The V versus U versus W recoveries: the verdicts are in?

Economist editorial.

Remember the now dated analysis that predicted a V-shaped recovery for the New Core and more of a U for the Old Core?

With China in the lead, and risky a bursting of its real estate bubble, the New Core still seems to spell V for victory.

Now the latter diagnosis is broken down further to say the sovereign debt crisis triggers a W (double-dip) for the EU while the US doesn't seem--for now--to be in that danger zone.

Still, our U feels like a U--hence the temptation to consider more stimulus. 

But hard to complain about the global recovery:  a bit more than 5% growth currently.

Concluding thoughts:

The world is nervous for good reason. Although the fundamentals are reasonably good, the judgment of politicians is often unreasonably bad. Right now that is what poses the biggest risk to the world economy.

Same old, same old.

Slowly grind the gears at Basel

WSJ front-page headline, though now a week old. 

But the nice thing about this rule-set reset is that it drags on with all the urgency usually mounted by bankers when it comes to unpleasant change.  So it’s hard to fall behind the curve much.

The gist: large multinational banks will be forced to raise “vast sums to cushion any future losses.”

The give:  the new rules won’t go into effect for a bit.

The “race” as it is called:  to hammer out the new rules by year’s end.

The two main players are the G-20, whose financial ministers met this week in Seoul, and the usual Basel Committee on Banking Supervision.

In many ways, the new rules will simply update the old Basel package initially set up in the late 1980s.

Perhaps it will be known as Basel III (a previous revamp years ago was dubbed Basel II).  I guess these are becoming like GATT-cum-WTO trade rounds.

Always tricky stuff to negotiate, so naturally drawn out.

You cool the market--you cool it too good!

WSJ article by Andrew Batson—a favorite.

China’s government has spent a lot of effort pouring cold water on the red-hot real estate market, and it has apparently succeeded.

Now experts cite a “period of paralysis that some industry executives say will last for months, weighing on global growth prospects already battered by Europe’s turmoil.”

Hmm.  Be careful what you wish for, I guess.

The rebound in real estate was considered a prime driver of China’s successful recovery from the global financial freeze.

Still, something had to give with China’s unreal growth this year.  People are describing a 20% haircut in prices—stretched out over months.

Not so bad.

China plays global central banker on euro too

WAPO story about how just a reassuring word from China that it won't sell off any significant portion of its euro holdings is enough to calm global markets regarding the ongoing eurozone crisis.

That, my friends, is an amazing world.

Your globalization $ at work: CA start-up, PRC tech, OH factory, US jobs

WSJ story.

CA start-up Coda Automotive is set to build factory in Ohio with 1,000 jobs, using Chinese technology to make lithium-ion batteries for an all-electric vehicle.

Batteries are too heavy to ship, so Coda wanted a US-based factory.  Until it's up and running, a previous JV set up in Tianjin will make the initial batteries.

Africa's flagships set sail?

WSJ story.

Foreign consumer goods companies from the West have competed in Africa for decades without any real competition from local players.

That changes as Africa's middle class grows.

Now, home-grown companies are expanding aggressively across the continent, eager to accommodate a growing middle-class among the billion-person population.

Highlighted is a Kenyan supermarket chain (Nakumatt Holdings), the continent's largest mobile provider (MTN Group) and South Africa's restaurant chain (Spur Corp), among others.  

The supermarket chain modeled itself on Kmart, and the founder's personal hero is Sam Walton.

Ah, but globalization is unraveling--man!

System perturbed? You bet. Rule-set reset? Did not take.

WAPO piece saying no comprehensive global rules likely to emerge from recent financial crisis primarily because the EU and the US cannot agree on any one approach.  We agree on desired ends; we cannot yet agree on chosen means.

This was always the downside of the collective stimulus packages working so well in the short run: the crisis does not end up being enough to foster systemic change.

The go-your-own-way approach undoubtedly leave us with a patchwork of rules, whose gaps will inevitably be exploited--once again--by innovators both well-meaning and nefarious:

. . . a resulting patchwork of reforms could allow companies to continue exploiting national differences by moving operations to countries where conditions are most favorable and thwart the efforts of regulators to spot financial threats early on. The outcome, for instance, could be very different ways of banking in New York and the financial capitals of Europe, prompting leading American firms to shift their riskiest activities overseas beyond the purview of U.S. regulators.

