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Another perspective on BNP Paribas – centralized control of French economy

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Previously mentioned another perspective on possible penalties on BNP Paribas for violation U.S. sanctions on trade in some countries – could it be U.S. harassment of banks who don’t bow to U.S. foreign policy?

At The Feed, Walter Russell Mead provides perspective on why there has been such a strong reaction from the French government – Hollande’s Top Priority: Save BNP. His discussion is quite helpful for me.

The article explains that the government, big companies, and the banking system in France are tightly linked. There are overlapping ownership interests, centralized control, close coordination, and wide revolving doors between the government and private sector.

The article explains:

In France this effect is magnified by the ties created among large firms, and between them and the government, through centuries of a powerful and centralized state system. The French government is a large shareholder in many of the big firms, and the banking system is tightly integrated into national policymaking. On top of that, the French system of elite education creates a small and tightly-knit group of national leaders who move between government and large industrial and financial companies.

This makes possible sanctions on BNP Paribas a really, really big deal in France.

That explains why very senior staff, like the president, senior cabinet officials, and multiple banking regulators, are making such a fuss. That’s why they are lobbying federal and state regulators here to back off. On 6/15, the WSJ quoted the French Finance Minister as saying they were “making progress” on getting the fine reduced.

That also means that BNP Paribas’ efforts to evade US law weren’t an oversight or accident, but were likely an extension of French government policy according to Mr. Mead, who said:

In helping big French companies evade U.S. sanctions, BNP wasn’t a rogue actor off on its own. Its resistance to U.S. sanctions policy was part of a larger campaign by France (and others) who deeply resent the attempts of U.S. authorities to use the international financial system’s dependence on the U.S. as an instrument of national power.

On the other hand, the US is not obligated to help other country’s intentional efforts to negate US foreign policy:

…the French penchant for undercutting U.S. sanctions and diplomacy for special advantage is not something the U.S. is obliged, morally or legally, to indulge.

Don’t complain about pushback if you are an agent of your government’s foreign policy

It is likely that BNP’s intentional efforts to evade U.S. sanction laws are a part of France’s foreign policy efforts to undercut U.S. foreign policy. If that is the case, then could we reframe sanctions on BNP as little more than pushback from the U.S. government against an intentional French foreign policy?

That would mean that BNP better get ready for some penalties since they merely an instrument of French foreign policy. I don’t know the names for international rules and diplomatic protocols, but it doesn’t seem that a person can claim innocent status when suffering consequences from knowingly carrying out government policy.

If you are a diplomat working in another country and your host government kicks you out of the country after declaring you persona non grata as retaliation for some little spat, I don’t think you have a claim to unfairness or persecution.

If we were to take that “extraterritorial powermongering” concept seriously, would that mean Google could blow off the recently invented right to be forgotten, since it is an arbitrary imposition of European opinions on an American business?

Wall Street Journal comments

The WSJ covers much of the same territory in their editorial Tehran’s French Bankers / A big fine against BNP Paribas may be deserved.

On the efforts of the country’s leadership trying to protect the bank, the editorial says:

Virtually the entire French governing elite has decided that the most pressing economic issue facing the country isn’t slow growth and high unemployment, but how to protect a too-big-to-fail bank from the consequences of its actions.

The editorial subtlety addresses the assertion of double standard embedded in the claim the U.S. government is ignoring the big bad U.S. banks having 100% of the blame for causing of the great recession:

So the same crowd of Euro-journalists that wants to punish U.S. banks for imaginary crimes thinks that U.S. law enforcers should look the other way when foreign banks are accused of committing real offenses.

There’s a problem in the international banking system

It’s not just trade with Iran or Sudan that is a problem.

Really bad people have been hiding money in the international banking system for a long time. Credit Suisse admitted in writing and agreed not to dispute the fact that it has been knowingly helping people launder money for a century, since before there was even a US income tax to evade. They have facilitated evasion for a century. I’ll make a not-very-wild guess there are lots of other Swiss banks that have been doing the same thing, although perhaps not quite so long. Or perhaps longer.

That’s a problem. That ought to be a problem to everyone.

The need for better and coordinated oversight of international banking is described by Mr. Mead:

Too many narcotraffickers, terrorists, kleptocratic dictators, and thieving oligarchs are too comfortable in the financial system as it currently works.

When dictators, say in Africa, rip off a few billion dollars of gold or oil or diamonds from their fellow countrymen, how do they hide the money? I’m slow on the uptake, but I am gradually catching on to the pattern that if from Francophone Africa, said dictator would hop on a jet to Paris. If from Anglophone Africa, the destination is Geneva.

This ties in to poverty and never-developed economies. This ability to hide stolen money on a grand scale is part of the poor infrastructure that hinders economic development and keeps poor people poor.

Written by Jim Ulvog

June 18, 2014, 6:47 am at 6:47 am

Posted in Other stuff, Pondering

Tagged with ,

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