Find Insurance Online

In the wake of Greece’s announcement that it would indeed need a bailout, Angela Merkel’s coalition partners suddenly got cold feet. Germany was slated to provide 8.4 billion euros out of the EU’s total contribution of 30 billion. Leaders of the FDP feared that the payout would ruin that party’s hopes of providing tax relief.  The German Foreign Minister Guido Westerwelle,told ZDF television, “It has yet to be agreed that Greece will actually get assistance from Europe at all.” He added: “We will not write a blank cheque”. FDP deputy leader Andreas Pinkwart said it would be “a slap in the face of German employees” if the government would give billions of euros to Athens, and tell Germans “there’s no money left for easing their tax burden.” The FDP’s  finance expert Hermann Otto Solms also criticized Finance Minister Schaeuble’s plans. “It was wrong to put the pot of honey in the middle of the table right from the start,” he said. “That was a signal for the Greeks to just help themselves.” The right thing to do would have been to offer Greece no help and direct them straight to the IMF, Solms told the Passauer Neue Presse daily.
The government’s role in the rescue package also received criticism from Chancellor Merkel’s second coalition partner, the CSU party, which is based in the region of Bavaria. CSU parliamentary leader Hans-Peter Friedrich said his party would prefer Athens to leave the eurozone and solve its problems by “re-introducing its former national currency, the Drachme, at a devalued rate of exchange.”  Friedrich’s opinion was echoed by economist Joachim Starbaty from Tuebingen University. Greece was “no longer competitive within the eurozone,” he said. “It’s impossible for the country to repay its debts and the loans it now receives because its economy will be unable to accumulate surpluses for a long time “, he said. “Devaluing a national currency is the only chance for Greece to regain its competitiveness. Starbaty announced he would lodge an official complaint with Germany’s Constitutional Court should parliament in Berlin give the green light to the bailout package.

However, the German financial houses were very powerful at the time, and they could have pushed Merkel into going ahead with the deal anyway. Germany’s financial institutions held some €28 billion, or $37 billion, in Greek bonds.  About half of it had been downgraded by S & P to junk.  Indeed, 14 billion is more than the 8.3 billion that Germany is set to pay as part of the EU rescue. Deutsche Bank’s chief financial officer, Stefan Krause, indicated that the bank would feel the effects of a deeper Greek crisis. “We don’t have much exposure to Greece directly. We are not concerned,” Mr. Krause said during a conference call with analysts. He added, “We could not completely isolate ourselves if the situation gets worse.”

Analysis:

Germany’s direct exposure to Greek debt provides another reason why the Greece's financial problems were very much Europe’s problems. “It’s not just a question of paying for Greece’s luxury pensions. There are intrinsically strong German interests as well,” said Alessandro Leipold, former acting director of the I.M.F.’s European Department. Even so, the politics within Germany shouldn’t be ignored either. The ability of one state to pull out of the EU’s attempted bailout of another of its states illustrates the EU’s vulnerability in having so much authority continue to reside with the state governments.  Ultimately, the risk is one of dissolution of the union.  To be sure, giving the EU too much power would risk consolidation–something that the US is in risk of “achieving.”  The trick is to create and perpetuate a federal balance of power, wherein the two governments for each bit of territory can check each other.  The FDP’s interest in giving the residents in the state of Germany tax relief suggests that states will indeed look out for themselves at the expense of other states, even if one is going bankrupt.  Starbaty’s reference to the “eurozone” ignores that the EU is not just a “zone” wherein there is the euro currency.  Even for the states having the euro, the EU is much more.  In fact, becuase the EU’s ECJ (European Court of Justice) has decided that EU basic law trumps state basic law, it is not clear to me that the  Starbaty is going to the correct court.  That is, an EU court has the jurisdiction to decide on the EU’s assistance to one of its states, even if the EU is counting on its state governments for the funding.  There has been such reliance in US history, and as Hamilton attested, it did not work out well.  Unfortunately, getting away from that problem led the US on a track too close to consolidation.  