The evolving divide, analysts say, is spooking investors and contributing -- along the European debt and euro crisis -- to the sharp losses in recent days on stock markets from New York to Frankfurt to Tokyo.

Plenty of points of agreement (e.g., next time, the financial community itself must pay), the article notes, but wider perceptions of profound philosophical differences creates uncertainty in the system.

Zoellick on lessons of "lost" decades

FT op-ed

The fear of a lost decade in the Old Core (a la Japan in the 1990s) must be dealt with by seeing the bottom-of-the-pyramid (that neo-Marxism-killing concept) potential staring us in the face.

Again, the Core survives by integrating the Gap and increasing prosperity there.  That's the dominant system impulse right now:  globalization must expand further to keep on prospering.  Shrink the Gap:  there is no alternative.

Zoellick:

Riots, debts and the creeping fear of a looming Lost Decade - no wonder there is pessimism in Europe. But what we are seeing is not just "financial crisis, part two"; it is "sustainable growth challenge, part one". The difference has implications for policy. Get the diagnosis wrong and the wrong treatment will follow.

Stimulus packages buy time--nothing more.

To avoid a decade-long work-out - with political and economic risks - the world needs stronger growth in developing and developed countries. We are seeing a shift towards a new multi-polar global economy, with better prospects in developing countries than in developed ones. The World Bank projects growth in developing economies of about 6 per cent this year and next - more than twice that of high-income countries. Since 2000, developing countries have accounted for more than half the rise in global demand for imports.

This is not about winners taking all. An acceleration of this shift can help developed countries work out their problems while building a better-balanced global system. A dollar spent on investment goods in developing countries can yield 35 cents worth of demand for capital goods produced in high-income countries, precisely the kind of high-value goods that generate well-paying jobs.

As for de-globalization and retreating from connectivity and seeking refuge in more state-ownership? Complete bullshit:

Financial crises can spur reform. Last year as developed economies focused on Keynesian changes in demand, Asia-Pacific economies were advancing reforms - especially in services - to generate higher growth. As developed economies focused on financial regulation and a broader reregulatory movement, Asians were considering how deregulation might foster innovation and jobs.

Developing countries have understood that a sustainable recovery depends on reviving the private sector. Businesses will invest if the policy environment enables them to turn a profit. More governments implemented regulatory reforms to make it easier to do business in 2009 than in any year since 2004, with nearly 300 reforms registered worldwide. Most occurred in developing economies.

In "sustainable growth challenge, part one", it is not about unmitigated austerity, but finding sustainable paths to prosperity. The EU and developed countries elsewhere need more than fiscal stringency, especially if achieved by piling on more taxes. They need to seize opportunities from growth in developing countries to avoid their own lost decade. There is a broader lesson: in 2008, the crisis was US-led; in 2010, it is European. For both the US and Europe, it is developing countries that point to the way ahead. It is time we took note.

As always, the smartest guy in the room.

Nothing confuses like success. We don't realize how successful we've been in institutionalizing--on a global scale, our American System-cum-international liberal trade order-cum-the West-cum-the global economy-cum-globalization.  It is the gift that keeps on giving, and our disciples now outrank us in the ferocity of their beliefs.

These are the best problems we could hope for at this point in history.

Eyes on the prize, boys, eyes on the prize.

Long-term unemployment in America: the new nasty twist

Scary piece by Clive Crook in the FT noting how the long-term unemployed share of total unemployment is unusually high by historical standards--almost 5m out for 6 months or longer.  They account for something like half the unemployed right now, also something not seen in decades.

Americans have always lost their jobs more frequently than their European counterparts, but we've also tended to find new ones faster while the Euro govs tend to offer better retraining and cushier benefits.

It would seem we enter a new period, hence the need for some new rules on how to handle it.

What's good for China is good for globalization

chart here

An FT op-ed by the president of the Chinese Academy of International Trade and Economic Cooperation and the chairman of the Center for America-China Partnership, timed to the recent Strategic and Economic Dialogue in Beijing.

