Friday, December 11, 2009

[RED DEMOCRATICA] CFR.org Daily Brief, December 11, 2009

 

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From the Council on Foreign Relations

December 11, 2009

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EXECUTIVE SUMMARY

- Goldman, governments weigh banker pay.
- Shell and Petronas win Iraqi oil contract.
- American detainees in Pakistan may be deported.
- Violence spreads in India over separate state.

Top of the Agenda: Crackdowns on Banker Pay

Goldman Sachs announced it would eliminate cash bonuses (FT) for its top thirty executives this year and allow shareholders to vote on compensation, as global leaders consider bank bonus reform.

Goldman's quick recovery from the financial crisis and its high pay standards have made the bank a frequent target for politicians and the public. Goldman has said publicly that the bank consistently pays out a smaller portion of its net revenues than most of its peers, but the firm has also met privately with regulators for advice on how to tweak compensation policies to allay public anger.

Meanwhile, France announced its backing (WSJ) of Britain's special tax on banker bonuses unveiled this week, while the United States and Germany have yet to follow. France said it would likely implement something similar to the UK tax. The Financial Stability Board, created by the Group of 20 countries to coordinate regulatory reform, has issued pay guidelines, but the rules focus mainly on how to reward risk and how compensation affects banks' capital levels. Little attention has been paid to the size or timing of bonus payments, which is the goal of the UK special tax. The United States has not indicated it will follow Britain's lead. Congress briefly considered a special tax on bonuses earlier this year but abandoned the idea after public ire died down.

German Chancellor Angela Merkel said the bonus tax was a "charming idea which would perhaps have certain educational effect" but did not comment on Germany's willingness to follow suit (DeutscheWelle).

Analysis

In the Wall Street Journal, David Wessel says compensation and capital reform is not enough to quell public anger. Bankers also need to "distinguish clearly between financial innovations that enrich only bankers and those that enrich the entire society" and then convince the public that their intention is to do less of the first and more of the second.

In the Times of London, Anatole Kaletsky says the government's war on the financial industry will cost Britain dearly in jobs and tax, and picks on the wrong target.

In an interview, CFR's Marc Levinson says further international coordination on financial regulation may do more harm than good and expresses doubts about federal restrictions on executive pay.

Background

A CFR Backgrounder examines international efforts to regulate the global financial system.

MIDDLE EAST: Iran Sanctions

U.S. Defense Secretary Robert Gates said he expects the United States and its allies to impose new sanctions (PRESSTV) on Iran because the country did not keep agreements it made in October to allow international inspection of its nuclear program.

Iraq: Britain's Shell and Malaysia's Petronas won a major joint contract (al-Jazeera) to tap Iraq's Majnoon oil field, worth an estimated $12 billion.

PACIFIC RIM: China Trade Dispute

China imposed duties on imports (FT) of some specialty steel products from the United States and Russia, the latest sign of trade tensions between China and its main trading partners.

North Korea: North Korea said direct talks with the United States were a good start (Yonhap) and that the two countries would continue to work toward resolving differences on stalled Six Party nuclear talks.

SOUTH AND CENTRAL ASIA: American Detainees in Pakistan

A local Pakistani police chief says the five American men detained over alleged terrorist links in Pakistan are likely to be deported (Dawn).

India: Widespread protests broke out (AP) against the plan to create a new state in India's Andhra Pradesh.

AFRICA: Guinea Violence

Troops who took part in the assassination attempt on de facto president Captain Moussa Dadis Camara are being hunted down and shot, al-Jazeera reports .

In an Expert Brief, CFR's John Campbell says that the worsening political crisis in Guinea will require stronger UN involvement and greater efforts on the part of African leaders to avoid what could become a civil war and a massive humanitarian crisis.

Somalia: Somali's Parliament speaker says the suicide bomber who killed twenty-two people, including three government ministers, in Mogadishu last week was a Danish citizen of Somali descent tied to Al-Shabaab rebels (Reuters). The man's father denies that his son carried out the attack.

AMERICAS: Private Defense Contractors

Former guards at Blackwater Worldwide said their involvement in security operations blurred the line (NYT) dividing the U.S. Central Intelligence Agency, the military, and private security. Instead of merely protecting CIA officers, they say they became partners in operations to capture or kill militants in Iraq and Afghanistan.

Honduras: The Mercosur trade bloc condemned the coup (LAHT) in Honduras and announced they will not recognize the new government that came out of November 29 elections, which Colombia, Panama, Costa Rica, and the United States have supported.

EUROPE: EU on Climate Change

At the Copenhagen climate summit, EU leaders, struggling to come up with more money to help developing countries deal with the effects of climate change, said they would work through the night (EUObserver) to come up with the funds.

Greece: Greece acknowledged to the European Union that its public sector is rife with corruption and requires reform to ameliorate its fiscal crisis (FT).
 

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