Perhaps the US and EU can learn from each other.  The EU is now where the US was in its first fifty or so years.  That is, the EU has passed the Articles of Confederation stage, as the Articles did not have a legislature (i.e., EU Parliament), a President, an executive branch (i.e., the European Commission), and a supreme court (i.e., the ECJ).  Even so, the EU’s governmental institutions are weak relative to those of the states.  This makes it difficult for the EU to effectively respond to a crisis in one of its states because another state, such as Germany, can thwart a viable solution.  In short, the EU needs to move closer to the middle in achieving a federal balance of power.  As the US has already overshot it, perhaps the EU can showcase how federalism at the empire level (i.e., a union consisting of nation-states) can work.

Sources:
http://www.dw-world.de/dw/article/0,,5506597,00.html ; http://www.nytimes.com/2010/04/29/business/global/29banks.html?pagewanted=1

Structural, or institutional, conflicts of interest are of great significance in applied ethics, even though they are often disregarded or ignored. Far more salient are personal conflicts of interest, such as when an employee pockets money meant rather than declares it as revenue for his or her company. Structural conflicts of interest are institutional in the sense that organizational arrangements inherently evince a conflict of interest such that people in them are necessarily subject to a conflict in their interests simply by participating in one of the organizations in the arrangement. An organizational or institutional conflict of interest, whether within one organization or involving relations between organizations, is not any less unethical than a personal conflict of interest because in both cases people are subject to a conflict of interest--only one being valid.  I present two cases and an argument that “firewalls” in an organization to prevent it from a conflict of interest are insufficient.

In the EU, the European Commission (the executive branch of the EU Government) sued four elevator companies that were part of a cartel in Belgium and Luxemburg.  Essentially, the Commission was seeking anti-trust damages—a first in EU jurisprudence.  Benoit Allemeersch, attorney for one of the companies, argued that the jurisdiction of the the commercial court of Brussells, the Tribunal of Commerce, violated the jurisdictional clauses in the contracts between the companies and the Commission.  He argued that the Commission acted as “police officer, prosecutor, jury and sentencing judge” in finding the existence of a cartel, and then used its own decision to make a private claim for itself before the commercial court. He argued that “the mere statement by the Commission that they respected their own ‘Chinese walls’ in making their decision and bringing the claim is not a sufficient guarantee to the defendants nor to any other citizen.” He maintained that in the case being argued, there was no “equality of arms” between the two sides, given the commission’s privileged position. According to Allemeersch, “the European Court of Human Rights requires that justice is not only done, but is also seen to be done.”  In other words, even the appearance of a conflict of interest, which can be in an institutional arrangement even if not acted upon, is enough to dismiss claims. The existence of “firewalls” within an organization does not sufficiently mitigate either the dismissal or, more generally, the institutional conflict of interest.

Even though the commission had previously argued that its own “Chinese walls” ensured the independence of the claim, Allemeersch correctly maintained that these safeguards could not be proven, tested or substantiated. I contend that the counsel is correct. Even if the Commission could show policies and procedures that act as its safeguards, such internal guidelines do not have the force of law and thus are insufficient to be relied upon—especially by external parties.  It can not be assumed, moreover, that an organization’s policies and procedures outweigh whatever internal interest happens to be dominant in the organization, given the nature of power to overflow its boundaries.

To say that the most powerful person a room is constrained by parchment alone is to be woefully ignorant of the reality of human nature.  Even if there are two equally-powerful people in the room with antipodal objectives, institutional checks and balances can only work as long as too great of a power imbalance does not exist.  If a US President is intent on invading a country, for example, and the Congress does not have sufficient power over his, the separation of powers institutionally could not be counted upon to keep Congress from rubber-stamping the President’s declaration of war.  For the President to be able to effectively declare war while being the commander in chief of the US military and the armies of the union’s republics is itself a structural conflict of interest.

Essentially, I am making a Nietzschean and Hobbesian argument that the most powerful person in the room is not apt to be constrained by invisible ”firewalls” in the room that are intended to level the powers of that person and a weaker person.  As Nietzsche writes, the strong must be strong and the weak cannot be other than weak.  To ask the strong to be weak or treat the weak as though it were strong goes against the nature of power.  In my analogy of the room, the two persons can represent heads of departments whose respective goals are at odds with each other. A “firewall” of policies and procedures is not sufficient to inhibit the more powerful head from pressuring the other.  Furthermore, the existence of a person whose authority includes both departments relativizes the firewall.  To bring in this element, I turn to the roles of rating agencies and Goldman Sachs in the American financial crisis of 2008. In the case of Goldman, the bank sold what its salespeople referred to as “crap” because the bank’s own proprietary position profited by the sales. In the case of the rating agencies, they were paid by the issuers of the securities that they were rating.  That either of these conflicts of interest were allowed to exist at all points to a proclivity among the general public to ignore institutional conflicts of interest—focusing instead on personal ones involving someone’s compensation and job.

