Evictied lands in Cambodia are offered to South Korean businessmen for profit: UN's Raquel Rolnik (0)

Housing Rapporteur Raquel Rolnik, next stop CCNV in DC

At UN, Rights Reports Overshadowed by Climate Change and Sex, Evictions, Films and UNU

Sunday, October 25, 2009
By Matthew Russell Lee
Inner City Press

Inner City Press asked Rolnik about her entreaty to the governments of Cambodia and Nigeria to stop their mass evictions. In the Cambodian case, the cleared site is now being offered to South Korean businessmen for profit. The news is not good, Ms. Rolnik said.

UNITED NATIONS, October 24 -- There are only two big issues, a major human rights group told Inner City Press on Frday, in the UN's Third Committee: Gaza and the gays. The reference was to Richard Goldstone's report on Gaza -- which now seems destined not for the Committee but the full or plenary General Assembly -- and a forthcoming report by Martin Scheinin which touches on the lesbians, gay, transgendered and bisexual issue.

This is sure to draw fire from Egypt, Syria and other countries which last year when a motion for decriminalization of homosexuality was proposed, countered with amendments referring to bestiality. Only at the UN.

Blocked out by these two super charged issues are appearances of the UN's other special rapporteurs, who travel the globe, from rural Russia to Brazil to yes, the South South Bronx to assess government's compliance with the treaties that they sign. On Friday Raquel Rolnik, the special rapporteur on housing, told the Press how climate change will mostly hurt the poor.

Inner City Press asked Rolnik about her entreaty to the governments of Cambodia and Nigeria to stop their mass evictions. In the Cambodian case, the cleared site is now being offered to South Korean businessmen for profit. The news is not good, Ms. Rolnik said. She said evictions have also continued in Angola, where UN HABITAT claimed to have gotten a commitment to the contrary.

Ms. Rolnik is a law professor in Brazil, so Inner City Press asked for her views on President Lula's much touted plan to limit land use for ethanol. Ms. Rolnik said as a Brazilian she might be biased, then said the problem goes beyond ethanol to all of agri-business. She noted that Brazil grows the soy beans to feed cattle all over the world. One wanted to hear also about the favelas, and recent surge of violence. Next time.

Rapporteur Manfrek Nowak spoke, not only about torture but also imprisonment. He said that in Uruguay, people were kept in metal boxes called las latas, but later were released. Inner City Press asked if he'd look into the two UN system staff in Sri Lanka who reportedly were tortured by the government. Not personally, he said. Doesn't charity begin at home? Said otherwise, if the UN system can't even defend its own people, what can it do for others?

An event sponsored by UN University featured the Bruce Jencks of the UN Development Program bragging about UNDP's work with local entities like Catalonia. He apologized for not speaking Spanish, much less Catalan. But one wondered if UNDP likewise has an agreement to work not only with northern Sri Lanka, but South Ossetia, and if not, why not. Madrid gives a lot of money to UNDP, and is said to not be happy with the UN's hype of Catalan. But to actually oppose it would be bad politics at home. And so UNU goes forward, webcasting to the world.

Radhika Coomaraswamy, herself from Sri Lanka, hosted a film screening early in the week. To make a film about the brutal lives of child soldiers cannot be easy. The Dutch production "Silent Armies," based on a thinly veiled Lord's Resistance Army, is far from a perfect film. But it aims high, or low, to confront the audience with children being forced to kill their own parents, children blown up by casually mislaid bombs, and a United Nations more concerned with the "big picture" of working with governments than the fate of children pulled into the bush and a hellish life. Sounds about right.

In an attempt to draw in European audiences, "Silent Armies" plays up a Dutch restauranteur who son befriends an African boy the same age. While the Dutch boy mimics machine gun killings on Play Station, the African boy has a wooden console carved by his father in a wheelchair. Regardless, the screening of this film at the UN was more appropriate than the one slated for October 25, when the UN is given to Disney to put on Tinker Bell, who -- or which -- will be named a "Goodwill Ambassador of Green." For the green?

Footnote: An argument being advanced for taking the Goldstone report straight to the full General Assembly is that it will somehow show the United States respect. "They took the leap to join the Human Rights Council in Geneva," one insider said. "We don't want their first time in the Third Committee on this to be overshadowed by Goldstone, which we know they'll have to oppose. Let them have their moment." Really? To be continued.

Labels: world news

In the World of Banks, Bigger Can Be Better (0)

By CHARLES CALOMIRIS

Legitimate concern about the risks to taxpayers and the economy posed by banks that are "too-big-to-fail" has prompted some observers, among them Simon Johnson, former chief economist of the International Monetary Fund, to favor draconian limits on financial institution size. This is misguided. There are sizable gains from retaining large, complex, global financial institutions—and other ways to credibly protect taxpayers from the cost of government bailouts.

