Bad time for French market lessons

The anguish in the financial world has made this week a poor moment for convincing France of the joys of the free market. In a piece of unlucky timing, President Sarkozy will be expected to do that tomorrow when he is presented with a radical remedy for France's economic ills.

The cure is a batch of ideas devised over the past eight months at Sarkozy's request by Jacques Attali, the famous Paris economic strategist, and 40 lesser eminences. They could be entitled "300 ways to save France".

Sarko asked Attali, who remains best-known as economics guru to François Mitterrand, the late Socialist president,  to suggest ways of helping the French economy break free of the bonds that stifle growth. Even Sarko, with his fondness for la rupture, was not bargaining on how far Attali would go down the "Anglo-Saxon road".

We visited this last autumn when Attali's ideas for shop-keepers were emerging. In the final version, which is circulating in draft, he proposes removing or loosening most of the restrictions on trades and professions, from hair dressers and supermarkets to lawyers and taxi drivers. He also proposes opening the frontiers to worker immigrants, letting people work beyond retirement age and even the assessment of school teachers performance by their pupils. Read on in today's newspaper.

Unsurprisingly, Sarkozy is said to be uneasy about endorsing quite such an un-French menu, especially when the country is feeling the pinch and yearns for reassurance. Ségolène Royal, the Socialist, sees the Attali report as good chance for nailing Sarkozy as an inhumane "ultra-liberal" as she campaigns for her party leadership.

Much in the Attali report also proposes old-fashioned heavy spending by the  dirigiste state. But its stress on the virtues of competition will meet a chilly response in a week that much of France seems to be gloating over the misfortunes of the financial markets. Bernard Maris, the lefty commentator on France Inter, the public radio, dispatched the Attali ideas this morning as unworkable and immoral.

The reaction to the financial melt-down follows predictable lines, with leftwing newspapers talking about panic and the abyss. Libération (front page at top) was gleeful today as it denounced the greed and irrationality of the markets.

"Heated white hot by liberal dogma, the financial profession has rejected all attempts at regulation, explaining that the divine market would find in itself the remedies to its imbalances," wrote Laurent Joffrin, Libé's Editor. "The only medicine that it has been able to produce is the crash. We are there now."

Le Monde joined in, inveighing against the greed of the City and Wall Street. "Marxism is a philosophy which went bankrupt. But its critique of capitalism -- that profits are privatised while the risks are shared by all -- has always contained a slice of truth," wrote Le Monde's commentator.

Away from ideology, France is much like everywhere else. People are worried about their investments, whether financial or in the housing market. The gloom this week will not help Sarkozy persuade millions in the protected sectors to give up their security. 

Comments

[azloon]

CB, thanks for jumping on this subject which is sure to be topic numero uno for months to come. the discussion actually started on the previous string and will be picked up vigorously here.

finally, a problem which wiil test sarko's substance. i think Carla should fade into the background for awhile. she's a marie antoinette-type character who will not endear sarko to his financially-aggrieved subjects over the course of a recession.

[Daisy]

His best opportunity for reform was in the first 6 months in office when his popularity was high and people were in favour of reforms. Now with recession brewing, people will just hunker down and protect their own. Let's look on the bright side though: we have Carla's next CD to look forward to!!

[Pierre Bernardi]

Charles, the risks are shared by those who decided to play the stock market. Let's turn your maxim on its head: under marxism, the risks are shared by all while the profits are non-existent.

Meanwhile, the US appears to be paying the price of speculation. France is insulated by its lesser reliance on variable credit. Less gain when times are good, less pain when times are bad.

[Rocket]

"Jacques Attali, the famous Paris economic strategist, and 40 lesser eminences. They could be entitled "300 ways to save France".

Lest we forget this is the same Jacques Attali who wrote in the IHT on April 19, 2007

"You're all just jealous"

http://www.iht.com/articles/2007/04/19/opinion/edattali.php

[Daniel Strohl]

"Bernard Maris, the lefty commentator on France Inter, the public radio, dispatched the Attali ideas this morning as unworkable and immoral".

A lefty commentator qualifiying the ideas of the "economics guru to François Mitterrand", as unworkable and immoral ! LOL !

Let us hope that this distinguished gentleman will present "workable and moral" ideas as soon as possible - it is urgent ! Tout le monde est suspendu anxieusement à ses lèvres ...

[Daniel Strohl]

Rocket,

Excellent link - as usual, I would say !

[rockinred]

@ PIERRE BERNARDI
"the risks are shared by those who decided to play the stock market etc" What complete and utter nonsense! This is arrogant, economically illiterate rubbish that flies in the face of the facts. For example, the so-called sub-prime crisis, one of the main contributory factors to the current dire circumstances, was a deliberate ploy to foist bad debt on to others, engineered by bankers desperate for short term profit. Do you suppose that any of those in the UK who have seen their Northern Rock savings evaporate thought they were bravely 'sharing risks by playing the market'? People like you provide the very best illustration of why France should not - and will not - pursue the deluded path of neoliberal economics.

[Valentin]

Re Rocket's link:
Good article. I was pleasantly impressed to see Jacques Attali repeat word by word my different positions on French state, economy, language, immigration. This blog's popularity never ceases to amaze me.
Attali might define himself as leftwing, I still bet he'll never get his own metro station from Mr. Bernardi :)

[concedo nulli]

Azloon, I learnt recently that Marie Antoinette was not so pretty to loook at. Her mother thought so at least. Maybe that's why the French never felt for her. When I first went to a lycée, a little friend (the daughter of a well-known communist journalist) asked as a test of where I stood who I liked best Marie Antoinette or Robespierre. Of course I liked the foreign princess better, I did not know she was not personable.I have believed for a while that she was unintelligent, or rather that she was not properly educated, very much like Princess Diana but have never bothered to look into the matter more thoroughly.Clearly "l'imaginaire des français" is sick: to have to choose between Marie Antoinette and Robespierre!I was brought up to believe that the XIXth century was "stupid" because of its puritanism. I now feel that the XVIIIth century was a disaster, ending as it did. Fortunately, now we can expect looks, brains and a modicum of mental balance around our deserving and vulnerable president who is doing his best to break with this unhealthy inheritance.

[azloon]

[one of the main contributory factors to the current dire circumstances, was a deliberate ploy to foist bad debt on to others, engineered by bankers desperate for short term profit] Rockinred

ummmmm.....so .....what's your point ??

is mcdonald's 'desparate for short-term profits' because it wants to sell a billion hamburgers every day?

the romans (yes, the romans, for chrissakes!!) had an expression for this situation: caveat emptor.

when someone wants to sell you something that sounds too good to be true, it probably is. :)

look at it positvely. you can bet european banks won't be buying u.s. mortgage-backed securities for quite awhile.

you must be one of those french leftists CB mentions who are gloating at the meltdown of stockmarkets around the world...as just one more bit of evidence that capitalism is evil, and the french 'nanny' state is the antidote to this evil.

i suggest you drop your bitterness, call a stockbroker and pick up a few (depressed) shares of
veolia or vivendi, or better yet, both.

life's a bitch, then you die.

cheers

[Dominique]

Rocket,

I think we talked about this Attali article at that time. Comments did not change. When i read comments about, for exemple, the "jalousie" toward the so hated french leftist"fonctionnaires" and public services, 35 hours week, from our foreign friends, i tend to believe that Attali was pretty right.

[Pierre Bernardi]

Rockinred, bit of a confused message you've got there. Let's balance the risks, shall we? On the one hand, imperfect workings leading to cyclical loss. On the other, impoverishment for billions. At present, mechanisms to combat the imperfections of liberalism include a plan to protect the savings of Northern Rock investors. There was no plan to save the populations of the Soviet Union. I advise you to write to your MP. In the free market, that at least is a freedom you retain.

If the general case is clear, I will return to your specific point. I agree entirely when you say that "one of the main contributory factors to the current dire circumstances, was a deliberate ploy to foist bad debt on to others, engineered by bankers desperate for short term profit". Hence the euphemism, 'subprime', turning out to mean 'the whole market except for the Capitol'.

Chacun voit midi à sa porte. The UK may be suffering from a serious bout of 'neoliberalitis' at the moment, but France remains beholden to a socialist past. Charles Bremner's article provides comfort for armchair observers, far from reality. But thank you for the opportunity of clarifying my post.

