For a sign of how the mood has changed at the World Economic Forum in Davos this week, consider the speakers at an invitation-only client lunch hosted by Paul Calello, who runs Credit Suisse Group AG’s investment bank.
Last year’s panel on “Financial Market Dynamics” featured senior executives from financial companies JPMorgan Chase & Co, Blackstone Group LP, hedge fund Eton Park Capital Management and NYSE Euronext. This year, clients will learn about ‘Leadership, Responsibility and the Recovery of the Financial System’ from UK and Swiss regulators and Laura D’Andrea Tyson, an economics professor who has served in the US government.
“Regulatory reform and how that plays out at the national and global level will have major impact on the shape of financial services,” Calello, 48, said in an interview. “That is obviously of interest to a broad audience, not just those working in the financial services industry.”
Financiers will cede the spotlight to government officials, regulators and central bankers at this year’s annual showcase of global power brokers, as government’s role in markets has gained prominence. More than a year after the high-water mark of the worst financial crisis since the Great Depression, bankers are in retreat on issues ranging from the size of their companies to the size of their paychecks.
Bowing and scraping
US President Barack Obama, who isn’t scheduled to attend the conference, has denounced “fat-cat bankers” and called for limitations on the size and trading activities of financial institutions. The UK government, which is supporting four of the country’s lenders, has imposed a 50 per cent tax on bankers’ bonuses for 2009 as a way of recovering some of its costs.
“There will be a lot of bowing and scraping before the central bankers, treasury secretaries and regulators,” said Niall Ferguson, a professor of history at Harvard University in Cambridge, Massachusetts, who will be participating in three sessions at the conference, including a debate on “rebuilding economics.” “They kept the show on the road, and we have to acknowledge the state matters much more these days.”
White House economic adviser Lawrence Summers, UK Chancellor of the Exchequer Alistair Darling and French President Nicolas Sarkozy will be among the political elite at the Swiss ski resort this year. Adair Turner, the chairman of the UK’s Financial Services Authority, and Barney Frank, chairman of the US House Financial Services Committee, are participating in public panel discussions.
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Blankfein, Dimon absent
Davos will be missing some prominent bankers who appeared in previous years. JPMorgan Chase Chairman and Chief Executive Officer Jamie Dimon dropped out and Goldman Sachs Group Inc Chairman and CEO Lloyd Blankfein will be skipping the event for the second year in a row.
While those attending may represent banks that are too big to fail, they are not too big to keep a low profile. Citigroup Inc CEO Vikram Pandit, Morgan Stanley Chairman John Mack and the chief executives of Credit Suisse and UBS AG won’t be speaking at any sessions listed in the official programme. Bank of America Corp CEO Brian Moynihan and Goldman Sachs President Gary Cohn are each participating on one panel.
None of them will be speaking at a session on “Redesigning Financial Regulation” on Saturday afternoon moderated by Barry Eichengreen, a professor of economics and political science at the University of California at Berkeley. That panel will include European Central Bank President Jean-Claude Trichet, the governor of the central bank of Mexico, the South African finance minister and the CEO of UK insurer Prudential Plc.
Vigorous regulation
“In years past, the good and the great believed that markets and financial institutions could be relied on to self regulate, so the people on the stage were the self-regulators,” Eichengreen said in an interview. “Now we’ve learned that the official sector needs to apply vigorous regulation. The people who are going to be doing the speaking reflect that new reality.”
Banks are facing escalating calls from politicians, economists, union leaders and media commentators on both sides of the Atlantic for policy changes that could threaten their business.
Obama proposed a levy on banks with liabilities that exceed $50 billion to recoup $117 billion in taxpayer money that helped stabilise the financial system in 2008 and 2009. Mervyn King, governor of the Bank of England, has advocated breaking up banks deemed too big to fail. The G-20 countries have called for new capital and liquidity requirements for the biggest banks.