Nice summary of China's thinking regarding our bilateral economic relationship:

America is used to having it all its own way.  In 1972, as the US opened diplomatic relations with China, it abandoned pegging the dollar to gold.  That enabled it--through its monopoly on printing US dollars--to create huge trade and investment advantages.  Its economy grew strongly as it managed the value of its currency at the expense of other nations.

Washington has not always fully acknowledged that from 2000, the year China joined the World Trade Organization, to 2008 the US dollar declined against many currencies, while from 2005 to 2008 Beijing gradually increased the US dollar exchange rate of the renminbi by 21 percent.

The US stimulus plan increased America's debt and deficits and will decrease the value of the dollar. China increased its holding of dollars as America's other trade partners reduced theirs.  As the US financial crisis loomed, China pegged the renminbi to increase stability and exert a positive influence on its economic recovery.  It will keep a relatively stable renminbi exchange rate to ensure its economic growth is steady rather than uncontrollable, which would harm all nations. Currently, China is providing stability as the largest holder of US government debt and US dollar-denominated reserves.

China-US relations changed when the world learnt that America's financial system would collapse unless the government saved insolvent US-based global banks, insurance companies and carmakers.  The bail-out turned the US government into the largest shareholder of formerly privately-owned companies, subsidizing their commercial failure.  Laissez faire theories, which US policymakers still demand that China adopt, were suddenly replaced by massive US government control of market forces.

The US often pursues policies that are "win-win" for itself alone.  Its policymakers would undermine China's vital national security and economic interests while seeking China's help in protecting America's vital interests.  But the reality is that the policies America proposed are implementable and sustainable only if they are beneficial also for China.  The Strategic and Economic Dialogue should focus on new US policies instead of trying to change China's policies, which are essential for global economic recovery.

An excellent and hard-to-refute summary argument.  Our success in encouraging China's rise is such that it can now legitimately claim to be working on behalf of global economic security as much or more than America. In short, it can make the claim that "what's good for China is good for the world," an argument to which only America could lay serious claim in past decades.

This is why we've never going to war with China; the codependency on globalization is profound.

Krugman: our fear of deficits may doom us to a Japanese-style "lost decade"

Pic/graphic here

Krugman argues against our popular instinct not to see our government get insanely in debt, saying:

But the truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.

But the truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.

If that isn't a vigorous enough statement, consider this:

I strongly suspect that some officials at the Fed see the Japan parallels all too clearly and wish they could do more to support the economy. But in practice it’s all they can do to contain the tightening impulses of their colleagues, who (like central bankers in the 1930s) remain desperately afraid of inflation despite the absence of any evidence of rising prices. I also suspect that Obama administration economists would very much like to see another stimulus plan. But they know that such a plan would have no chance of getting through a Congress that has been spooked by the deficit hawks.

In short, fear of imaginary threats has prevented any effective response to the real danger facing our economy.

I will admit:  as much as this scenario scares me, I am still more scared by the crowding-out phenomenon associated with that massive federal debt.  I sense that we'd be better off facing tough challenges in the shorter-run than assuming recovery of government revenues for a long-enough stretch to make good on all this debt.  That just strikes me as too optimistic, given our demographics and love of medical technology and our enduring commitment to fielding a large military--all of which will have to give.  I also agree with Krugman's suspicion that more stimulus is a political non-starter.

Growing Chinese investment in US economy takes new turn

WSJ story:  China's Anshan Iron & Steel Groups says it will invest in as many as 5 US production mills owned by a Mississippi company.

It's a small move by a big (#6 in world) player, "but the deal appears to carry political overtones, coming as Beijing puts emphasis on outbound investment as a spark for economic activity elsewhere."

That's the lesson Japan had to learn years ago, and China appears to be moving in this direction with much faster speed.  It's a real credit to them and a good sign overall.

I've told this story on China for a couple years now in the brief: Japanese cars used to be keyed in Indiana parking lots years ago. Why? This is Big 3 production territory. It doesn't happen today. Why? Toyota and Honda have IN plants now.

Read this from the print story:

Last week, a government official in Beijing suggested China's steelmakers could learn from Japanese auto makers, which in the 1980s responded to complaints about their imports by opening U.S. plants.  Jia Yingson, of the Ministry of Industry and Information Technology, said Chinese steel production in the U.S. would help the industry sidestep rising trade barriers . . .