Governments currently have trouble allowing large, complex financial institutions to enter bankruptcy, or receivership in the case of banks, because there is no orderly means for transferring control of assets and operations, including the completion of complex transactions with many counterparties perhaps in scores of countries via thousands of affiliates. The problem is important to resolve. The inability of regulators to agree on who had claim to which assets in the case of the Lehman bankruptcy, for example, has substantially prolonged the resolution of that bankruptcy.

Yet the challenge of coordinating the efforts among different countries' regulators can be met through prearranged, loss-sharing arrangements that assign assets to particular subsidiaries based on clear rules. This would make it possible to transfer control over the assets and operations of a large international financial institution in an orderly fashion, in case of its failure. This process could be handled by the courts for nonbank failures and the Federal Deposit Insurance Corp. for banks. With such arrangements in place, governments will have no reason (or excuse) to bail out large, international institutions.

But is it worth the trouble to preserve large financial institutions? Emphatically, it is.

Oliver Williamson, an economist at the University of California, Berkeley, just won the Nobel Prize for his pathbreaking work on the "boundaries of the firm," specifically for arguing that it can be more efficient to extend the boundaries of a single firm than for independent firms to contract with each other in the market. That theory explains why nonbank corporations operate world-wide supply chains.

International trade today, unlike the 19th and early 20th centuries, is largely driven by those supply chains. Intermediate goods, not final goods, account for most of international trade, and the same firms that import the bulk of goods into the U.S. also account for the bulk of exports. This underlying reality is the background factor that helps explain why some financial firms also need to be large.

First and foremost, they need to be large to operate on a global scale—and they need to do so because their clients are large and operate globally. Small, local banks simply could not provide global corporations the same physical capabilities for trade finance, foreign exchange contracting, and global capital access that large global financial institutions can.

Second, there are economies of scope when financial firms combine different products within the same firm (lending and foreign-exchange swaps, for example). A financial firm able to offer multiple products to a customer means savings in marketing costs and in the costs of information production (about the creditworthiness of clients, for example). Economies of scope among products also imply economies of scale within finance suppliers, since small financial firms cannot afford the overhead costs of building platforms with many complex products.

True, some empirical studies in the field of finance have failed to find big gains from mergers. But those studies measured gains to banks only, and measured only the performance improvements of recently consolidated institutions against other institutions, many of which had improved their performance due to previous consolidation.

Yet even unconsolidated banks have improved their performance under the pressure of increased competition following the removal of branching restrictions, which permitted the consolidation wave in banking. And when an entire industry is involved in a protracted consolidation wave, the best indicator of the gains from consolidation is the performance of the industry as a whole. One study of bank productivity growth during the heart of the merger wave (1991-1997), by Kevin Stiroh, an economist at the New York Federal Reserve, found that it rose more than 0.4% per year.

Third, many of the gains of consolidation accrued to customers, not banks, in the form of cheaper and better financial services. For example, my research shows that from 1980 to 1999, after controlling for changes in the mix of firms, the underwriting costs of accessing the public equity market fell by more than 20%. These declining costs encouraged an expanded use of the market particularly by young, growing firms.

Large-scale global finance has also expanded the supply of credit to emerging market economies. That's transformed the political economy of those economies very much for the better, by undermining domestic crony-capitalist networks. Indeed, perhaps the greatest accomplishment of global finance in the past two decades has been the replacement of crony banking networks in emerging market countries with branches of large global banks.

Fourth, global financial institutions also have made stock, bond and foreign exchange markets globally integrated and more efficient. Global financial institutions are the institutions that provide the funds for arbitrage across markets, which ensure global market integration.

Research in the 1970s and early 1980s by international economists like Stanford University's Ron McKinnon bemoaned the inefficiency of foreign exchange markets due to the lack of arbitrage funding, which promoted exchange rate volatility and limited the ability of exporters and importers to hedge their risks. Today the foreign exchange markets for most currencies are extremely active for a wide variety of currencies. Important developing countries now enjoy deep markets for currency trading against the major currencies, which promotes greater access to trade and international capital markets.

Limiting the size, complexity and global reach of financial institutions is fraught with downsides for the international economy. We can solve the too-big-to-fail problem without destroying global finance. It certainly is worth a try.

—Mr. Calomiris is a professor of
finance at Columbia Business
School and a research associate
of the National Bureau of
Economic Research.Printed in The Wall Street Journal, page A21

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Labels: world news