The ECB-G30 conflict

In November 2011, Corporate Europe Observatory (CEO), a Brussels based lobby watchdog, asked Mario Draghi to withdraw from the group of G30 because it conflicts with his duties as ECB President. According to them the ECB's press office dodged their criticism and, in February 2012, they referred the matter to the ethics officer of the ECB.

This referral comes as it is uncovered that Draghi stated in writing that there were no relevant personal factors to be taken into account in considering his nomination in June 2011. It is  misleading because it fails to disclose a conflict of interest (Nouvel Observateur). Specifically, his son has been working for some years as an interest rate trader at Morgan Stanley (LinkedIn). The code of conduct of the ECB warns against "potential advantage for [the] families [of the Governing Council]". It's a real risk. In January 2012 the president of the Swiss National Bank was forced to resign after it was found his wife traded on insider knowledge, reported The Telegraph.

While CEO's criticism is purely based on principle, we point out that Mario Draghi is one of four members of the G30 who are connected to the Goldman-Greece (off-market currency swaps) affair.

The CEO complaint

Here's the response of the ECB to CEO's letter asking Draghi to leave the G30:

“part of the President's tasks to represent the ECB in international conferences, fora and groups to exchange views on international economic and financial issues and to communicate the ECB's positions and policies. When representing the ECB in such conferences, fora or groups, the President of the ECB acts in accordance with the principle of independence and integrity.”

CEO says that his answer is unsatisfactory because it does not specifically address the group in question, the G30, and it offers no guarantee as to the observance of the "principle of independence and integrity". In their complaint to the ECB, CEO lists multiple provisions of the code of conduct of the Governing Council and, more specifically, the Executive Board, that discourage this sort of affiliation.

 

The ECB President

He's our take on the problem: 

Would removing Draghi from the G30 shield him from influence from his peers and the international bankers that make the bulk of the G30? 

Everything else (such as meeting privately for golf outings etc.) equal, probably not. And some might argue the influence works both ways. But it would make a great deal of a difference this way : the ECB Presidency would not be lending its credibility/respect to that organization. Symbols matter, at that level of power.

 

The relevant question, therefore, is:

Should the ECB Presidency support the G30?

Some might answer that Draghi's British homologue (in active duty, that is, unlike Volcker), Mervin King, is also a member. But just because a practice is established doesn't make it right.

Admittedly, there are adversarial positions in the G30. Consider, for instance, this recent headline: "Goldman Sachs, Morgan Stanley say Volcker rule could raise risk". All three are represented (self, in the case of Volcker). But is the right balance struck between the parties?

 

Big finance

In a press release, CEO cites research that says that the G30 has the characteristics of a lobby group and has contributed to ineffective banking regulation, in association with the Institute of International Finance (see Simon Johnson's April fool take on them). In the last couple of years, the latter has gained prominence in its negotiations with the Troika and Greece on country's debt restructuring.  Perhaps related, Nobel prize laureate Joseph Stiglitz recently alleged in an op-ed that Draghi's ulterior motive for having pushed for a voluntary restructuring was to spare a "few banks" losses on the CDS they sold. In fact, it's perhaps wrong to call it an ulterior motive because it was openly claimed by Draghi at his nomination hearing, according to an MEP (interview at 1:40, English subtitles), albeit not a defensible one, thought the same MEP.

Big finance has quite a representation in the G30. For brevity, let's keep it to Goldman Sachs. It includes William C. Dudley, former Managing Director of the firm,  who replaces another a former MD of the same firm, Mario Draghi, as Chairman of the Financial Stability Board (FSB). E. Gerald Corrigan is currently Managing Director at, and could become the next chairman of, the same firm (NY Times). He is also chair of the Counterparty Risk Managment Policy Group (CRMPG). A former Commodity Futures Trading Commission (CFTC) official recalls in a PBS interview that the CRMPG was set up in the 1990s to lobby Clinton's administration to keep the OTC-derivatives market exempt of "all the fundamental templates that we learned from the Great Depression [in order to] have markets function smoothly", a.k.a as the Brooksley Born vs Summers, Greenspan & Rubin episode.

 

Central bankers and economists

The the allegedly less than prophetic Martin Feldstein and Larry Summers, whose alleged selective memory recently made headlines, were singled out in Inside job. According to The Telegraph, Phillip Hildebrand, former chairman of the Swiss National Bank, was forced to resign because his wife traded on insider knowledge about a market intervention of the SNB.

If Greenspan replaced Trichet as head of G30, would you think it's a viable organization for impulsing reform in banking regulation, at a time when we're grappling with the legacy of the financial crisis? If the answer is no, that is, it would be far from the best choice, then consider reading Greenspan vs Trichet, a tie? as a follow up to this article.

 

The Goldman-Greece connection

The Draghi connection is covered in Goldman-Greece-Draghi-Morgan-Stanley. E. Gerald Corrigan took a public role in defending Goldman Sachs in 2010. Jean Claude Trichet, now chairman of the G30, kept details of the transactions that were in the custody of the ECB confidential, against a legal proceeding by Bloomberg to release them. After Goldman Sachs' role in the US mortgage crisis was exposed, Gordon Brown, then UK prime minister, called for a special investigation of the firm's practices (BBC). The Goldman-Greece deal should have been on the radar of FSA, directed since 2008 by Lord Adair Turner, but it doesn't appear to have been the case. 

