Bankers Have Low Expectations for the G-20 Summit

LONDON, April 1, 2009 — -- As President Obama and the leaders of the 20 most powerful and developing nations in the world gather in London this week to develop a way out of the worst financial crisis since the Great Depression, many bankers here are questioning how likely they are to come up with viable reforms.

But while most analysts are certain that the summit will fall short of the grand expectations British Prime Minster Gordon Brown and his counterparts set out late last year, some bankers are mildly optimistic.

"It is very good to see that this is the G-20 summit meeting and not the G-7 or the G-8, given the gravity of the situation and the structure of the world today," Vittorio Perona, managing director of the energy and utilities group at the European investment bank Dresdner Kleinwort, told ABC News. "A longer table of world leaders could not be more crucial at this time."

Despite security concerns, Perona said the G-20 could not have chosen a more symbolic place to meet.

"In terms of location, the city of London could not be a more appropriate place to have the meeting since this is where capital flows really originated a few hundred years ago," he said. "Still, one would hope that while exercising their right to march, the demonstrators would not revert to violence to make their point."

As for the success of the G-20, Perona said it depends on several factors: How fully all the main countries are willing to agree on a common set of actions to manage the crisis, how willing they are to agree on the extent of the financial packages and, more importantly, where to draw the line.

"The key is to limit excesses that could be very damaging," he added.

Regulations vs. Reforms

One U.S. banker who spoke to ABC News on the condition of anonymity was less optimistic. "Are the G-20 leaders really going to solve anything in seven hours," he said. "I don't think 20 people in the same room, all with different agendas, are going to be able to come up with a real solution to the greatest economic crisis since the 1930s."

The real debate at the summit is going to be whether to pursue regulations or reforms, he said. And while many countries are struggling to halt inflationary pressures from setting in, everything, he said, reeks of protectionism.

Just as the United States set its campaign of "buy American" into full throttle after a historic $17 billion bailout, so has Germany, with its GM Opel brand, and, according to an article in today's Financial Times, a $858.7 million aid package sought by General Motors for Vauxhall, which is GM's U.K. brand.

At this point, however, it looks more like punishment of the banks than anything else with much of the blame being laid on the United States, the banker said.

"Everyone is trying to gang up on the U.S. right now," he said, "most likely from the bad years on the back of the Bush Administration. As the world's largest trading block and the world's reserve currency, it is easy for everyone to blame the U.S. for the financial crisis instead of taking responsibility for their own bad investments."

Along with recent developments in the credit derivatives markets and an excessive risk-taking culture, analysts believe most of the G-20 central banks are equally responsible for a lack of oversight. Indeed, the only central bank that banned setting up off-balance-sheet special investment vehicles was the Bank of Spain after the European currency crisis of 1992, which left the Spanish banking system relatively unscathed in terms of bailouts, although still exposed to the mayhem of the housing market.

Bash a Banker

The lynch-mob attitude toward investment bankers that appears to have taken hold has many bankers and their families worried. AIG employees seem to have suffered the greatest backlash in the wake of the firm's announcement of $165 million bonus payouts, months after the world's largest insurance company once deemed as "too big to fail" was forced to ask for more than $180 billion in federal bailouts.

Meanwhile, many London workers were told to dress down this week after banks and other institutions warned they may be targeted by protesters.

"Obviously, there are some bankers that hold a great responsibility for the financial meltdown," the source told ABC News. "Many people's net worth has been completely wiped out."

That being said, he believes that the public's misperception of bankers needs to be corrected. "Everyone thinks we have these golden parachutes, and it's simply not true," he said. "Some people get paid ridiculous, but most don't."

The beleaguered bankers and, more recently, their blogging spouses, are ordinary people with mortgages, school fees and medical bills, he said.

Desdner Kleinwort's Perona agreed. "Clearly there have been some abusers," he said. "The vast majority, however, have not."

Bankers point out many people outside the financial sector may not realize that only a small fraction of bankers make vast amounts of money.

"Those who have engaged in abusive practices need to be corrected," Perona added. "We need to make sure those same mistakes are avoided in the future."

But thousands of G-20 demonstrators in London this week would beg to differ, with many chanting derogatory slogans against bankers.

According to the anonymous source, it is unfair to punish everyone.

"We had a great year in 2008, for example," he said. "I worked my tail off all year; does that mean that I should get nothing for all my hard work?

"But I guess it's easy for a public who is angry and upset to lump us 'banksters' all together."