In listening to and reading about the banks and rating agencies culpable in the American financial crisis, I doubted the “firewalls” argument given by the rating agencies.  The CEO of Moody’s for example, stated in Congressional testamony that he placed an equal emphasis on market-share and the quality of the ratings.  However, several of his former employees testified that they had been pressured not to lose a client to a competitor.  They stated that when ratings were changed, it was typically to protect the firm’s market-share (i.e., out of fear of losing the issuer).  The CEO’s faith in his own equipose as well as his firm’s “firewalls” was mistaken, even if he didn’t realize it.  To be sure, he may not have been aware of a more-powerful department putting such pressure on a less-powerful one.  It is possible, however, that the CEO was actively pushing his subordinates behind the scenes for more market-share, essentially profiting from the conflict of interest in the issuer-pays system.

In general, because an organization has an official above its firewalls, it is possible, even legitimate in terms of that position’s authority, for that official to put pressure on one side of the wall to capitulate in the interest of the whole (i.e., the entire organization).   Consider, for example, Lloyd Blankfein, who was CEO of Goldman Sachs at the time of the financial crisis.  He was over both the market-making and proprietary-trading units.  He could therefore have put pressure on the units selling securities to do so in a way that complements the bank’s own proprietary holdings.  For example, he (or his VP’s) could have pushed shorting sub-prime mortgage-backed derivatives in market-making (the clients taking long positions) because the proprietary interests of the bank would benefit from a fall in the housing market.  The bank’s sales people did indeed clients to go long even as the bank itself was going short in the belief that the housing market bubble was headed for a hard landing.  Before a US Senate committee, Blankfein claimed that the market-making and bank’s trading on its own books were unrelated unless the bank took out a position on its books as a counter-party needed by a client.  However, the bank sold clients on taking long rather than short positions on the housing-based securities even as the bank was taking a net short position on its own books above and beyond what was necessary to be a counter-party to its clients’ transactions.  This conflict of interest manifested in the duplicity involved in selling clients on what the sales people knew privately was “crap.”  As one of them wrote, if the clients knew the bank’s reason for going short, that would interfer with the bank’s ability to profit from the shorts.  Structural conflicts of interest are designed such that there is an incentive in favor of duplicity. Given a company’s overall interest and the fact that senior managers have authority over the entire firm, firewalls should not be relied upon by outside parties (or by those inside).
In the end, given the nature of human beings and power, we ought not be blindsided by claims of the efficacy of paper “firewalls.”  We ought not assume that the most powerful person or coalition in an organization will necessarily be voluntarily restrained by a weaker party in the same organization.  Moreover, we ought to take more seriously institutional or structural conflicts of interest in how we design and reform arrangements between institutions.  Where the status quo contains a structural conflict of interest, that condition ought to be put on a limited lifeline, with a deadline set for changing the arrangements.  Even if the alternative is not as efficient (it would doubtlessly not be flawless), it would be better than the status quo.  Charges of an institutional conflict of interest can be treated as red flags that instantly move to the front burner on people’s agendas.  We need not be hoodwinked by the duplicitous and self-interested into believing their asseverations concerning their own paper “firewalls.”

Thousands of Romania’s Roma, also known as Gypsies, have been heading for the relative wealth of Western Europe, and setting off a clash within the European Union over just how open its “open borders” are. Migration within the 27 nations of the European Union has become a combustible issue during the economic downturn. The union’s latest expansion, which brought in the relatively poor nations of Romania and Bulgaria in 2007, has renewed concern that the poor, traveling far from home in search of work, will become a burden on wealthier countries. The migration of the Roma is also raising questions about the obligations of Romania and Bulgaria to fulfill promises they made when they joined the union. Romania, for instance, mapped out a strategy for helping the Roma, but financed little of it.