[Rocket]

Dominique

"When i read comments about, for exemple, the "jalousie" toward the so hated french leftist"fonctionnaires" and public services, 35 hours week, from our foreign friends, i tend to believe that Attali was pretty right."

So let's look at the facts.

Point one

Who is talking about so hated French? We are offering constructive criticism

Let's not put the blame on "leftist fonctionnaires" themselves. Anybody will suck on a nice steak if you give it to them on a platter. That is what the French government has done for years with "fonctionnnaires" Let's just say that "fonctionnnaries" are too numerous which Mr. Attali details in his "10,000 propositions" to save France.

Point 2

35 hours. Well it seems as if it has been a failure. Finally it is politically correct in France to say so. Unfortunately the "reformettes" which we have in France will not completely do away with this aberration. (il ne faut pas affoler les français) This has got the be the only industrialized country in the world where a government tried to push working less to "earn more"

Point 3

Public Services. You still can't get someone to answer the phone or respond to e mail in a "decent" (by rest of world standards) in France.

To sum it up.

"Les Français savent très bien qu'il n'y pas d'argent dans les caisses",

N.Sarkozy

http://droiteetmoderne.canalblog.com/archives/2007/12/01/7085801.html

et al.
Once again read the propositions and you will understand the M Attali supports drastic cuts in public spending.

I tend to believe that "la moutarde lui est monté au nez" before he took pen in hand to write his article in the IHT. he should have stepped back and counted to 10.

The French also claim to abhor nationalism, but try and criticize their country and you are called a bigot and then suddenly everyone in the country becomes nationalistic.

I personally see no reason to be jealous except for some incredible patisserie that I recently ate from a patisserie called

La Petite Rose
11 Bd de Courcelles
75008 Paris

http://paris.8.evous.fr/La-Petite-Rose,1182.html

IT IS ABSOLUTELY HEAVEN!

When you eat their patisserie you die and go immedately to heaven.

[dada]

http://fr.youtube.com/watch?v=a-aI1Ch39ZU

[Jolly Swagman]

Could Atali be the Necker for Sarko's Louis XVI and Carla's Marie Antoinette???

[Sam Young]

How did Wealth Tax ("ISF") go unmentioned in this Attali report?
This ISF tax is charged to all people (French tax resident or not) who have net assets in France worth more than 760,000 euro. It was introduced by François Mitterand to punish people who have a bit of wealth.
I'm assuming that the main reason for holding on to this tax is that it has a strong symbolic value. But Luxembourg had it and got rid of it. Sweden too. Spain is getting rid of it.
Who seriously believes (for example) that the taxi industry will be liberalized? I am willing to bet that the Govt. won't even enact those elements of the proposal which are under its control (such as paying it suppliers earlier - for those of you who don't know, the French state pays between 3 and 6 months after the service is rendered)

Here's an interesting stat: almost half (47%) of French Info tech & Comm. Tech. Start-ups created between 1998 and 2001 were sold to foreigners, mainly to American companies (31% of Starts ups sold were outside the EU).
On the one hand, one could argue that it shows that young French engineers, graphics designers, programmers, etc.can be creative and daring. But it is most unfortunate that they could not get the venture capital to stay in France. There are lots of stats of this type available, and they all point to one thing: basically, the French do not know how to manage an economy nor create wealth.

[Tom Benford]

If Attali in IHT(Rocket's link) is a sample of his intellectual rigour and clear-sighted economic and political thinking, I wonder if it would be possible for us Brits to get enough money together to convince him to take on the job of Prime Minister ? It could be the saving of us. I have never, ever, seen such an unbiased assessment of national circumstances, by anyone whether pol or journo, in Britain.

[GAG]

Rockinred

A correction. No savers in the British Bank Northern Rock have seen their savings evaporate. It’s true that investors have seen the value of their shares drop, but depositors are still able to recover their savings in full and the bank is still offering interest rates comparable with other banks and building societies.

I agree with you though, that France does not have and never will have, the courage to carry out the structural and, often minor reforms necessary. Unfortunately, France is condemned to a slow but inevitable descent into impoverishment.
GAG

[Richard Huxley]

Too true France needs more competition in it's marketplace but is dogged by the same old problems. It is far from easy to set up shop here and the costs to employ someone are very high. These social costs generally drive people away from creating their own companies and creating competition. Add to this the inefficiency and complexity of the tax/social system and you have a real crap shoot. For example Urssaf (the social contributions people) charged me the cotisation for someone else in another department...when I call them up they pass you around on the phone saying it's not their job, incroyable!

People want cheaper goods...did anyone see the programme on M6 about Pouvoir D'achat? I was only thinking about how little inflation is talked about here in France but relatively, across many sectors, prices for food and electronics are higher than in the UK. People do not use the internet as much in France to find better deals...relative to wages the price of life is getting much more expensive.

Its too late for all this idle talk and hot air ranting (like always) about the evil capitalists. France is on it's knees no wonder it needs more immigrants. Going back to the 'good old days' is what actually fuelled the downward spiral in the first place.

If the ECB drops rates then inflation and cost of living across the eurozone will only get worse.

I think it's a great idea to open up many sectors to more competition. Reduce regulations and get people out being more entrepreneurial. This word hardly exists in France.

Come one France..I love you..but things gotta change.

[Rocket]

As usual Christophe Barbier hits the nail on the head.

http://tinyurl.com/2hkdbk

[David]

Thank You CB a lot! I've been quite a frequent reader of Your posts and I was starting to be a bit afraid, that the "Sarko" fascination has prevailed far too much around over the real issues.

Sarkos personal life might be a nice easy reading once in a while, but (although it might be a No. 1 topic in Paris Match) I think what's really important is what he and his administration have promised and are (or not) doing in their offices.

So far I completely agree with Richard Huxley (to name the last one, but also many other posters). Attali report FINALLY names the problems and tries to offer solutions. They might be "unfrench" and too liberal (almost a swear word here) for the people around, but then they're also:

1. Necessary (no argue about the fact that France needs a change in its market)

2. The Only ones available (and implementable) so far (that I'd know of).

If there is a better solution for a way out of the mess, I'd like to hear about it in about the same level of details, as Mr Attali gave.

[textibule]

I had not read the Jacques Attali article in IHT, so thanks for the reference. It is infused with that frustrating wisdom that the French are so good at when defending their immobilism.

Back in 1998, M. Attali flew down to our little patch of France profonde and gave a 10 minute speech to high-tech entrepreneurs, telling us that we should keep the faith, that France was proud of us, and agreed that the Internet was going to change the world.

The directeur of our local Chambre de Commerce later told me that M. Attali had asked for, and received, 20000 FFrancs (3000€) for the 10 minute sermon.

Which proves that being an eminence grise is a fabulous metier in France. The fact that the 20000 FF was paid somehow by us entrepreneurs probably explains why, as someone famously pointed out, there is no longer a word for 'entrepreneur' in the french language.

[christopher muir]

I wish that Charles could start writing again about Carla and thus cheer me up. While assessing the charts of the krach gyrations of the past days, I was invited to a rather unsettling report of George Soros' updated musings about our futures. http://news.bbc.co.uk/2/hi/business/7204159.stm

[john o'doe]

Just jealous? Attali's proposals recycle previous preposterously pretentious ambitions, see http://actu.efinancialcareers.fr/NEWS_ITEM/newsItemId-11568 to make Paris Europe's foremost financial centre. Could he be just a little jealous of the City?

[GAG]

In an earlier comment I said “Unfortunately, France is condemned to a slow but inevitable descent into impoverishment.” But it’s not all bad news. France as a holiday and second home destination is likely to become more attractive in the future, a sort of pre 1980’s Greece, with cheap labour, restaurants, property, etc. France should get out of the Euro and then devalue its Franc to find its new true place in Europe. Imagine a whole nation of skilled artisans, domestic servants and chefs just waiting to cater for the needs of other Europeans, what luxury we could all live in. Let’s settle the immigration debate once and for all and allow only skilled immigrants from France to carry out our menial tasks.
GAG

[Valentin]

"Point 3
Public Services. You still can't get someone to answer the phone or respond to e mail in a ..."

Rocket is exaggerating.
My latest exchanges with the tax administration, as well as those of last autumn with the social security were extremely professional and efficient, both by mail and by post.

