When two of Europe’s corporate titans sat down to negotiate a merger this year, they called American banks.
Fiat Chrysler Automobiles hired Goldman Sachs Group Inc. as its lead adviser. France’s Renault SA hired a boutique bank stacked with Goldman alumni. In a deal that would reshape Europe’s auto industry, the continental banks that had sustained Fiat and Renault for more than a century were muscled aside by a pair of Wall Street deal makers.
A decade after fueling a crisis that nearly brought down the global financial system, America’s banks are ruling it. They earned 62% of global investment-banking fees last year, up from 53% in 2011, according to Coalition, an industry data provider. Last year, U.S. banks took home $7 of every $10 in merger fees, $6 of every $10 in stock commissions, and $6 of every $10 paid to hold and move corporate cash.
urope’s banks are smaller, less profitable and beating a hasty retreat from Wall Street.
- Germany’s Deutsche Bank AG is firing thousands of investment bankers.
- Switzerland’s UBS Group AG abandoned its huge trading floor in Stamford, Conn., to refocus on its roots as a private bank.
- Barclays is the lone holdout with an ambition to be a universal global bank. Under Chief Executive Jes Staley, an American who rose to prominence at JPMorgan Chase & Co., the bank has resisted shareholder calls to go back to its roots serving British consumers and companies.
From their central perch in London and with close ties to developing countries, Europe’s banks were primed to benefit as financial services went global. They charged onto Wall Street in the 1990s and pressed their advantage as U.S. banks limped out of the 2008 crisis.
Then, “they handed the whole system on a platter to the Americans,” said Colm Kelleher, the Irish-born former Morgan Stanley executive.
Coming out of the crisis, U.S. banks quickly raised capital and shed risk, unpleasant tasks that Europeans put off. American businesses recovered quickly, and its consumers are eager to borrow and spend. A tax cut in 2018 boosted profits. Interest rates have risen.
Meanwhile in Europe, regional economies are sputtering and borrowing has slowed.
Central bankers have cut interest rates below zero, which leaves banks struggling to eke out a profit on loans. Banking policy in Europe remains fractured, with national and continental regulators pursuing often conflicting agendas.
“It is not our remit to promote national, or even European, champions,” said Andrea Enria, the European Central Bank’s top banking regulator.
Twenty-five years ago, European banks charged into the U.S. They bought storied firms like Donaldson, Lufkin & Jenrette and Wasserstein Perella and dangled big paydays for rainmakers. When Deutsche Bank announced a $10 billion takeover of Bankers Trust in 1998, it promised at least $400 million in bonuses to retain top bankers.
The challenges of merging a conservative European commercial lender and a U.S. derivatives shop gave competitors pause. Goldman’s CEO, Hank Paulson, shared his doubts with a hotel ballroom of his bankers: Deutsche Bank “just signed up for 10 years of pain,” attendees remember him saying.
But in an era of cheap debt and light regulation, the land grab seemed to pay off. Deutsche Bank had a $3 trillion balance sheet in 2007 and that year earned twice as much as Bank of America Corp. in securities-trading. Royal Bank of Scotland was briefly the largest bank in the world, wielding a balance sheet bigger than Britain’s entire economy.
Even the financial crisis looked at first like an opportunity. When Barclays PLC bought Lehman Brothers in a fire sale, it got 10,000 of the firm’s U.S. bankers and few of its bad debts. On Lehman’s Times Square trading floor, the loudspeakers played “God Save The Queen.” Deutsche Bank pounced on Wall Street’s clients.
The high-water mark was in 2011, when global investment-banking fees were roughly split between European and U.S. firms.The good times didn’t last. A 2012 sovereign-debt crisis across the continent put new pressure on the region’s biggest banks. Economic growth slowed across the continent. Central bankers turned interest rates negative in 2014. German media calls them “Strafzinsen,” translating roughly to “penalty rates.”
UBS slashed 10,000 jobs and cut big parts of its trading operation. Royal Bank of Scotland fired thousands of investment bankers and sold its U.S. retail arm to focus on the U.K. Three-quarters of the Lehman bankers Barclays picked up in 2008 were gone within five years, according to Financial Industry Regulatory Authority records.
Meanwhile, U.S. banks were quietly encroaching on European rivals’ territory. In 2009, JPMorgan completed an acquisition of Cazenove, the U.K. investment bank. Every year since 2014, JPMorgan has generated more investment-banking revenue across Europe than anyone else, according to Dealogic. (The London-listed owner of Peppa Pig, a British cartoon character, hired JPMorgan Cazenove to advise on its sale in August to U.S. toy giant Hasbro Inc. )
As U.S. banks got stronger and their European rivals weakened, client loyalties began to change.Today’s companies are increasingly global. They make more of their money in the U.S. and have swapped a shareholder register stacked with old-line European families and trusts for the likes of BlackRock Inc. and other U.S. investment giants, where Wall Street banks are better connected. The percentage of U.K. companies’ stock owned by foreigners rose from 16% in 1994 to 53% in 2016, according to government statistics.