Nicolas Sarkozy of the state of France has demanded that the Romanian government do more to aid the Roma at home. He vowed to keep dismantling immigrant camps and angrily rejected complaints from EU Commission officials that the French authorities were illegally singling out Roma for deportation. Mr. Sarkozy has tried to revive his support on the political right by deporting thousands of them, offering 300 euros, about $392, to those who go home voluntarily, and bulldozing their encampments. The European Commission has threatened legal action against Paris over the deportation, calling it disgraceful and illegal.

This case illustrates the problem the EU has in enforcing compliance of the terms of the accession talks of new states. In addition, this case puts the power relation between the EU and its state governments under palpable pressure. Lastly, the case showcases the difficulty involved in integrating Europe.  More than a common market, the EU states have open borders.  This appreciably decreases the power, and indeed sovereignty, of the state governments such as France and Germany—governments that were hitherto used to being in the driver’s seat.  So it will be interesting to see whether Sarkozy bows to the EU government or the ECJ (the EU’s Supreme Court) when he is under what must be strong domestic pressure to get rid of the Roma.

Relative to Arizona’s new immigration law, France’s deportation of a race of people is radical. Yet whereas in the US France’s policy would produce a vitriolic response from the media and the left, in the EU it is largely the EU government that is objecting. This difference points to a difference between American and European culture.  Perhaps due to the relatively recent history of racial slavery in some of the American states, there is more sensitivity to race in the US—yet there is also racism in the US. Perhaps the racism in the US is one on one now, whereas the racism in the EU is in some state policies.

Source: http://www.nytimes.com/2010/09/17/world/europe/17roma.html?pagewanted=1&_r=1&hp

The philosophy of leadership in the EU is evinced in the fact that the major governmental institutions each have a president.  The EU Commission, the European Council, and the EU Parliament each have a full-time president.  Also, there is a rotating E.U. Presidency occupied by what in American terms would be the governors—each one assuming the office on behalf of his or her state for six months. The presidents of the European Council (e.g., van Rompuy in 2010), the Commission (e.g., Barroso in 2010) join whichever State occupies the E.U. Presidency in jointly representing the EU abroad. This picture, as well as the underlying political philosophy, differs from that which has been dominant in the US, wherein the U.S. Government has only one president representing it. The Speaker of the House and the President of the Senate do not jointly represent the US with the US President abroad. My main contention is that both approaches have their pluses and minuses, as do their respective undergirding assumptions; both are heavily informed by culture, which in turn is formed by historical experience. Because it typically goes unquestioned in the U.S. that only one person can be in charge (i.e., “The buck stops here”) and this generally accepted premise has led to criticism of other unions—namely, the E.U.—I pay particular attention here to making the drawbacks of our own system transparent. At the very least, this project might prompt greater humility in the recognition that our system is not necessarily the default that others should emulate. The E.U. should not become a replica of the U.S. even if both are federal governments on the empire-scale. Indeed, in some ways, we might learn something by looking at the E.U.’s system of governance and even potentially improve our own from the observations. Simply put, humility regarding one’s own dominant assumptions is not of weakness; rather, it is inherently of strength and confidence as well as a willingness to improve by learning from other cases having different presuppositions. Such an attitude would also make us a better partner to the Europeans.</p>&#13;
<p>The “unitary” leadership theory, which is dominant (and typically unquestioned) in the U.S., is evinced even in the classic epic film, The Wizard of Oz. When the Wizard leaves Oz in his balloon, he announces that the Scarecrow would rule in his place by virtue of the Scarecrow’s brain. The Scarecrow would be assisted by the Tin Man (by virtue of his heart) and the Lion (by virtue of his courage).  This is Platonic rationalism applied to governance—reason controlling the passions of love and courage in not only the psyche, but the polis as well. This assumption was evinced in the U.S. constitutional convention.Governeur Morris, on August 9 in the convention, argued “we should be governed as much by our reason, and as little by our feelings as possible.” (Madison, Notes, p. 421. Both the assumption that intelligence is primary and that one of the three characters must be singled out as the ultimate boss are vulnerable to critique. The Wizard could have announced that the three figures would be co-rulers: reason, love and courage ideally governing in balance. To set reason above the other two can be reckoned as artificial. It could be argued that as governance involves power, which can result in other people being hurt emotionally or physically, the leader’s heart ought to be forefront—assisted by reason and courage. In other words, both Plato’s ideal of reason dominating the passions not only in the psyche, but also in the polis, and the assumption that one person must be chosen to be the executive can be questioned; they are both cultural assumptions. In criticizing the E.U. for its multiple presidents, one might keep the subjective nature of these assumptions in mind rather than simply castigate the Europeans.