If I stop and think about it, I had no communication issue for quite some time now, be it with the public administration, (cell)phone operators, electricity provider, internet provider... the only problem I had the last 2 years was with my bank - so annoying that I'll probably move to another one.

[Actu75]

Rocket
Thanks for the link. I too had not read the article that kind of sums up the debates going on around here.Like Dominique I largely share his views, though I wonder if Mr Attali does not himself by times reproduce some behaviours of these french elites he mocks.

And, also, thanks for the joke:
"Who is talking about so hated French? We are offering constructive criticism"

[Pierre Bernardi]

Richard Huxley, why should the ECB drop interest rates? Have you seen today's consumption figures?

Anyway, as I pointed out, French households are far less dependent on variable rates than British or American ones. You can't do subprime if you don't have the ammo. You'll need to adapt your mentality if you want to find refuge here. This country has laws. Ask Azloon.

[Pierre Bernardi]

Paris has a wonderful transport system.

A quick comparison:

Size of London: 1579km²
Size of Paris: 105km²

Number of London tube stations: 276
Number of Paris métro stations: 298

That's 16 times more per km².

[Dominique]

Dada,

"Who is talking about so hated French? "

I did not.. i talked about the "hated french leftist"fonctionnaires" and public services, 35 hours week".

How come did you translate this into "hated french"? that probably is more of your own problem...

More, regarding "public services" you obviously dislike so much because you can't have them answering your phone call, please be aware that their purpose is not to have you on the phone, but to have people being able to use hospitals, roads, schools, electricity etc...

Regarding public spendings and ATTALI propositions, i see no contradiction with his IHT article. The french society does make choices, being aware of what it means and what it takes. More healthcare, more time, means less earnings and less dependance on the CAC40 crash! ATTALI does not propose to get rid of the quality of life, he rather makes an economical project out of it.

That's the very purpose of politics : make the society more smooth, regulated, and less market addict or dependant. I know you will cry about this, but this is the very purpose of the concept of a state : citizen's insurance against the bad side of human condition. Otherwise, what is the point paying for an administration?

Challenging the city would be easy : let's get rid of all laws, all regulations, all moral, and offer the easiest business friendly environment whatever it cost to others! This very system is based on the idea that other countries don't do the same. That's called economic darwinism : the opposite of the "politique de civilisation" Sarkozy is willing to set up by the way...

[john o'doe]

According to radio reports Sarkozy says he'll be considering Attali's remedies particularly the recommendation regarding TAXIS! The whole country needs reduced taxation but he's giving priority to the problem of finding a Paris taxi!

[Daniel Strohl]

Pierre,

"That's 16 times more per km²".

You seem to be "un fin connaisseur du métro parisien", and not only in left wing political matters - LOL !

Valentin,

"so annoying that I'll probably move to another one.

May be you should try "une banque nationalisée" - LOL !

[Daniel Strohl]

Richard,

You too have hit the nail right on the head.

"These social costs generally drive people away from creating their own companies and creating competition."

Exactly ! And in addition to the costs, one should not forget to mention the disheartening complexity of the paper work. The bosses of small and medium companies spend almost more time dealing with administrative issues than with their main job – i.e get orders, deliver them, organize the maintenance if relevant, manage, train and motivate their staff etc. And one should not forget to mention the problem of late payments (state payments of course included).

The above is a description (may be somewhat exaggerated) which was up to date 12 years ago, when I decided to retire, fed up with the whole mess. Yesterday, the young gentleman (young – he is nevertheless aged 46 now !) and former employee who took over our company called me yesterday to wish us a happy New Year. He told me that he is still struggling with late payments – his customers are private industry (semiconductors). However, he did not complain over the administrative burden. Either he has got well mithridatized with the time, or else things have become easier. May be it is a mix ...

[Valentin]

Pierre Bernardi:

"A quick comparison"

The 1500 km2, isn't that GREATER London? Because if yes, at the very least we should compare it to Paris + "la petite couronne", not to Paris intra muros. (also see John's remarks in that sense on previous threads)

Daniel,

not really, thanks :) after BNP Paribas and Societe Generale I've had quite enough of their kind of customer service. I'll probably go to some online bank; plus they often pay you for using their services and not the other way around.

[stephen Bull]

France is fortunate to be diverted by King Bling and Carla. Think how boring are the messages from the British Government. While Sarko addresses important personal and global issues, our rulers are busy telling us not to eat, not to drink, to teach our children to cook, to build wind-mills and not to walk in the streets.
What a contrast!

[stephen Bull]

France is fortunate to be diverted by King Bling and Carla. Think how boring are the messages from the British Government. While Sarko addresses important personal and global issues, our rulers are busy telling us not to eat, not to drink, to teach our children to cook, to build wind-mills and not to walk in the streets.
What a contrast!

[Daniel Strohl]

Valentin,

I was a customer of one of the two banks you mention. I got fed up with them (not with the person with whom we were dealing, who was very nice and very competent, but with their rules and manner "de faire de l'argent").

Now we are back in our former bank, which has a more pastoral and less Parisian mood (they were our bankers when we were in activity). The customer service is excellent; we know one or two employees since 1984.

Stephen,

"our rulers are busy telling us not to eat, not to drink ..."

Too bad ! In contrast, Sarkozy is known for inviting people in restaurants and even if he does not drink wine or alcohol (everybody has weaknesses !), I am pretty sure that his guests are honoured with good wine and good food...

[Richard Huxley]

To Pierre:

''Richard Huxley, why should the ECB drop interest rates? Have you seen today's consumption figures?''

Thanks for the response. ECB rates would be changed if growth across the eurozone continued to slow. Agreed it is almost 50/50 whether they will stay the same or go down. I think by the looks of it Trecher is taking a tought stance. However I would not rule out a cut in the first half of this year.

I agree France has limited itself by good banking methods and only allowing people to pay 33% of their net income on a mortgage. However it is slightly foolish to think that only this will not cause a reduction in asset values. Indirect exposure to the credit crisis (like what we are beginning to see) is causing major problems for europe. France does not have much room for manouveur regarding public spending..Sarko put a freeze on that this morning for 5yrs.

[Richard Huxley]

Addendum:

The next best thing to making massive changes to the social tax and compulsary pension scheme would be to adopt a new stance on Frais de Notaire.

Frais de Notaire is the one thing that is stopping many french people from buying a property. It runs at 7% for older properties (almost 10% when you add on the sundries). Young people therefore have to save a deposit AND pay this insulting fee...incredible and almost impossible.

Here is Strasbourg prices are quite high compared to the rest of France. It is a region where there are better job prospects, 'apparently'.

Take the UK where stamp duty doesn't exist up to 260-280k euros. This would be fairer to many...

[dot king]

Richard H - at least half of the 7% of "notaire's fees" is government taxes. The total, unless a loan dossier is needed, is just less than 7%, that round figure being a good "rule of thumb" for clients to be able to calculate the final cost of the transaction.
I mention this because it seems to me unfair to call them "notaire's fees" when s/he doesn't bank that much, but simply collects the whole amount, at least half of which is then transmitted for frittering away in the national coffers.
(Like everyone else in that kind of profession libérale, the notaire takes a percentage in fees, but what s/he takes for his/her work isn't the whole 7%.)

It is shameful that house-purchase is thus restricted to those who can produce in one fell swoop, the deposit, the whole purchase price, plus(allez) "transaction costs", or if, instead of paying the full price they take out a mortgage and have to pay on top of that lot, bank dossier fees, then mortgage registration fees (stamp duty equiv) - which the notaire also has to collect and pay to the lending bank and the local tax office.

The "prêt à taux zéro" was put forward as a remedy, but perusal of the small print was enough to learn that this was available to only a few who fitted the criteria for acceptance. (You needed to be really poor, therefore even more at risk.)
I don't know whether these criteria have been revised since Borloo took over and added "la maison à €100.000" to the equation.
Given that even for un prêt à taux zéro, a loan dossier has to be drawn up, am I right in thinking that bank dossier fees still apply?
I always thought that it was yet another way of "punishing" the less well-off - they need a mortgage to purchase, so charge 'em more.

