I think directionally they are good. Because he is indicating that more regulation and better regulation is needed, and there are issues that need to be addressed, so that in and of itself is a good signal.
Some of his proposals just would not work for us. When he is suggesting, for instance, to dissociate between commercial banks and investment banks, for us it wouldn't make any sense. All our banks have a universal model, so to speak - they have a mixed model, being predominantly commercial and marginally investment banks, and it's a business model that has really helped them resist the crisis.
Point number two, in and of itself I'm not sure if that's the adequate response. Because if you look at what initially started the process, Lehmann was not a commercial bank, it was an investment bank, so you could argue that effectively it complied with the Glass-Steagall Act in a way - it didn't have access to liquidity; it was not a mixed model.
Q: But there has been a crisis in France attributable in part to proprietary trading.
A: But that crisis was essentially attributable to the lack of compliance and the failure of the control system, if you're referring to Société Générale. That's also what the Commission Bancaire, the supervisor, concluded: A clear breakdown in the system, failure to comply, and sanctions were imposed. But I would not put that particular failure in the same category as the Lehman collapse - it's different. It could have happened, notwithstanding, anyway.
Q: On the problem of currency imbalances, President Sarkozy suggested a reregulation of exchange rates, as occurred during the Bretton Woods period, and a revaluation of the Chinese currency - is there any consensus among ministers in how to confront this problem? And given that this has come up over the past decade over and over, is there any way to make this work?
A: The consensus we have is that we all want stability of the currency system, and we all want to avoid by any means volatility and particularly excessive volatility - you will find the same wording and the same jargon over and over in every communiqué of the G7 in the last 10 years - so there is no question that there is a historical consensus, because it has travelled through crises and ups and downs and the rest of it.
So we want that. Clearly we are not having it at the moment. And there is a changed relationship between the US dollar which used to be a very dominant currency, and the renminbi or yuan, which is clearly gaining strength and power, to the extent to which you believe that a currency reflects the strength of an economy…
So, given that, and the fact that the system has changed, we need to talk about it, and we need to address the issues. I am not suggesting that we have a consensus, and there may be some of my colleagues who are not particularly keen or concerned about it. But I think it's worth raising it, because if we don't, then we will continue to have a situation with volatility, with clear over- and under-valuation of one currency relative to where it should be according to IMF and other experts, and it doesn't hurt to think about it, frankly.
Q: President Sarkozy's other big idea was to return to a regime of managed exchange rates, as during the initial Bretton Woods period…
A: He said we need a second Bretton Woods. Which means, back at the time of Bretton Woods, there was an agreement, there was the setting up of international institutions, there were mechanisms in place, the IMF being one - we need to give it a second look, and decide whether it can sustain the current situation and the rise of china and the rebalancing we all hope for, and we need to put a new system in place.
Q: And how would such a system work?
A: With a bit of brain, first. No, seriously, it's not going to happen overnight, and I am sure there are chapters of books which have been rewritten and revisited on the issue, but we need to concentrate on what we want and what we're prepared to do, whether it's the SDR [a turn to the International Monetary Fund's Strategic Drawing Rights as an international reserve currency]or a special reserve or a rebalancing.