Fiat, the Italian car maker that pursued a tie-up with France’s Renault this year, makes two-thirds of its money in the U.S., where it owns Chrysler. Its shots are called by John Elkann, the New York-born scion of the family that founded Fiat in 1899.
One of Mr. Elkann’s closest advisers is a Goldman Sachs banker who for the past 15 years has organized a yearly gathering of European billionaire business owners, according to people who have attended. They swap stories, share advice and, more often than not, hire Goldman for deals.
Globalization has cost the Europeans not just on headline-grabbing mergers, but in the everyday business of managing money for clients. Deliveroo, a food-delivery startup based in the U.K., sought to ramp up in Europe and the Middle East. Instead of hiring local banks in each market, it consolidated its money flows with Citigroup , which has local licenses in 98 countries and a global digital platform.
JPMorgan has made a big push to expand transaction banking for European clients. In 2010 it established a new unit of global bankers to pitch day-to-day transaction services to big companies, and later took over dozens of European transaction relationships from RBS.
Most recently JPMorgan said it is extending its commercial banking business globally, targeting hundreds of midsize businesses across Europe. It has sought to take on a more local flavoring, doing things like sponsoring math-and-science programs for students in France, Germany and Italy.
Last year, Citigroup and JPMorgan were two of the three biggest providers of day-to-day transaction banking globally, along with Britain’s HSBC Holdings PLC, according to Coalition. U.S. banks accounted for 57% of the global transaction-banking revenue pool among the biggest banks in that business, versus 22% for Europeans, Coalition said.
Mark Blyth’s best seller Austerity: The History of a Dangerous Idea https://amzn.to/2Lcw556 Mark Blyth is a British political scientist from Scotland and a professor of international political economy at Brown University.37:43here’s a story when they did the Podestaemail Hawks when they got the Democratsemails somebody took the data fromWikiLeaks and decided it was called geolocate the data in other words what werethe place names that the leadingDemocrats who are the last part of hermentor represent all of us rememberright not the elite Republicans whatwere the police names that he talkedabout and their private communicationsand their selection what was the numberone most frequently named place in theircommunications can you guess have aguess Martha Martha’s Vineyard yeahnumber two Eastern Southampton then NewYork then San Francisco then I think itwas Ellie in DC and the rest of thecountry two standard deviations out sowhat’s the imaginary of a party thisseeks to represent all if that’s all theplaces did they talk about becausethat’s where the money is and it’s notjust to castigate the Democrats theBritish Labour Party was like this underblare of the German SPD under shorterit’s done that’s the left issystematically failed the people that itsupposedly represents so why should webe in the least surprised that theydefect and then go to any one at allthat actually says here I know thateveryone’s ignored you for 25 years I atleast hear the fact that you’re cryingand I understand why people’s everydayexperience is very different from anational average walking out and tellingpeople that the price of iPods hasfallen which means that really they’vegot more money than they think at a timewhen they can’t afford to send theirkids to college or their kids would beinsane to take on that much debt becauseit’s like having a house with no ASSAit’s just parts on izing and the exampleof immigration occupied to that one it’svery different depending on where youliveimmigration to me is another person fromanother interesting country who has aphd but that’s what it means where Ilive right but that’s because I’m in thetop 20% if you’re living in publichousing in France right and thoseresources are been finite and thoseresources are being cut and you’re theones are confronted with incrediblydifferent cultures coming and notintegrating with you taking theresources from you at least as youperceive it and that’s what’s beennarrated by the National Front don’texpect them not to make end roadsbecause it gels with everybody’s commonsense regardless of whether we can saywell on average and migrants benefit theeconomy no one lives in an average nowthe problem here now close with us is.. prompted the following response I thinkthe election of Trump has been good forclimate change because it stops the restof the world waiting around for Americato solve the problemso if the gentleman’s and the Chinesenow get together and do technologgreentech bring it to scale China forexample has installed more solar in thepast few years in the United States hasright if they end up doing that we’rethe suckers because we should have beenleading the investment we’ll be buyingit from thembut in a way if that forces them to dothat and that’s good in a global sensego for it so does that mean Trump was agood leader in that regard well that’s adifferent question right but it can havea positive effect so the mark like let’snot summit all up to you know the oneleader the genius the charisma whateverthe doesn’t that’s not good we arethinking about it they can’t make adifference but the key thing is whenthey’ve actually got the trust ofeverybody who’s who wants them to leadthat’s when societies work better butwhen you have leaders who are divisivewho pet people against each other Inever walk so for anybody that’s thetype of populism you want to avoid all
How do we make sense of today’s political divisions? In a wide-ranging conversation full of insight, historian Yuval Harari places our current turmoil in a broader context, against the ongoing disruption of our technology, climate, media — even our notion of what humanity is for. This is the first of a series of TED Dialogues, seeking a thoughtful response to escalating political divisiveness. Make time (just over an hour) for this fascinating discussion between Harari and TED curator Chris Anderson.