Meanwhile La Société Générale is "dismissing" a rogue trader who has lost them a record sum, surpassing even Nick Leeson's performance. He went to prison for bringing down Barings, but it was a "dismissal" of a kind I suppose. I expect all those who can hardly manage to keep a roof over their heads will lie awake marvelling at how lax are those who are supposed to take care of the world's finances. They can drift into sleep whispering "we wuz poor, but we wuz 'appy"
I'm sure there are bloggers who understand much more about the innardly workings of the monetary world than I do (nobbut a babe in arms, I freely admit it), but in the end it comes down to the same thing. Highly paid people who deal only in other people's money and this in a cavalier and cynical fashion.

[thinknoworpaylater]

Rocket - my old friend - so you think weare still living in Roman Times. Get up to date. Caveat Emptor is fine ina face to face economy. But cunning ruses are now described as *products* (sub-prime for Godssake) Is that face to face - are you and I in the same world? Remember - You will reap as you sow is anothewr one with more relevance to the current situation. The banking system has freaked-up as you like to say - thats the problem!

[azloon]

THINKNOW

i think you are referring to my post, not Rocket's, where i mention caveat emptor.

the people who packaged the subprime derivative instruments and sold them world-wide did not believe they were selling junk. and neither did the rating agencies who gave them 'AAA' ratings, act for which they will probably go bankrupt.

the issuers may have been naive in that they misunderstood and understimated the 'worst case scenario.' but their actions were not criminal. in fact, they were required and did gain approval from the u,.s. securities and exchange commision before selling these products.

for the most part, they were packaged and sold by investment banks whose mission is, in favor to their own stockholders, to make as much money as they can. in fact, they are remiss if they don't take this attitude.

clearly, greed enters this equation. but, as gordon gecko (michael dougless) said in oliver stone's 'wall street,' "greed is good." that may be somewhat hyperbolic, but it is a manifesttion of adam smith's 'invisable hand,' which has always operated in free markets.

you win some, you lose some. (gallic shrug)

[thinknoworpaylater]

Sorry it was Azloon not Rocket - but then what the hell there isnt much difference (mischief). And in passing a beefburger is not a*product* like the stuff that was sold to international banks. Dont be so hard on Rockinred there remains a question of moral culpability for those who know more (the banks?) selling to those who know less.

[Richard Huxley]

I stand corrected re: Notaire's share of fees. Still even 3/4% isnt bad is it.

I heard that they dismissed ideas to reduce this fee last year...I suppose in the last few years a booming property market brought in hefty taxes.

Thanks for clarification.

[azloon]

THINKNOW

please read my post: is there EVER a situation in which the seller doesn't know more than the buyer? i hope not.

as i said above, the sellers may have been greedy but that doesn't mean they acted dishonestly. they thought these products were safe, and so did the rating agencies -- moody's, standard and poors. again, greed may have affected the rating agencies as well.

investment banking not charity work. an investment banker who feels the urge to act charitably are encouranged to work at a soup kitchen or to tutor a disadvantaged child (as a number actually do).

i am not meaning to be 'hard' on Rockinred, just to present an alternative view of the issue of subprime 'slime.'

euroliberal financial thinking does not jibe with the attitudes of u.s. style capitalism. in fact, most americans are scornful of the views expressed by Rockinred.

we may, over time, move closer to some of the more paternalistic approaches of europe (the 'nanny state'), but there is stiff resistance to it presently.

[dot king]

"you win some, you lose some. (gallic shrug)" azloon

yes, that's the name of the game if you're a bank or a stockbroker, or a mortgage broker, but -
at the bottom of this particular food chain are people who lose their homes

there's nothing surer
the rich get rich
and the poor get poorer
in the meantime
in between time
ain't we got fu-un

da da da dum ksshhh ; )

[John Gregory Flinn]

I'm really cheating here, Charles - coming in after 'La Société Générale'story has broke.
I'm sure you would have had a good few points to make!

Greed and Fear drive the markets, which when combined produce the 'S.G.' affair, as with Barings and Nick Leeson some years ago.

"France is insulated by its lesser reliance on variable credit"

I think PIERRE BERNADI is partly correct in that the average French person who has a job, a mortgage and no direct investments in the market will fare better than those in the US or UK.
Property values in particular have not inflated so much here as in the UK, US and elsewhere (Australia?). The easy never, never credit available in the anglo-saxon economies has produced a bubble of immense proportions which is currently deflating.
However Banks and other like Financial institutions in France have bought into the debt and credit markets of the US and can therefore be similarly affected.
That could affect the average Frenchman if, for example he/she is employed in financial services and their employer goes to the wall. Foreclosure of property could follow in that sort of case.

Cash is king, but Bonds may also be safer than shares.

Incidentally I have seen press reports that Hilary Clinton's solution to the crisis is to;-
"declare a moratorium on (property) foreclosures for 90 days", and,
"freeze interest rates for 5 years (thus voiding financial contracts with variable interest rates).
A definite whiff of socialism in the US election campaign unlikely to help any Market recovery!

[Thanks John. I wanted to post on the SocGen disaster, but I've been too busy reporting it for tomorrow's newspaper. Quite a story ! CB]

[Valentin]

Azloon :

"the people who packaged the subprime derivative instruments and sold them world-wide did not believe they were selling junk."

That's exactly what I was telling you a few months ago when we discussed this and you were calling me a kind of socialist (or typical french :)) for saying that all modern finance must be seriously regulated because they risk to bring down the whole system.

Back then I argued exactly this: risk is more and more hidden in packaging and re-packaging of all sorts of financial products, and far from limiting the possibility of trouble, this will act like cancer cells hidden in an otherwise healthy body.
You can now see that in action. Everybody is scared and credit is crunching because no one knows for sure where subprimes actually are, and how much they're worth.

I'll also repeat now that the traders, as the whole system, are not naive at all, understood and knew very well what they were doing, and this is just another, very sophisticated kind of speculation.
Or like Terry said, no different from gambling - only at the expense of everyone else, for the profit of the financial barons.

It's not criminal, because the thing is practically completely unregulated. Enron wasn't very criminal either.

Greed is not punished by the law (as opposed to insult :)) but when its effects are bankruptcies, throwing millions honest investors in poverty (ex.Northern Rock) or bringing a whole country in recession (the United States of America),
something must surely be done to limit greed's scope of action.

Forbid all hedging might be an idea.

[dot king]

"Still even 3/4% isnt bad is it."
Richard Huxley

An architect would take 10% for example, so it seems almost reasonable . . .

[dot king]

I thought Northern Rock was a building society - it certainly used to be. In the UK such organisations existed to enable those with modest earnings to save for housing projects (personal). To have an account in a building society used to mean that you had a better chance of getting a mortgage when you wanted to buy property, often the interest rate was slightly higher than at a bank.
Gradually the building societies took on banking activities as well, issuing cheque-books on current accounts with an interest rate attached in excess of a certain minimum permanent balance. The "high street" banks had quite severe competition at one time to match their services and keep their clientèle. Now some of these building societies call themeselves simply "bank" (Woolwich, Abbey National, Halifax) but there will be a large number of (probably older generation) savers who still think of them as building societies where their money is SAFE.
THIS is the shame of it all.
Modest people who have always "put by" find themselves going down the pan because of what someone on the other side of the world did in the time it took to press a "send" button on a computer keyboard.
Hallucinant, non?

[Blendi Progri]

I will also add my Thanks, to Rocket, for the link.

Great article `tongue in cheek` by Jacque. Am a bit surprised tho, on why the Herald Tribune at the end Only describes him as:
“head of Planet-Finance He was a key aide to President François Mitterrand”

that’s well and good, but I`llto point out the name Jack Attali was made internationally famous for being the 1-st president of the “ Bank for Reconstruction and Development”,that played a key role on assisting transition of the ex-communist countries in their difficult road towards market economy. Some liked the bank \ some may have resented its role (reforms were painful, not always popular and didn’t produce fast results), but the fact is that J.A. was the 1-st president; it could have been mentioned in H.T.
---------------------
Y/day, PM Brown, on PMQ, said that in UK, EU and USA the Inflation stands at (respectively) 2-3-4% and that makes UK a very stable economy. Also he pointed out few other factors, as he should.

It is his job to try and instill some confidence, people don’t want their PM to panic. But not everything is up to him and the Government, there are so many other factors [see the link] at play that governments can do little about to influence at crunch time. if there`s no collapse, there is slow-growth. The Times reported that from this turmoil 127 houses will be repossessed in UK, daily.
-------------------------.