And from the online version:

In the 1980s, Japanese car makers faced the kind of political and popular resentment about imports in the U.S. that much of Chinese industry is up against today. To ease some of the tension, Japan engineered a considerable higher yen exchange rate while companies such asToyota Motor Corp. built U.S. plants so their cars could be labeled "Made in America, by Americans."

Our pushback forced Japanese companies to evolve from national flagships to truly globally integrated enterprises (IBM CEO Sam Palmisano's term).  No doubt the same learning curve happens here.  Bigger question is whether Africa can do the same vis-a-vis China.  But even there, I remain optimistic.

Again, very pleasing to see.  You go around spouting this stuff for years, wondering when it'll happen or if you'll be proven "naive," and then the economics shapes the political decision-making and even deeper economic connectivity and evolution results.

And everything old is new again. 

Turnabout is fair play: now it's the dropping euro's turn to hurt China--and by extension US

"Put that Chinese product back, Mr. Euro, as of 20 minutes ago, it costs too much!"

Back when it was the surging dollar, along with pegged yuan, Europe complained that it was being abused.

Now, thanks to the PIIGS weakness, the euro's decline means a lot of previously signed deals between Europe and China are being cancelled because the margin has evaporated.  

Upshot?  A China now made more nervous about its ability to export is less likely to go through with its promised revaluation of the yuan, hurting our exports in turn.

This 3-way ain't going away any time soon; it's like watching an old Three Stooges routine.  Eventually, the interlocking dynamic works it way around the horn, and then it's your turn to get poked in the eye.

Nyuk nyuk nyuk!

The fluctuating rule-sets that define emerging markets

FT piece that leads with recent acquisitions highlighted here previously (Geely buys Volvo, Bharti Airtel buys Zain's Africa telecom biz).  New Core corps are described, predictably enough, as "climbing up the value chain," meaning offering higher-end product and services or moving off the low-cost end of the spectrum.

We saw Germany do this after WWII, then Japan, then Korea, then the tigers, and now India and China and Brazil.  The big difference now is the speed of the climb.  These new corp giants are described as moving with far less caution than their Japanese predecessors did, for example--especially when it comes to aggressively acquiring Western companies and joint ventures with Western firms.  And when state-owned companies are involved, the political pushback from the West will only grow--as it should.

The quote that caught my eye: 

Securing global standards throughout an emerging markets-based organization is a difficult task.

Gist:  when you're rising, you make up a lot of new rules as you go, typically transgressing more than a few established ones--hence the sense among your competitors that you're shaking things up.

"That'll do PIIGS. That'll do."

Chart per Bloomberg BusinessWeek story.

The PIIGS acronym refers to financially troubled Portugal, Ireland, Italy, Greece and Spain.

What I found interesting:  the IMF telling an Old Core country that it needs to cut spending substantially, to include defense spending (WSJ story).

But the Greeks don't get the memo, avoiding the subject in a recent summit with Turkey designed to improve relations.  Turkey is in better shape, and as a rising power, naturally spends more on defense.

A lesson there, perhaps, for the US vis-a-vis China.  We can obsess over the growth of Chinese defense spending or we can realize that we don't need to outspend them as excessively as in the past.  Even at the highest credible estimates, we outspend the Chinese military by 6-fold.

Of course, Greek defense spending isn't the big issue; it's all the social spending.

Still, the lesson hangs there, waiting to be absorbed by the Old Core:  we cannot rebalance and age and continue to outspend every targeted rising great power at the same old levels.

Lenin (and all those BS neo-Marxists) turned upside down

Ah, but we know that capitalism and free markets are thoroughly discredited now that our global quarter-century boom came to an end.  If it could not last forever, it all had to be revealed as false--right?

And, of course, the crisis revealed that the have/have-not gap was globalization's greatest legacy, despite the unprecedented rise of a global middle class that occupies the middle 60%.  

So what is the way forward, besides all of us living under "superior" Chinese rule?

Well, it seems that the only way forward for globalization's Old Core West is to get better at selling to the bottom of the pyramid.

CANYOUBELIEVETHAT?  The ONLY way the Old Core can stay rich is by shrinking the Gap!

So it turns out Lenin and all the neo-Marxists had it right--just completely backwards once the American model of globalization truly surpassed the colonial legacies and Cold War divisions.

