As the G-20 begins to converge in Washington,
the Economist provides an excellent backgrounder.
The more I think about this, the gloomier I tend to get, for two reasons.
First, the basic conundrum is that governments would like to regulate financial institutions in such a way that private capital does not come up with a way to evade those regulations and engage in the exact same activities with a lower regulatory cost. In the history of financial regulation, however, private capital has excelled at regulatory avoidance. Given the complexities of financial markets, I have every confidence that even if the G-20 were to agree on common standards, they would not be airtight. The loopholes that would be found would let the air out of any governance balloon that was inflated.
Second, I'm beginning to wonder if the United States is the
Junior Soprano of the G-20 summit.
Let me -- or rather,
Wikipedia -- explain. One of the highlights of the
Sopranos was when Tony actually applied advice from his therapist to deal with a succession crisis in his business. What Tony did was to allow his uncle and rival, Junior Soprano, to technically became the boss. However, Tony had more control of the family -- he and the other capos would agree on actual policy, while using Junior as a front to distract law enforcement.
The lame duck status of the Bush administration exaggerates the parallels, but the way in which this summit was arranged -- Sarkozy whispering into Bush's ear -- has the definite echo of Tony using Junior Soprano.
Commenters are encouraged to post their expectations of what, if anything, will emerge from the G-20 meeting.
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