As an observation.
------------------
Miterrand used to call J.Attali .”my computer” I mention this cos there`s another “computer”, a British equivalent in The Times. A real walking encyclopedia, his face is the 1-st one, we see on entering blogs-page. You all may have read his article y/day
http://www.timesonline.co.uk/tol/comment/columnists/daniel_finkelstein/article3234420.ece
He was an aide to PM J. Major. I read his articles with pleasure and I think he`s one of the most erudite journalists. But that won`t be enough on its own, especially today.

I think I must stop for a simple parenthesis for anyone who doest know him (keep an eye, or read previous articles and you won`t be disappointed): when one reads from D. Finkelstein (DF from now on, to save space) its like he has written his article Only for You, feels like a one-on-one chat.
Many journalists in The Times write in an eminently sensible and highly informative manner, but very few have the gift of making the words jump of the page, making me, you, The Reader feel glad that he bought the paper, and didn’t miss today`s article!.

Some do, others try, but most cant achieve this rapport with the reader. It is called Reader Validation- what we thought before and talked amongst each-other and now, with feed-back and Blogs can make it more well known and find similarly oriented people.

Is like a gift that’s given to very few, it cant be bought or taught. It is a gift that not everyone is born with, and D.F, like very few people on print today, has it.

Charles, has the same gift/ability also, by conveying facts, ideas in an apparently “easy way” and making the you / the reader `feel` they are analyzing everything together, when in fact he does most of the dissecting while you just watch and `feel` involved.

It’s not only the feel-good-factor one gets from great writing, but a sense of a privilege, the reader senses that by the simple act of reading, alone, he becomes part of an exclusive group. Sport too, has this kinda power on people, but as something that needs massive involvement, is different to a degree; only reading as a solitary pursuit, almost a guilty one, to a point addictive, can achieve this effect on men. I am trying to put into words…something that mostly can be felt, however is not easy.

I`m sure that if one wants to argue about notoriety and titles, some may say Jack has run this and that, has this title and that one too, is known here, there and everywhere; but I think DF, Is a real equivalent based on “brain-power” alone. That’s why I took him as an example.

Every article by him has great opening, with either a parable, analogy, anecdote, a story; something or the other. A joy to read. Always he can find a precedent from UK, USA or Abroad. And one of the main things that I enjoy in his articles is that he manages to be didactic without being pedantic.

No one can claim to know everything in everything field and if I don’t understand a subject in economy, politics or both, that’s where I`ll gladly learn it from, if I have the choice- from him, sure in the knowledge that he will explain it in such terms that you will think - yep, I thought so too, I even knew it! Strange, but that’s how it is.

I won`t exaggerate when I say: reading from these types of journalists one is made to feel cleverer than he/she really is; here I have an anecdote –when someone was asked:
” what is the difference between Disraeli and Gladstone?
He replied: talking with Gladstone you understand that He is the cleverest man in the world, while talking to Disraeli you are made to feel like you are the cleverest one.
DF. isn`t the most photogenic of guys –as I seen him on Newsnight ( a BBC2 programe @10.30 PM daily ) and I personally think that his `talk` translates better in print than TV. Lol, but one cant have it all. Whoever wants to read him, will not be disappointed. Or if you are the kind of person who mostly read Journalists –not simply `the papers` I can safely say that he`s in UK`s top 5 journalistic-writers today.
----------------------/
But I`m sure Attali is just as good at writing ;)

[Valentin]

" architect would take 10% "

yeah but at least he actually DOES soemthing... :-/

"find themselves going down the pan because of what someone on the other side of the world did"

very hallucinant, and not only for individuals; countries can go down the pan because electronic transactions allow capital move out at the slightest rumour; what they call "financial capitalism" wouldn't be possible without the computer infrastructure allowing that to happen in a matter of seconds. Technological advances are far ahead of real economy, where real companies need to pay workers that still move at 6 kmph and produce at most 10 cars per day, while tens of billions can quit a market or a whole industry almost instantaneously.

Globalisation can be as bad for financial markets as it can for any other market: even if France produced enough wheat for its 60 million population, it would still be a victim of a global market price surge due to a guy blowing himself up in Tadjikistan.
Or that's total nonsense, no matter how capitalist one would be: globalized, unregulated markets go hand in hand with globalized, totally uncontrolled panic and speculation: globalization should have been preceded by strict regulations accepted and enforced by all countries. There's no place for Cayman islands in a globalized world.

[vdoxon]

Dear Charles,
once again a post about King Sarko the 1st. It seems unappropriate in a day of huge losses in the financial markets by the SocGen. This is an even more relevant insight of French society.
We have a trader with a stroke of genius, a hierarchy too snob and sufficient to check his operations, Michel Bouton is not resigning (what a maskerade his fake resignation yesterday), the Governor of the Banque de France supporting his former colleague at ENA instead of watching carefully bank activities and doing his supervision job.. Old boys networks, there is something rotten in the French finance.
there is now a general distrust in French derivative products and more generally on French banks. Michel Bouton bears a big responsibility in it, there is no point in accusing a single trader, it is internal matter inside the socgen, thre must have been a control, there was not, then Michel bouton should assume his fault. It is even said that the mini krach in european market on Monday could originitate in the Socgen sell of its dubious products. It is not a good example for the rest of the world..
What would you say Charles on such a topic, as a foreign correspondent?

[Paul Padley]

When France elected Mr Sarkozy it restored the monarchy and all the ego that goes with that choice. I recall being somewhat bemused by the result. It seemed to me from this side of the channel that the rejected alternative Segoline Royale combined beauty, strength and compassion; traditional French virtues. Mr Sarkozy seems bent on setting France at war with itself; or maybe he is simply reflecting the state of the nation. Get well soon, France! Or perhaps as a Englishman I might be excused for saying 'pull yourself together'!

[Pierre Bernardi]

Valentin,

"The 1500 km2, isn't that GREATER London? Because if yes, at the very least we should compare it to Paris + "la petite couronne", not to Paris intra muros. (also see John's remarks in that sense on previous threads)"

The Paris métro covers Paris, with a few offshoots into the suburbs. The London underground covers the whole of London. Hence the comparison, which demonstrates a far higher network density in Paris than London.

In other words, who cares about taxis? Jacques Attali's team would have been better focusing on property transaction costs, in my not so neutral opinion.

Furthermore, the pharmacy regulation was rejected out-of-hand. A finer analysis focused on the pros and cons of freeing up the analgesics market and other sundry OTCs would have produced better results. I write this having attended to Nurofen's liberalisation in France by Boots in the 90s. Such reforms require industry drivers - downwards lobbying, in other words. You can't just produce a stack of proposals out of thin air and expect to be taken seriously. Not even BCG does that.

[dot king]

" architect would take 10% "

yeah but at least he actually DOES soemthing... :-/" (Valentin)

Be assured, everyone, that the notaire "does something", be also assured that if s/he fouls up in a transaction then s/he becomes PERSONALLY responsible for any funds not checked out thoroughly, paid over too soon, not shared out properly, etc etc

I worked in property transactions for over 10 years and I can say with certainty that buying property in France is easier and safer than in the UK.
And let's not forget that when you buy property in the UK, the solicitor can rarely tell you the transaction costs in advance, they just keep going up and up.
In France, at the beginning of a transaction it's possible to ring the notaire and ask what the transaction costs will be on any purchase, and the answer will be given from a scale of costs directly related to price - including everything that goes to the government. The notaire will ask if there's a loan involved and at what amount, so the bank dossier fees can be calculated at that point too.
In France, grace au notaire, you can budget your transaction costs, no nasty surprises.
Of course some notaires are more efficient than others, many have extremely able legal clerks who are worth their weight etc.
All of the études I worked with over 10 years (with one exception where the partners seemed to be at war with each other) were highly professional, and no-one seemed to begrudge them their fees once they understood the work being done for them.

Now, architects on the other hand, come in only after the transaction is finished, but I was also responsible for an "after sales service" to translate and/or interpret, pass on instructions etc. This is where costs can just go up and up.
Usually, the architects will want to use their own "teams" of artisans who can then charge more or less what they want. Being sure of having the job, they can then inflict delays, even if there are contractual dates, knowing full well that the only next step is a lawyer. (I have seen more problems arising from architects and artisans than from notaires.)

