated strategy? The answer to that question came when his 25-year-old son, Jean, visited the presidential palace in the waning days of his father’s presidency — just prior to Hollande’s inauguration — to seek his father’s benediction. Jean Sarkozy planned to run for a conservative seat in Parliament in June.
Sarkozy père, ever the political calculator, nixed the idea of his son carrying the family’s political torch forward. “Bad idea,” Nicolas told Jean, according to a brief report of the encounter published in the French daily Le Parisien. “The Sarkozys must make themselves forgotten, and they will make themselves forgotten.”
The former president wants to send a Nixonian message: France no longer has Nicolas Sarkozy to kick around anymore. The subtext: Perhaps absence will make the heart grow fonder.
An object of as much public fascination as Sarkozy is can never completely escape the limelight, though. Paparazzi crews have repeatedly tracked the former president down on his regular jogs. For years, he harvested such moments for their dynamic communications impact. But on one recent occasion, which was broadcast on French television, the dejected former president asked his media stalkers if they ever planned to leave him alone.
Plenty of French people would be glad to oblige. Much of the country just wants to move on from the Sarkozy years, but if the Energizer Bunny presidency is over, the French can be forgiven for feeling like that rascal rabbit has left an improbably long trail of fecal pellets behind him. That sense has been growing since his presidential immunity from prosecution lapsed on June 16, a month after he left the presidential palace. French courts have a notable tradition of engaging in lengthy legal pursuit of former presidents in corruption cases, including Sarkozy’s predecessor, Chirac, who was found guilty of corruption in December of last year.
Sarkozy’s new chief antagonist may be Judge Jean-Michel Gentil, who is in the midst of a multiyear investigation that started out looking into whether people around the aging billionaire heiress Liliane Bettencourt, of the L’Oréal empire, manipulated the dementia-stricken octogenarian for their own financial gain and to buy political influence from Sarkozy’s political party. Charges have already been filed against 11 people, including Bettencourt’s former money manager, who spent 88 days in preliminary detention as the investigating judge sought to figure out what he did with a total of about $7 million of the old lady’s money.
In an offshoot of that investigation, Gentil, backed by police investigators, carried out a series of raids on Tuesday, July 3, on Sarkozy’s office, the home owned by Carla Bruni-Sarkozy where the couple live in the posh 16th arrondissement, and a law firm in which Sarkozy is a partner.
The judge is particularly focused on what was done with $1 million that was withdrawn from Bettencourt’s Swiss bank accounts on two separate occasions. The initial withdrawal came on February 5, 2007, days before Bettencourt’s money manager met with Éric Woerth, then the treasurer of Sarkozy’s first presidential campaign. Bettencourt’s former accountant (who is not the same person as her money manager) has told investigators that she gave $185,000 to Woerth. (Political donations in France are limited to $5,660 per person during campaigns.) The second withdrawal came days into the brief two-week runoff campaign later that year. Woerth, who went on to become Sarkozy’s minister of budget, and then of labor, resigned as the burgeoning scandal targeted him. He insists that he was the victim of a politicized witch-hunt whose real target was President Sarkozy. (His case is ongoing.)…
Why Some People Don’t Get Fat: Obesity researchers study thin people for clues about hunger and metabolism
July 9, 2012
Maureen Michael likes food. Most days, she has three or four meals, and on occasion she eats yet another in the middle of the night. But she rarely worries about her weight, and at 5-foot-8 and 155 pounds, she looks quite trim.
“I eat anything, and I eat a lot,” the 51-year-old District resident said. “I like large portions. I have one of those metabolisms, I guess.”
Just the other day, Michael ate a salad and two large helpings of spaghetti and meatballs for dinner — after having a hearty bowl of ice cream. For breakfast the next morning, she ate two scrambled eggs, half a package of Polish sausage, English muffins and orange juice. For lunch, she consumed a 12-inch seafood sub and some Doritos, and that night’s dinner featured two pork chops, potatoes and broccoli.
That Michael’s weight remains steady even though she eats whatever she wants and does not exercise interests scientists studying the nation’s obesity epidemic. By looking at people who are near their ideal body weight, these reseachers at the National Institutes of Health’s Metabolic Clinical Research Unit in Bethesda hope to figure out what causes so many others to be overweight or uncontrollably fat.
Michael is among the one-third of American adults who are at a good weight relative to their height and build. Another third are overweight, and the rest are obese. Unlike Michael, very few people keep their weight in check without paying attention to what they eat and being conscientious about physical activity.
For years, people have been told to diet, control their appetites, use a little willpower. But more and more scientists believe the obesity epidemic has been triggered by a combination beyond an individual’s control: genes, and how they interact with an environment of abundant, tasty, inexpensive and hard-to-resist food.
Each person’s unique genetic makeup, these experts think, may affect what he craves, how much he craves and how his body uses fat and burns calories.
“We are hard-wired to be a bit more hungry than we need to, because until very recently — in evolutionary terms — the vast majority of our fellow humans had no idea whether the next meal would be available or not,” said Francesco S. Celi, a clinical investigator at the NIH research unit.
Yet for some people, there is a profound imbalance between what they eat and the amount of energy they expend. Most of these people become obese as a result, but some, like Michael, don’t.
“Some are more sensitive” to that imbalance, said Rudolph Leibel, a diabetes researcher at New York’s Columbia University who has been studying the biochemistry and genetics of obesity for 25 years. “That’s the genetics.”
“There are people in the population who are skinnier or more slender with a different genetic response to the environment,” he said. That is why “just yelling at people and telling them it is sinful or gluttony is not a particular fruitful way to deal with the problem. It’s not very effective to insinuate that someone has moral failings when a behavior is involved.”….