Whew!  What a relief!  

Here I thought my whole vision was just a regurgitation of the 1970s neo-Marxists, when it turns out to be their complete ideological opposite!

Thank God I finally saw the light.

This rant was inspired by a Samuelson column in Newsweek--a very good one.  He quotes Arvind Subramanian (a current favorite, for good reason) on the need to cross the "Hobbesian threshold."

In Pentagon's New Map, I said much the same back in 2004:  the Tinkers-to-Evers-to-Chance ideological journey was from Hobbes to Locke to Kant--as in, security to good laws to peace-enhancing connectivity.

Roubini: the crash was a "white swan"

Roubini has become quite the brand name, thanks to his great 2006 prediction of a global recession.  His web site goes way beyond the usual blog and book-hawking to providing "a uniquely tailored look at the logic of the global economy, applying the methodology of its renowned founder, NYU economist Nouriel Roubini"--replete with all sorts of analytical pieces by his employees.

What drew me to this interview:

What have we learned from these crises of capitalism?

The first lesson is that crises are not "black swan" events, using the terminology of my friend Nassim Taleb. They're not just random outcomes. They are the result of a buildup of financial and policy vulnerability and mistakes—excessive risk-taking, leverage, debt, and so on. The first chapter of my book is called "The White Swan" because these events are predictable. But generation after generation, we seem to forget the past. When there's a bubble, there's euphoria. There's irrational exuberance. Consumers can use their homes like ATM machines. Governments and policymakers are happy because they get reelected. Wall Street makes billions of dollars of profits. Everybody's delusional.

It was an old staple of mine in the NewRuleSets.Project brief to talk about rule-set resets happening every 7-10 years on Wall Street, primarily because it was a young man's game and once you got some distance from the last crash, all the new people, being somewhat ignorant of the causes, began to imagine they had invented some new way of perfecting their gaming of the market.  Over time, in their mounting hubris, they unwittingly or wittingly broke old taboos, saying it was different this time.  As those abuses accumulated and the self-delusion grew, the crash was inevitably triggered, and many--but not all--of the "new" rules were found not to have surpassed the old ones, even as the old ones now needed to be updated to account for the new behaviors engendered in the latest round of going just a bit too far.

I got this entire logic from my people at Cantor Fitzgerald.  They said it was as regular as a clock.

So, 2008, about 7-8 past the last financial meltdown known as the dot.com crash, was a pretty decent bet or prediction to make.  Don't be surprised when another one happens sometime in the middle of this decade.

Then again, it's different now, because now we have more than just the NYC-London financial axis in play. Now we've a number of significant markets, all of whom are going through their own learning-curve cycles with predictable crashes and reboots--or rule-set rests, as I call them.

So yeah, more white swan than black.

The NIEO is a' coming!

Samuelson in WAPO by way of David Emery.

NIEO refers to the notion, championed by the South in the early 1970s, of a more equitable global economy (New International Economic Order).

Well, guess who made it happen?  Not the Sovs, and not the South, but the New Deal for the World-cum-post WWII order-cum-the West-cum- the global economy-cum-globalization, dreamt up by the United States (TR), launched by the US (FDR), defended and expanded by a series of presidents (Nixon getting the most credit, in my mind, because he opens up China and caps the Sov threat), and finally now rebalanced by our own success--and excess--in that quest.

The two biggest players in triggering this latest rapid expansion of globalization:  China and India, with Brazil, Turkey, South Africa moving up fast.

According to Subramanian (often in FT) by way of Samuelson, another take on the journey from the Gap to the Core: 

This is classic economic catch-up, as poor countries adopt the products and technologies of rich countries. It's a two-step process, says economist Arvind Subramanian of the Peterson Institute. "First, countries have to cross the Hobbesian threshold" -- that's after philosopher Thomas Hobbes (1588-1679), who declared that life without strong government is "nasty, brutish, and short." Governments must provide basic security and sanitation, create some rule of law and establish protections for property, says Subramanian. Otherwise, the stability doesn't exist to pursue Step Two: allowing markets to work; practicing standard economic virtues (taming inflation, disciplining government budgets).

Parts of Africa and Latin America still haven't crossed the Hobbesian threshold, says Subramanian. But elsewhere, many countries have reaped the rewards of moving to Step Two. China and India are the most spectacular cases. Only in recent decades have they relaxed pervasive state regulation and ownership and trade restrictions for more market-based policies.