This is NOT to say of course that architects collectively are crooks who run cartels of artisans who don't honour contracts, but they cost a lot more than a notaire and too often you don't know where the spending will stop.

[Valentin]

Paul Padley:
"When France elected Mr Sarkozy it restored the monarchy and all the ego that goes with that choice"

A question of style; otherwise, all former French presidents enjoyed the same power - huge, compared to other european heads of state. They were being discrete and using it from the shadow exactly because they didn't want to be called monarchs or something alike.
Sarkozy's manner is that he does everything transparently, into the open, while taking steps to limit that power by law.

Pierre Bernardi:
you don't answer my point: when you speak of "covering London" you mean "covering GREATER London" not just the City. Or Paris Intra-muros, your basis of comparison, is equivalent to the City.

[Valentin]

"but they cost a lot more than a notaire and too often you don't know where the spending will stop."

I've never been involved in real estate, so I probably fail to see certain things. Still architects actually build your house. Ive a hard time seeing the slightest comparable added-value from a notaire.

[Pierre Bernardi]

Valentin, no way is Paris equivalent to the city of London: the city is approximately 1 sq mile in area, or one third smaller than the 8th arrondissement.

Don't be misled by the tube map, which makes Barbican and Blackfriars seem miles apart.

[dot king]

"Still architects actually build your house. Ive a hard time seeing the slightest comparable added-value from a notaire."

builders build houses, roofers put the roof on, plumbers install the plumbing, tilers lay tiles, plasterers plaster and electricians join the wires up

archtitects draw up plans for all the foregoing, can advise on optimum use of space, the latest materials, in fact can be very useful, but you don't always need an architect whereas you need the notaire
and of course depending on the ups and downs of the housing market, the architect's "added-value" can be debatable.

the notaire's services are a constant, over the time I worked in real estate, transaction costs came down from 11% to 7%
I didn't notice any reduction in architects' charges during the same period

if you want to see "added-value" everywhere, then of course you're right - isn't that what you want to hear?
despite admitting not knowing the first thing about real estate you want the last word, well take it, that's fine by me

[azloon]

Valentin --

you post above re markets/subprime 'slime' is financial nonsense, as usual from you.

if i were your boss at a financial firm, and knew your views of free markets, i would fire you.

this history of financial markets is replete with instances of excess and malfeasance.

adopting rigid and widespread regulation is not, imo, 'a penalty which fits the crime.'

your suggestion that hedging should be forbidden is so patently outrageous that it makes me seriously wonder about your knowledge of markets. most financial entities could not function without hedging activity.

the u.s. had a tech bubble followed by a housing bubble. the latter was aggravated by large-scale issuance of packaged sub-prime debt, and overspending by homeowners based on the the escalating value of their homes.

this kind of stuff happens. it's the cost of allowing markets to operate without undue constraints. this is not ww2. no one has died, nor will they. we will all emerge from this, having learned a bit about how to approach our investments in the future.

btw, congratulations to france for producing the greatest 'rogue trader' in the history of finance. he embodies the spirit of the new france, one that thinks BIG.

i think sarko should give jerome an award for 'rolling up his sleeves' and 'putting france on the map."

[Valentin]

ouch ! :)

If you use an architect it's because you want a better house and you have the money for it - of course they can abuse it. A notaire no doubt is useful, and maybe he doesn't have the same abuse power, but he's also forced on you, so well, depends how you look at it.
Notaires are kind of fonctionnaires, so, like Mr. Bernardi praising Etienne Marcel's leftwing actions, I too support the Architects by principle: they represent the free enterprise! :))

[Pierre Bernardi]

Dorothy, the disingenuousness of your last comment is mind-boggling. Either a large share of transaction costs are tax, and their reduction from 11% to 7% has nothing to do with the notaires, or the state and the notaires are essentially the same thing, and the service might be provided by a department of the préfecture similar in function to the Cartes Grises. Which is it to be?

[Valentin]

Pierre, ok, you can't compare the City with Paris, nearly 6 miles in diameter - just as you can't compare Paris with Greater London, roughly 30 miles long and 20 miles wide.

[Valentin]

Azloon,

I know my remarks sound shocking; thing is, I am a rightwing, I'm for free markets, for a sane capitalism and a solid real-life economy, the classical liberal way.
I base on my 7 year experience on both financial risk assessment and investment funds. I currently work in backoffice and I deal with this on a daily basis.
What's your basis for dismissing my arguments, other than primary, uneducated capitalism?

[azloon]

Valentin --

i was a stockbroker, and securities trader for 25 years.

markets aren't always 'pretty."

neither are the ingredients of sausage.

you describe yourself a 'right-wing.' having glimpsed the 'french left-wing' (communist?) here on the blog, being right-wing probably puts you somewhere near the middle of the u.s. political specturm.

you would certainly get 'drummed out' of our right-wing.

[dot king]

"Either a large share of transaction costs are tax, and their reduction from 11% to 7% has nothing to do with the notaires,"
(Pierre)
This is so, but what difference?
when I started work in an estate agent's office, i remember now that the transaction costs were as high as 13% of the purchase price, within a couple of years they were reduced to 11%, then they came down maybe 7 (?) years ago to around 7%, in reality it's more like the high 6 point-something. These reductions were in government charges, I should have been more specific, but originally my points were (i) that almost everyone refers to "notaire's fees" when they are referring to a percentage of the purchase price including all taxes, stamp duty, bankloan dossier, "expertises" and lastly legal fees for the notaire's carrying out of his duties.
I have stated as well that these fees can be predicted and remain fixed from beginning to the end of the transaction, (3% - 3.5% of the purchase price agreed and noted in the compromis de vente) - I can add that if there are two notaires involved in the transaction, they split the portion that is "strictly" notaire's fees between them. (They don't care for this, but this is how it happens.)

I only mentioned architects as a way of showing that for a "profession libérale" the fees weren't all that high - and some of the transactions are for purchase of ruins or plots of land, at (all things being relative) low prices.

But since the illustration rather than the point has been taken up (why am I not surprised?), in addition to what i've already said, I'll say that IN MY EXPERIENCE it was the architect-designed houses that were often the most difficult to sell on, because they are over-personalised, often untraditional in form and style (most buyers wanting a house in the sticks want it old and traditional), but most often if the vendors wanted their money back plus a profit on the sale, then they had to add the architect's costs into the asking price, thus putting the property into a disadvantaged market slot - ie over-priced.

[Pierre Bernardi]

Valentin, you might compare central Paris to the area within the circle line or the large-scale section of the A-Z - still far fewer tube stops (47 or 54 respectively) than there are metro stations for an equivalent area.

[thinknoworpaylater]

Azloon where does one start? You often fly off into the stratosphere when someone proposes some further regulation in the light of new capitalist developments. Regulation of Capital is part of the Social Democratic system since long back. The degree is the question. Of course better regulation (not total regulation- note) might have helped. Now its too late - we have to live with the disease. For some fairly poor people the results will be serious as Dot King said. You have aseriously ruthless streak (devil take the hindmost) = I guess you are well protected. DOT KING - the notaires do a good job in that registration of property and land is secure. Many Brits have bought in Spain Italy and the old Eastern Block and suffered from a lack of regulation. So far Ive never had that problem. Thank God we have a notarial system!

[Valentin]

Azloon,

we've been there before, didn't you say your trading activities stopped years ago, while exotic derivatives and wild hedging literally exploded in the last 10-15 years?
You should have understood that I'm for a return to "old" style of finance, a bit less dematerialized and closer to the real world.
What I'm saying is that the last 15 years finance has gone totally out of line and unreasonable.

As to "rightwing", you know as well as I do that american rightwing would "drum out" not only French right but any other right in the world. I wouldn't take that right for a standard.

[dot king]

"DOT KING - the notaires do a good job in that registration of property and land is secure. Many Brits have bought in Spain Italy and the old Eastern Block and suffered from a lack of regulation. So far Ive never had that problem. Thank God we have a notarial system!" (Thinknoworpaylater)

Quite so.