In his article in Newsweek, for example, William Underhill criticizes the E.U. in arguing that “Europe still lacks the unity it needs for a proper partnership with the U.S.”  What is needed, Underhill maintains, is a greater clarity of purpose. This is being impeded, he argues, by the “continuing muddle over who’s in charge in Brussels.” Underhill traces the root cause to the inordinate power still being enjoyed by the state legislatures. I don’t think the fact that the EU has multiple presidents (i.e., of EU institutions) is a function of the relative power of the state governments at the expense of the EU; The union’s lack of energy, on the other hand, results in large part from the entrenched power of the states. No do I agree with Underhill that the lack of clarity of purpose is a function of there being essentially four co-presidents in the E.U. Government. In other words, the problem is not that the E.U. has too many chiefs. The system of multiple presidents representing the EU is a function of the dominant philosophy of leadership in the EU, which has been formed out of the European culture that included dictatorships. The resulting theory can be called “pluralistic” leadership and governance because no one person is put at the helm. That is to say, no one person is trusted to have a monopoly of power. Given the twentieth century in Europe, this assumption is reasonable.

The hegemony of the “pluralistic” theory of leadership in the E.U. in the twenty-first century is due to the disastrous “One Man Rule” of several of the twentieth-century European nationalisms (e.g., Stalin, Hitler, and Mussolini).  Europeans living in the century after that of the two world wars are much more cautious regarding “one man rule” because of the other things that can come instead of the promise of greater wisdom in one person. Mussolini may have made the trains run on time, but he did other things as well. I suspect that even the assumption that one person has much better wisdom than the rest has also been discredited by the practice of housing leadership in just one person as per the European nationalisms of the twentieth century. In the US, this view has been recessive because of the different experience even in spite of the colonists' experience with it in the form of George III and of the plurality that goes with an empire-scale polity. In other words, even the eighteenth-century Americans' experience should have produced a pluralistic approach. In the constitutional convention, Ben Franklin points to the inexplicable bias in favor of one-person leadership. "We seemed he said too much to fear cabals in appointments by a number, and ato have too much confidence in those of single persons" (Madison, Notes, p. 601). Even so, the plurality view can be found in theconvention.

In the convention, Randolph opposed “one person” as the executive (i.e., the President of the U.S.).  Besides noting that the “permanent temper of the people was adverse to the very semblance of Monarchy,” Randolph argued “that a unity was unnecessary a plurality being equally competent to all the objects of the department.” He “was in favor of three members of the Executive to be drawn from different portions of the Country.” (Madison, Notes, p. 58).  The assumption here is, as Sherman observed, that no “one man could be found so far above all the rest in wisdom.” (Madison, Notes, p. 62)  Furthermore, on July 20 in the convention, Madison pointed to the downside of the unitary leadership model. “In the case of the Executive Magistracy [i.e., the U.S. Presidency] which was to be administered by a single man, loss of capacity or corruption was more within the compass of probable events, and either of them might be fatal to the Republic.” (Madison, Notes, p. 333) Four days later, Williamson brought up another objection against “a single Magistrate”—“that he will be an elective King, and will feel the spirit of one.” (Madison, Notes, p. 357)  Similarly Ben Franklin averred that experience "shewed that caprice, the intrigues of favorites &amp; mistresses . . . were nevertheless the means most prevalent in monarchies" (Madison, Notes, p. 601). Besides the association with kingship, the empire-scale of the U.S. even in having thirteen republics was relevant. Williamson "did not like the Unity in the Executive. He had wished the Executive power to be lodged in three men taken from three districts into which the States should be divided. As the Executive is to have a kind of veto on the laws, and there is an essential difference of interests between the N. &amp; S. States [the case is different than in Britain].” (Madison, Notes, p. 357) Similarly, Col. Mason "was averse to vest so dangerous a power in the President alone . . . he suggested that a privy Council of six members to the president should be established; . . . two out of the Eastern [,] two out of the middle, and two out of the Southern quarters of the Union" (Madison, Notes, p. 596). In other words, the fact that the U.S. is on the empire-scale is an attribute exacerbating the downside of the one person theory that would not be present in the States of Europe (whereas it would be present at the E.U. level of governance). That is, the diversity inherent in an empire-scale polity made up of republics, which in turn are equivalent to the early-modern kingdoms in scale, is more difficult to square with having just one person at the helm--which brought up associations of a king (e.g. George III).  The empire-scale of both the EU and US works against the unitary theory, and the experience of the British colonists with kingship and of the Europeans in the twentieth century with dictators work against the approach as well. Furthermore, it might run contrary to being in a republic. On June 6, 1787, Wilson observed in the constitutional convention that the nature of republican government cannot “give to an individual citizen that settled pre-eminence in the eyes of the rest.” (Madison, Notes, p. 79).  This, Wilson noted, gives rise to a difficulty in rendering the executive competent to its own defense.