Now Samuelson's judgment on what must come next: 

So is rebalancing going according to script? Well, not necessarily. It's true that the massive trade imbalances have dropped sharply. The U.S. trade deficit fell from $760 billion in 2006 to $379 billion in 2009; China's trade surplus also dropped. But these changes mostly reflect the Great Recession. The worsening slump caused people and companies to stop spending. Global trade contracted sharply -- and with it the size of imbalances. But as the recovery has strengthened, trade and imbalances are growing again. American imports are increasing faster than exports; this surge could be temporary, suggests economist Richard Berner of Morgan Stanley, as companies replenish depleted inventories.

Still, what's missing is a sizable revaluation of China's currency, the renminbi. Fred Bergsten of the Peterson Institute thinks the renminbi may be 40 percent undervalued against the dollar. This gives China's exports a huge advantage and underpins its trade surpluses. Other Asian countries fear altering their currencies if China doesn't change first. "They'll lose ground to China," notes Hensley. The European Union, Brazil and India all feel threatened by the renminbi. President Obama wants U.S. exports to double in five years. That's probably unrealistic, but it's impossible if the renminbi isn't revalued.

The next best problem to have, no doubt, and I agree with those that say "paid in renminbi" will be the slow route by which China converts its currency (letting more and more of its importers use the yuan, swapped out by China via currency trades).  But as this process matures, it will represent a brave new world for the Chinese as much--or more--than for the US and its dollar.

In short, the catch-up strategy stuff ends and the competition gets a whole lot more real.

The G20 can play global executive, but it needs to delegate rule-setting

Good piece by Daniel McDowell at World Politics Review that highlights the natural limits of G20 leadership

When the finance ministers of the G-20 nations met on the sidelines of the annual IMF-World Bank meetings in Washington last weekend, it marked the sixth time they had convened since the fall of 2008. When the G-20 leaders meet this summer in Toronto, the total number of summits held since the global financial crisis erupted will hit double digits. 

And yet, despite early cooperation that addressed the global liquidity shortfall, little substantial progress has been made in the area of international financial regulation. Given the trauma that the entire world economy has suffered, in part due to a lack of such regulation, one would think more headway would have been made by now. A closer look, however, reveals a litany of factors that has created conditions making coordination points incredibly difficult to locate and even trickier to maintain. 

Much like my A-to-Z-Rule-Set-On-Processing-Politically-Bankrupt-States, there's a place for executive level decision-making and another for determining the implementing the new rules.  So, to me, it's logical for the IMF to step up and assist in this manner.  Not a loss or gain of power, but a logical separation.

That's essentially McDowell's excellent advice:

What's needed is an institution with a clear mandate for monitoring and enforcing any agreements reached by the G-20. But creating such an institution from scratch is unlikely given the current distribution of power. The last time major economic institutions were created, the United States had emerged from World War II as a global leader with unparalleled power. Washington led the world in building the Bretton Woods system and was largely able to impose its preferences on weaker powers when there were disagreements. Simply put, coordination is easier when the balance of power so dramatically favors one state. 

Today, conditions are obviously less favorable. While the U.S. remains the pre-eminent economic power, its relative dominance has diminished. And when it comes to the issue of financial regulation, America is sorely lacking in leadership credentials given its starring role in the current crisis. 

Yet, if the prospects for building a new regulatory architecture appear weak, the G-20 could consider widening the mandate of the IMF to include monitoring and enforcement of any regulatory agreements.

The fund has already rebounded over the past two years from near-irrelevance to play a central role in responding to the crisis, including as an important voice on the issue of regulation. Its monitoring capabilities are unparalleled. Lastly, it's available -- and would likely accept the job. 

Agree.

Basel banking committee chairman says no to bank tax

slide found here

FT story in which Basel committee on banking reform chairman Nout Wellink says the bank tax idea must wait until capital and liquidity rules are toughened, something the committee expects to have passed by year's end.

Of the tax idea, Wellink says:  "I doubt whether this is a good idea.  It's born out frustration.  There are strong political motives behind it."

Wellink's committee is the group that passed the landmark Basel II accords on banking in 2004.