TEDTalks is a daily video podcast of the best talks and performances from the TED Conference, where the world’s leading thinkers and doers give the talk of their lives in 18 minutes (or less). Look for talks on Technology, Entertainment and Design — plus science, business, global issues, the arts and much more.
What the strange war over “David French-ism” says about the right.
In March the religious journal First Things published a short manifesto, signed by a group of notable conservative writers and academics, titled “Against the Dead Consensus.” The consensus that the manifesto came to bury belonged to conservatism as it existed between the time of William F. Buckley Jr. and the rise of Donald Trump: An ideology that packaged limited government, free markets, a hawkish foreign policy and cultural conservatism together, and that assumed that business interests and religious conservatives and ambitious American-empire builders belonged naturally to the same coalition.
This consensus was never as stable as retrospective political storytelling might suggest; even successful Republican politicians inevitably left many of its factions sorely disappointed, while conservative intellectuals and activists feuded viciously with one another and constantly discerned crises and crackups for their movement. But the crisis revealed or created (depending on your perspective) by our own age of populism seems more severe, the stresses on the different factions more serious, and it is just possible that the longstanding conservative fusion might be as dead as the First Things signatories argued.
Among them was Sohrab Ahmari, the op-ed editor at The New York Post, whose public career embodies some of those shifts and stresses: An immigrant whose family fled the Islamic Republic of Iran, he began his career on the right as an ex-Marxist secular neoconservative at The Wall Street Journal editorial page and has since become a traditionally inclined Catholic (a journey detailed in his striking memoir, “From Fire, By Water”) and also more Trump-friendly and populist into the bargain.
In the last week Ahmari has roiled the conservative intellectual world with a critique of something he calls David French-ism, after David French of National Review, another prominent conservative writer. This controversy, like the debate over Tucker Carlson and capitalism earlier this year, has been a full-employment bill for conservative pundits. But it probably seems impossibly opaque from the outside, since superficially Ahmari and French belong to the same faction on the right — both religious conservatives, both strongly anti-abortion, both deeply engaged in battles over religious liberty (where French is a longtime litigator). Indeed it is somewhat opaque even from the inside, prompting conservatives engaging with the dispute to wonder, “What are we debating?”
I’m going to try to answer that question here. We’ll see how it goes.
Basically the best way to understand the Ahmari-French split is in light of the old fusion, the old consensus, that the First Things manifesto attacked. French is a religious conservative who thinks that the pre-Trump conservative vision still makes sense. He thinks that his Christian faith and his pro-life convictions have a natural home in a basically libertarian coalition, one that wants to limit the federal government’s interventions in the marketplace and expects civil society to flourish once state power is removed. He thinks that believers and nonbelievers, secular liberals and conservative Christians, can coexist under a classical-liberal framework in which disputes are settled by persuasion rather than constant legal skirmishing, or else are left unsettled in a healthy pluralism. He is one of the few remaining conservatives willing to argue that the invasion of Iraq was just and necessary. And he opposes, now as well as yesterday, the bargain that the right struck with Donald Trump.
Ahmari, on the other hand, speaks for cultural conservatives who believe that the old conservative fusion mostly failed their part of the movement — winning victories for tax cutters and business interests while marriage rates declined, birthrates plummeted and religious affiliation waned; and appeasing social conservatives with judges who never actually got around to overturning Roe v. Wade. These conservatives believe that the current version of social liberalism has no interest in truces or pluralism and won’t rest till the last evangelical baker is fined into bankruptcy, the last Catholic hospital or adoption agency is closed by an A.C.L.U. lawsuit. They think that business interests have turned into agents of cultural revolution, making them poor allies for the right, and that the free trade and globalization championed by past Republican presidents has played some role in the dissolution of conservatism’s substrates — the family, the neighborhood, the local civitas. And they have warmed, quickly or slowly, to the politics-is-war style of the current president.
But what, specifically, do these conservatives want, besides a sense of thrill-in-combat that French’s irenic style denies them? I don’t think they are completely certain themselves; in a useful contribution to the Ahmari affair, R.R. Reno, the editor of First Things, describes their animating spirit as a feeling that something else is needed in American society besides just classical-liberal, limited-government commitments, without any certainty about what that something ought to be.
Still, you can see three broad demands at work in their arguments. First, they want social conservatives to exercise more explicit power within the conservative coalition.
This may sound like a strange idea, since, after all, it is social conservatism’s growing political weakness, its cultural retreat, that led the religious right to throw in with a cruel sybarite like Trump. But there’s a plausible argument that even with its broader influence reduced, religious conservatism should still wield more power than it does in Republican politics — that it outsources too much policy thinking to other factions, that it goes along with legislation written for business interests so long as the promised judicial appointments are dangled at the end, and that it generally acts like a junior partner even though it delivers far more votes.