[Valentin]

Ok, notaires are fundamental in property registration. But man, do you guys realize what 7% or 10% mean, for a house buyer ?? I can buy a barrack for 50 000 Euro, or a new house for 300 thousand, and the fee will go from 3500 Euro to no less than 30 000 ! What on earth can justify 26500 Euro difference, what did they do to earn it?! And don't give me the song about protecting low-income families: if the same house is sold and bought several times by the same notaire, he will be able to buy himself one just by certifying the same house over and over again, while those poor people work their asses to the bone for 30 long years to pay the price. Outrageous!

[Daniel Strohl]

Valentin,

One should not forget that the state cashes in about 50 % of the "frais de notaire" of EVERY house sold in France, whereas the notaire gets 50 % of the "frais" of every house HE has sold. He has an office and qualified personnel to maintain - this costs money. He has also huge stockpiles of archives to maintain for years.

Furthermore, he has also insurance costs - as far as I know, the notaires pay fees in a common insurance in order for the latter to be able to compensate for problems due to a dishonest notaire "pris la main dans le sac". Of course, these problems (if any ...) are usually not of the order of magnitude of Société Générale LOL !

What I find outrageous is that the state cashes in such huge sums (compared for instance to the UK, as somebody explained in the blog) in order among others to be able to maintain "des chômeurs professionnels et des malades professionnels". Of course, their percentage is small, but nevertheless, this amounts to huge sums, which are no more available to help persons who really need help (and unfortunately, there are huge numbers).

I agree with Dot and Thinknoworpaylater : Thank God, we have a notarial system. Laws are awfully complex for laymen. There are dishonest house sellers and dishonest house buyers. Thanks to the notaires, problems are avoided in most cases and if not, they stay usually within reasonable limits.

[dot king]

Valentin, I hope you earn your money without "working your ass to the bone".
You've already said somewhere that you prepare your blog material even while you should be working and haven't really the time - does your boss know this? And what are the financial consequences for the disaster that is your beloved country? Would Nicolas 1er approve of such a cavalier and irresponsible work ethic?

I suggest that you are becoming shrill and all "cage aux folles" again over a subject (notariat and real estate) of which you've admitted you know nothing.

Your posts on this are uninformed nonsense. Your opinions have no foundation nad don't make sense in application.

There's no shame in not knowing something - one doesn't have to KNOW everything.

BTW I'm surprised Dominique hasn't taken you up on using the word "fonctionnaire" (which is how you describe notaires - again quite wrongly) in a pejorative sense - yet again :)

[Pierre Bernardi]

Daniel, it's much less than 50%. More like 10%. And why does it have to be regulated?

Vous voulez le beurre et l'argent du beurre.

[Valentin]

Daniel,

I don't contest their usefulness. But I think all kind of fee expressed as a percentage of the good is not justified (and especially one as high as 10%).
Why can't the notaires just be like lawyers, or doctors and receive a proper sum (based on their insurance plus a reasonable marge) for each job. Doctors or lawyers are just as important professions and they have professional insurances too, yet you don't see them charging tens of thousands. Asking for half a wall of my house in exchange for a bureaucratical act strike me as rather unreasonable.

As to the French state and its realestate dealings, the topic is well known and not nice at all, and it comes, as any other bad thing, from the leftwing spirit. The inheritance taxes forcing people to sell the houses inherited from their parents, are another outrageous example. The new government dealt with this, and you saw as I did how the measure was received by the leftwing bien-pensant lesson givers.

[azloon]

THINK NOW --

i don't see myself as ruthless, tho my comments about markets may make me appear so.

in reality, i am a registered member of the u.s. democrat party (left of center) and have donated substantially to barack obama's presidential election campaign.

but i see myself as a financial and fiscal conservative while, at the same time, somewhat of a social liberal (tho likely not by european standards). for instance, i am in favor of 'affirmative action ' for minorities who face barriers to integration into mainstream society due to prejudice and discrimination. (btw, this idea has become somewhat passe in the u.s. and we are reverting to our darwinian bent after years of liberal empathy spawned by the 60s revolution). i favor universal health care, tho of the 'reimbursement' variety in which the 'payer' pays private physicians to treat everyone, even those who can't afford it. i favor fair unemployment benefits, but with the stipulation of limits and incentives for the recipients to find work, or retrain, with government assistance, for new occupations. ok, enough of trying to convince you i am not a heartless neanderthal.

why my deeply held beliefs on the largely unfetttered operation of free markets? simply stated, i believe government usually 'screws up' most things it involves itself in. markets, with individuals acting in their own interests (yes, even jerome, the rogue trader !) arrive at the best solutions, with the ideal approach being institutions/bourses/stock exchanges regulating themselves. the cost of this relatively 'hands off' view is an occasional meltdown of the socgen variety, and greed-induced scandals of various sorts.

i suppose my free market view is not totally dissimilar to my strong views on free speech (argued at great length on this blog). i don't see these postions as inconsistent with a social conscience. i do believe, though, that excessively generous social benefits discourage personal inititive and responsibility. so, it follows that government assistance, support and intervention should be reserved for the truly disadvantaged, or societal circumstances in which the overriding public interest demands a non-private approach. and the fewer of these exceptions, the better, in my view.

as for my personal circumstance? i am currently comfortable. but as a serious risk-taker for my entire adult life, i have had periods of near total financial destitution, and others of extreme financial comfort. for the most part, having money is better than not having it. but i can't say my personal happiness has been entirely related to having money. i look back fondly on some of the periods of financial distress, and the energy and effort required to get out of those 'holes." and my good fortune to live in an economic system whic permits such 'escape acts."

cheers

p.s. Valentin

i left stock trading five years ago. i do not pretend to be expert, or even competent, in the area of derivative financial instruments. i am, as was the 'rogue' jerome, a 'plain vanilla' stock and bond person, with a few options thrown in for excitment.

my opinions on financial subjects are worth what you pay for them. :)

[Valentin]

Dorothy,

I'm not particularly an expert, but this does not mean I don't live in the real world, I don't have friends who buy houses, take a 25 year loan for it, and then a second loan for the notarial fee. I'm not an expert on politics either, yet I can still give a citizen opinion, and I will repeat it here: *I* dont find it normal that a clerk ask for HALF A WALL of my house for doing some checks and signing a few papers, even if I don't contest the utility of his service. The point is the one initially made by Richard Huxley: the fee is FAR TOO BIG.

Maybe you never took a 30-year loan for a house yourself - or you're a billionnaire - and you don't realize what it means to give half of what you earn during 3 years for the notarial fee.

For the rest, I'll leave our fellow bloggers judge your previous post: as often the case with you, it's pure pamphleteering, hostile and without the shade of a rational argument.
The fee is too high. You don't agree with this: it's your right and privilege. I said all I had to say on this, I won't waste any more time with your petty attacks.

[Daniel Strohl]

Pierre,

"Daniel, it's much less than 50%. More like 10%"

Pierre, what do you mean with "is more like 10 %" ? I don't understand

Valentin,

"how the measure was received by the leftwing bien-pensant lesson givers".

Yes, I saw it, but I think also that the lesson-givers will however not decline to benefit from the new law if the case arises for them ...

[Valentin]

Azloon,

I can identify with many of the positions you enumerated above.

There is a conflict of interest between investors putting money on real-life companies, and financial banks living exclusively from trading. The controls cannot be left to the good will of the financial market, for which money, or stock are just numbers on a computer screen: their best interest is profit, not care for real economy or little investors; just like you can't leave universal health care to medical or insurance companies, because their interest is to save money, not to deliver the best health care.
In this cases governments must get involved and set up the rules of the game.
Like I said, I work in a back office for quite a while now, and what I see there is not some plain vanilla stock trading, but amazingly complicated schemes to make money, with a total lack of regard for investors, or real-life companies. This is normal, that's their job, there's nothing illegal. But when people can go broke and financial systems severely perturbed because of the way they distribute or hide crappy derivatives, governments must step in.
There's little surprise that
1) 3/4 of investment funds are located offshore or in the United State
2) United States and offshore locations are mostly unregulated, especially in what concerns hedge funds

[azloon]

Valentin --

whether i like it or not, i sense that increased regulation of financial markets, and hedge funds in particular, is clearly a more likely possibility that it was a year ago.

personally, i don't believe that traders are morally obligated to have any real interest in companies whose securities they trade. why in the world should they? if they can make money furiously trading them, alternately going long and short, or 'strangling or straddling' the market, then i say, more power to them.

longer-term investors often find good bargains as the result of the excesses of cynical short-term traders, as is the case now, imo. so we should be thanking them, not pillorying them.

right now, if you aren't fainthearted, you can find wonderful trading and investing opportunites, perhaps once-in-a-lifetime situations. for the uninitiated, though, it's probably best to remain on the sidelines for awhile, or turn over your investments to a professional.

incidentally, one of the great investors of the past generation is a frenchman, jean-marie eveillard. he used to run the SoGen International Fund in the u.s. for many years, a fund owned by SocGen but based in new york. eveillard retired several years ago. (i just googled him to check the spelling of his name and discovered he is back managing his old funds for a few months because his successor unexpectedly quit and the new owners of the fund, first eagle, asked him to help them find a new successor).

i put a lot of client money in his mutual fund, and slept very well at night knowing that he was smarter than 99.9% of his peers and would make good returns in good markets and bad. guys like eveillard and warren buffet are extremely rare in the topsy-turvy financial world.