 


 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • 21st Century Shoe-Shine Boys
      Anecdotal Flags are Waved   "If a shoeshine boy can predict where this market is going to go, then it's no place for a man with a lot of money to lose." - Joseph Kennedy   It is actually a true story as far as we know – Joseph Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if...
  • Christopher Columbus and the Falsification of History
      Crazed Decision The Los Angeles City Council’s recent, crazed decision* to replace Christopher Columbus Day with one celebrating “indigenous peoples” can be traced to the falsification of history and denigration of European man which began in earnest in the 1960s throughout the educational establishment (from grade school through the universities), book publishing, and the print and electronic media.   Christopher Columbus at the Court of the Catholic Monarchs (a...
  • India: The Genie of Lawlessness is out of the Bottle
      Recapitulation (Part XVI, the Last) Since the announcement of demonetization of Indian currency on 8th November 2016, I have written a large number of articles. The issue is not so much that the Indian Prime Minister, Narendra Modi, is a tyrant and extremely simplistic in his thinking (which he is), or that demonetization and the new sales tax system were horribly ill-conceived (which they were). Time erases all tyrants from the map, and eventually from people’s...
  • The Forking Paradise - Precious Metals Supply and Demand Report
      Forking Incentives A month ago, we wrote about the bitcoin fork. We described the fork:   Picture a bank, the old-fashioned kind. Call it Acme (sorry, we watched too much Coyote and Road Runner growing up). A group of disgruntled employees leave. They take a copy of the book of accounts. They set up a new bank across the street, Wile E Bank. To win customers, they say if you had an account at Acme Bank, you now have an account at Wile, with the same balance!   BCH, son...
  • The Government Debt Paradox: Pick Your Poison
      Lasting Debt “Rule one: Never allow a crisis to go to waste,” said President Obama’s Chief of Staff Rahm Emanuel in November of 2008.  “They are opportunities to do big things.”   Rahm Emanuel looks happy. He should be – he is the mayor of Chicago, which is best described as crisis incarnate. Or maybe the proper term is perma-crisis? Anyway, it undoubtedly looks like a giant opportunity from his perspective, a gift that keeps on giving, so to speak. [PT] Photo...
  • The United States of Hubris
      Improving the World, One Death at a Time If anyone should have any questions about whether the United States of America is not the most aggressive, warlike, and terrorist nation on the face of the earth, its latest proposed action against the supposed rogue state of North Korea should allay any such doubts.   Throughout history, the problem with empires has always been the same: no matter how stable and invincible they appeared, eventually they ran into “imperial...
  • Long Term Statistics on AAPL
      Introductory Remarks by PT Below we present a recent article by the Mole discussing a number of technical statistics on the behavior of AAPL over time. Since the company has the largest market cap in the US stock market (~ USD 850 billion – a valuation that exceeds that of entire industries), it is the biggest component of capitalization-weighted big cap indexes and the ETFs based on them. It is also a component of the price-weighted DJIA. It is fair to say that the performance of...
  • Tragedy of the Speculations
      The Instability Problem Bitcoin is often promoted as the antidote to the madness of fiat irredeemable currencies. It is also promoted as their replacement. Bitcoin is promoted not only as money, but the future money, and our monetary future. In fact, it is not.   A tragedy... get the hankies out! :) [PT]   Why not? To answer, let us start with a look at the incentives offered by bitcoin. We saw a comment this week, which is apropos:   "Crypto is so...
  • To Hell In A Bucket
      No-one Cares... “No one really cares about the U.S. federal debt,” remarked a colleague and Economic Prism reader earlier in the week.  “You keep writing about it as if anyone gives a lick.” We could tell he was just warming up.  So, we settled back into our chair and made ourselves comfortable.   The federal debtberg, which no-one cares about (yet). We have added the most recent bar manually, as the charts published by the Fed will only be updated at the end of the...
  • Despite 24/7 Trading: Bitcoin Investors are Taking off for the Weekend on Friday Already
      Crypto-Statistics In the last issue of Seasonal Insights I have discussed how the S&P 500 Index performs on individual days of the week. In this issue I will show an analysis of the average cumulative annual returns of bitcoin on individual days of the week.   Bitcoin, daily. While this is beside the point, we note the crypto-currency (and other “alt coins” as well) has minor performance issues lately. The white line indicates important lateral support, but this looks to...
  • Precious Metals Supply and Demand
      Fundamental Developments There were big moves in the metals markets this week. The price of gold was up an additional $21 and that of silver $0.30. Will the dollar fall further?As always, we are interested in the fundamentals of supply and demand as measured by the basis. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.   Gold and silver prices in USD terms (as of last week Friday) - click to enlarge.   Next, this is a...
  • Precious Metals Supply and Demand
      Back to the Happy Place Amid a Falling Dollar The prices of the metals dropped this week, $24 and $0.38. This could be because the asset markets have returned to their happy, happy place where every day the stock market ticks up relentlessly.   Sometimes, happiness is fleeting... - click to enlarge.   The major currencies have been rising all year—we insist that this is a rise in these dollar derivatives, not a fall in the dollar—and this is a risk-on pattern....

Support Acting Man

j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com