Americans ought not blame Europeans for wanting to avoid the "one person" consolidation of power in the E.U.'s government. From the standpoint of the problems with the “unitary” approach, the E.U.’s approach to having multiple presidents representing the E.U. abroad may be better than the imperial U.S. Presidency as a leadership approach for the U.S. This is the irony in pointing to the E.U. as having too many chefs in the kitchen—too many chiefs—while presuming that the U.S. model is and should be the default. Perhaps we (meaning here Americans, as I am one) ought not be so presumptuous, and instead examine our own presuppositions.  Being open to learn from others could make us stronger, which would include being humbler. Yet we are not even aware of the minority position expressed in our own constitutional convention against the “unitary” approach; we are much more familiar with the dominant position on the matter. Wilson, for example, expressed the dominant philosophy in arguing that a “principal reason for unity in the Executive was that officers might be appointed by a single, responsible person.”  (Madison, Notes, p. 67). In other words, unity and energy of government favor one person.  I contend that another assumption along with the unity and energy is that one person can be found to be distinct in being qualitatively more wise than the other candidates.

One might think that the colonial experience with King George III might have led the convention’s delegates to favor splitting the presidency up between two or more persons.  However, the colonists had accepted the imperial rule of the Crown; they viewed the province of Parliament to be solely within the host kingdom (Great Britain).  So it was the taxation by Parliament over the North American British colonies that had the colonists so much up in arms.  That the king went on to support the usurpation of Parliament to imperial rule implicated the king as corrupt in not having stood up for the distinction between rule of the empire (the domain of the king) and of the host kingdom (the domain of the king and of Parliament).  In other words, the real beef was with Parliament rather than with one man rule.  So Wilson’s view won out in the constitutional convention, and has remained dominant in the US ever since in part because the European nationalisms of the twentieth century were so far from the American experience.

Theoretically speaking, aside from the contending virtues of diversity, unity and energy applied to governance, the question seems to be whether certain human beings really are so distinct with respect to leadership and governance that the rule by one person is justified. Even without the European experience of the twentieth century, it is unlikely that there is apt to be one person in a republic so superior that he (or she) should be the unitary president. Furthermore, the Obamamania of 2008 in the U.S. and the subsequent wide-spread disappointment in the man in office (approval ratings in 2010 were down considerably from those just after Obama was elected) may suggest a fine line between the “great man” theory of leadership and hero-worship, which is a form of idolatry. Fortunately, the E.U. provides an alternative by which Americans may check such an excess and perhaps even re-evaluate the “wisdom” assumption undergirding one man rule. Of course, having three presidents in a council has the disadvantage of dissent and perhaps even conflict, hampering the energy of the European executive. Perhaps this disadvantage could be put at one extreme and hero-worship on the other—both underlying assumptions having their downsides.  The point is perhaps not to go to the extreme in either direction. The salience of popularity in the U.S. Presidential election of 2008 may suggest that the U.S. has gone too far in the direction of one man rule.  Part of the lack of energy at the E.U. level of leadership may suggest that the E. U. has gone too far in esteeming consensus—though this could have more to do with the power of the state governments than with the pluralistic approach to leadership. Both unions therefore have their respective challenges, and could thus ill-afford not to learn from each other.

Source on the EU: William Underhill, “Europe Still Has Too Many Chiefs,” Newsweek, November 22, 2010, p. 6.
Source of quotes from the U.S. Constitutional Convention: James Madison, Notes in the Federal Convention of 1787. New York: Norton, 1987.