[dot king]

"I won't waste any more time with your petty attacks." (Valentin)

Possibly the best news I've had in ages - but as per usual, Valentin, you are missing every single point, but this is your general mauvaise foi arguing tactic.
If you go back to Richard's reply to my post, he thanked me for my clarification about the breakdown in what he had called "notaire's fees". You are bandying percentages about and making them up as you go along.
I am not a billionaire FYI, as you suggest, but I am a home owner and when I bought my house the transaction charges were at 11% of the purchase price, of which 3.5% notaire's fees, the remaining 7.5% being govt charges. I considered it perfectly normal that the notaire should be paid for doing all the necessary searches, conveyancing, drawing up of initial contract, title deeds etc, and I have a mortgage so he also called for funds and did all the necessary debt checks before paying the previous owners.
There's a lot more work and responsibility involved than "just signing a few bits of paper", plus the personal responsibility and liability where the monies are concerned.
Since I took out my mortgage the interest rates have gone down and then up again. I have exactly the same deal I agreed to on the day I purchased the property. The notaire hasn't asked me for a centîme de plus.
The bank, however is still raking in interest each month on my mortgage, so is the insurance company - so why are they good and the notaire bad?

Perhaps the difference between myself and the people you cite who "work their butts off for 30 years" is that I have always been careful not to live outside my means, not to want more than I need, not to spend more than I can afford, and to recognise that when you ask someone for a service, you pay for it, but the govt still takes more - why aren't you complaining about that?

It isn't the notaires who decide what the taxes, duties and charges are on the legal matters they deal with, it's the government. The notaires collect and pay the charges on the clients' behalf, and of course they don't only deal in conveyancing, but a lot of small family matters for which there is a fixed fee, often modest.

You talk of a house being sold again and again and the percentage of the notaire's fee going up with the plus-value, but the part that is government taxes also goes up - and it must be remembered that some people don't buy houses to speculate with, they actually want to live in them - for a long time. Not everyone has their eye on the main chance every minute of their life.

When I bought, I was working in real estate, do you think I allowed myself to be cheated, or do you have the generosity of spirit to credit me with getting the best deal possible?

In one of you posts, you asked why notaires couldn't be like lawyers. Huh? I've recently accompanied a British couple, as translator/interpreter through a court case, which they won, so all charges were paid by the opposants, apart from the lawyer's "honoraires" which were calculated on a percentage basis! They didn't mind paying this as he had advised them well and they had won on appeal, but it was still a percentage on the funds he recuperated for them.

I don't know why you've chosen to rail against notaires in such a virulent way, I feel sure if someone else had made the points I've made you wouldn't have been so insistent in your opposition.

[Pierre Bernardi]

Daniel, I mean that much more than half the transaction costs are tax. Above €30000, notarial fees are 0,825% - closer to 10% of total transaction costs than 50%.$

The question is, if Sarkozy is serious about deregulating France, why not start with the obvious?

[Daniel Strohl]

Pierre,

Thanks for the info. I supposed of course that the notaires' fees would not stay proportional indefinitely to the sales amount, but that they would decrease sharply with the amount above a given level. However I didn't know that level, nor the exact modalities.

Of course, Sarkozy (in my opinion, he is serious about deregulating France) should start with the obvious. But it is also obvious that "les caisses sont vides"; therefore, choices have to be made regarding which taxes should be lowered first in order to get the best possible result regarding a sound stimulation of the economy. Choix quasiment cornélien ...

[Valentin]

"so why are they good and the notaire bad?"

Banks are very bad.

"and the percentage of the notaire's fee going up with the plus-value, but the part that is government taxes also goes up -"

Government is very bad also. Taxes in France are confiscatory - for everybody except the smigards.

"it must be remembered that some people don't buy houses to speculate with"

More and more people sell when their contract allows them too, ie after 5 to 10 years - not to speculate, but for family reasons, more kids, job change etc.

"lawyer's honoraires which were calculated on a percentage basis"

Does this happen on a house too? Then out with the lawyers also! They're worse than banks or government anyway.

"I don't know why you've chosen to rail against notaires in such a virulent way"

Because I plan to buy a house, go figure :)

"I feel sure if someone else had made the points I've made you wouldn't have been so"

I promise you that isn't true. btw I don't "prepare" my post "material", this blog isnt my second job and I never write for an audience - especially now, that my fan club so cowardly dumped me :)

"this is your general mauvaise foi arguing tactic"

Sigh..some people just can't breath without stinging.. your post would've been too civil without that cute introduction.. you're like those television series, they must put a shower scene in every episode to keep the rates up despite the lame screenplay :)

(that mus'be worth a nice little insult like only you or Az can pull out! whazzit gonnabe this time? surtout dont hold yourself back :)

( 3,5% is still a lot - which is what R.Huxley concluded btw)

[dot king]

Valentin, you still have a fan club, but the person wisely remains anonymous! ;}

[Valentin]

Alas that was still me ! I'm my own fan club it seems, these days... how sad, how pathetic !...
Oh well.
Value is rarely recognized, Conan Doyle said it:
http://www.brainyquote.com/quotes/quotes/a/arthurcona125358.html

:D

[dot king]

Valentin, hmm, yes, I had my little idea about it all along . . . ;0

[Maggie G]

Well anyway, I have learned a lot about notaires that I didn't know before, so thanks to you all -- including Valentin, because if he hadn't resisted so strongly, Dot would not have continued to provide more examples and explanations.

So in the end we have been given a very good picture of the services provided by a notaire. Thanks Daniel, Valentin, Pierre, and especially Dot.

[Valentin]

Why thank YOU Mags, here I am in the devil posture :) Oh well. What can I say, at least I'm useful for once!

(ps1 I still think 3.5% is a lot, which was the only point I made the whole time; my statement about the repeated certifying of the same house which in time brings our notaire a house in itself, still stands)

(ps2 I think I got a clue as to where my fan club went; they weren't worthy of the honour anyway :))

[Daniel Strohl]

Valentin,

Re : Conan Doyle

There is also a well known quote from Corneille :

"Aux âmes bien nées, la valeur n'attend point le nombre des années"

How old are you, Valentin ? LOL !

[Valentin]

LOL not so so young anymore Daniel, but you're right, I had to bear that weight from early childhood :))

[Lily]

Daniel, he's still 34 or already 35, psst... :)

[dot king]

"Because I plan to buy a house, go figure :)"

"ps1 I still think 3.5% is a lot,"

(Valentin)

Hey, Valentin, if you still think 3.5% is a lot, just wait 'til you see what the estate agent plans to take off you! It'll be at least double that - and the irony is that you're better off opting to pay agency commission yourself (rather than have the vendors pay it as per le mandat de vente) as it will cost you less in (ahem) transaction costs! And of course your point which you say still stands on the resale of the house, also applies to the estate agent - in fact I'm very surprised no-one took up the cudgels against estate agents (I was a salaried administrator - never an estate agent -OK?)

Seriously, if you want the how-to on cost-saving and avoiding pitfalls off-blog, then say the word and I'll pass something on through Charles - or if you want it blogged, then I can do that, but not to get into endless nitpicking - in some ways each transaction is different - but there are ways of saving on the costs - perfectly legally. I would just give the same advice I gave clients over the years - and advice is for taking or leaving :).

[Valentin]

I do want the how-to in cause, even if the said operation is not for toute de suite, but more like the end of the year. I promise not to nitpick about it :P