Sandra Navidi - SuperHubs - How the Financial Elite and Their Networks Rule our World

I attended the IMF meetings for the first time in October 2008, three weeks after the Lehman debacle and at the height of the financial crisis. Over the course of three days, I participated in several meetings at the IMF, the International Institute of Finance, the Group of Thirty, and various other think tanks. I knew very few people and only recognized the most senior ones from the media, such as Dominique Strauss-Kahn, Jean-Claude Trichet, and a few big bank CEOs like Joe Ackermann of Deutsche Bank. Throughout the weekend, I met a couple hundred people, and it was impossible to remember all of them. Often I was unfamiliar with the institutions they worked for and had no concept of how different entities were interlinked. It has taken me several years to become sufficiently acquainted with these vast IMF-related networks, learn the names of their members, and grasp the myriad institutional interconnections. It is like assembling a complicated puzzle consisting of countless unfamiliar pieces—the organizations, the individuals comprising them, and their respective networks—and fitting them together takes time to figure out.

The financial system is complex and can only really be fully understood, if at all, in its entirety. Because it is impossible for laypeople to know all the parts of this network, it is hard for them to get a true grasp on it. It also makes it difficult to explain because the theory is so abstract and dry. The resulting opaqueness of the system has provided ample fodder for conspiracy theories. However, in following the behind-the-scenes discussions of policy makers, I was disabused of any notion that they were using their superior knowledge to execute a master plan. In the wake of the financial system’s collapse, I was perplexed at how little perspective and control over the system they had. Quite to the contrary, they seemed disconcertingly panicked and overwhelmed.

IMF Meetings in Istanbul: Dancing on the Titanic

The IMF and related meetings can be dull and the mood somber, but they are often hosted in magnificent locations with no expenses spared.

For two years in a row, the meetings take place in Washington, D.C., before rotating to an international location. Remote locations entail cumbersome and time-consuming travel, and in that respect, these meetings are inefficient. But this inefficiency provides them with the ultimate efficiency: Because participants invest so much effort into joining these gatherings, they tend to focus more seriously on them. People share experiences that bind them—whether it’s a tediously long plane ride or getting lost in an unknown city. Over time, these bonds grow stronger and, in many cases, mere business relationships evolve into friendships.

In October 2009, when the crisis was in full force and many banks’ survival was in question, the meetings occurred in Istanbul. In spite of the dire economic situation, financial institutions had taken up pricey headquarters at the most exclusive hotels, including the magnificent Çirağan Palace located on the scenic shores of the. Built in the 1800s as an Ottoman palace, it looks like something out of The Arabian Nights. Its grand architecture and baroque interior design feature marble columns, intricate marquetry, and heavy gold furniture. The world’s financial elite arrived on the adjacent helicopter landing pad and gathered in elegant sun-drenched meeting rooms and on beautiful, panoramic terraces. It was surreal to see the same players from all over the globe regularly reappearing in formation at the same time in different parts of the world.

Many attendees discussed whether such expenses were appropriate in view of the fragile financial system and the fact that many of the splurging banks might need taxpayer support. However, reality had not quite caught up with many bankers, who still seemed frozen in the past. Bookings had been made far in advance, there was only a limited number of choices regarding accommodations, and bankers felt pressured to impress their clients and maintain appearances. All the banks were in the same predicament, and it was inconceivable for any of them to lead by example and open up shop in a low-rent location. Besides, any worries of an impending collapse of the system and possibly of one’s own institution were much easier to bear in splendid surroundings with champagne and caviar.

The meetings wove together top politicians, central bank governors, bank CEOs, and fund managers. Prime Minister Erdogan (now president) keynoted at the gala of the International Institute of Finance in the grand ballroom of the Çirağan Palace. The event was so formal, festive, and glamorous that it felt more like a society ball than a dinner of bankers. Turkish Central Bank Governor Durmuş Yilmaz and Deputy Prime

Minister and Minister of State Ali Babacan circulated nonstop between events, meetings, and receptions all over town. One of the most breathtaking receptions was hosted by Commerzbank at the truly spectacular Esma Sultan Palace. The antique three-story waterfront mansion had been tastefully restored, its ambiance further enhanced with elaborate lighting. Everyone who was anyone was in attendance, even though the palace was located in an old, narrow part of the city that required a time-consuming commute. Commerzbank pulled out all the stops and spoiled its guests with haute cuisine and fine wines.

The Deutsche Bank reception featured the highest concentration of prestigious guests, which was at least partially due to CEO Joe Ackermann’s clout. Among the guests were Turkish businessman Kahraman Sadikoğlu, who invited Ackermann; Caio Koch-Weser, vice chairman of Deutsche Bank; Axel Weber, at the time president of the Bundesbank; their wives; and a few other guests—including lucky me—onto Ataturk’s yacht, the Savarona. We received a private tour of one of the largest yachts in the world, which Sadikoglu had paid to restore, and discussed the state of finance while the men smoked cigars and one of the guests played the piano.

I was exhausted, but it was impossible to escape the gathering as the only way to reach the shore was by way of a dinghy. So another long evening concluded at three o’clock in the morning, but often such unique private gatherings forge tighter personal bonds. Eventually the overstimulation of these conferences causes mental exhaustion. I usually have what I call a “conference curve.” On the first day, I am a bit shy and still busy absorbing impressions. On the second and third days, I surge to top form. And on the fourth day, I generally start to feel fatigue.

POWER SUMMIT: THE BILDERBERG CONFERENCE

Perhaps the most exclusive gathering of the world elite is the Bilderberg conference. It was founded in 1954 to foster transatlantic dialogue and named after its first meeting place, the Hotel De Bilderberg in the Netherlands. The three-day event is strictly by invitation only, and about 150 of the world’s most powerful people attend, among them many participants of the financial sector. Heads of state mingle with diplomats, generals, CEOs of blue chip companies, policy makers, aristocrats, thought leaders, and journalists. Past attendees include central bankers such as Mario Draghi and Ben Bernanke; finance ministers George Osborne, Jeroen Dijsselbloem, