Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

On October 16 an emergency recapitalization and refinancing program was ramrodded through the French parliament. The urgency was commonplace. What was different in France was the response of the private sector. All of the major banks, led by BNP Paribas, agreed to take capital from the Société de Prise de Participation de l’État (SPPE). A second tranche followed in January 2009. Again, all the banks took the capital. Even more unusual was the refinancing scheme headed by the Société de Financement de l’Économie Française (SFEF). This entity was legally entitled to issue state-guaranteed bonds on behalf of banks up to a total of 265 billion euros, but 66 percent of its shares were subscribed by the six major French banks. Even HSBC France signed on. It was an elegant construction. With the French state holding only a minority stake, the SFEF’s liabilities were not counted toward the French public debt. At the same time, thanks to a special arrangement with the banking regulators, the SFEF was not required to meet Basel II capital rules, so the actual financial call on the banks was minimal. It was an efficient mechanism for restoring confidence made possible both by the relative lack of pressure on France’s biggest banks and close cooperation within France’s extraordinarily tight-knit elite.95 Though they work in very different ways, business and government are every bit as interconnected in Paris as they are in New York and Washington, DC, enabling that rarest of things un...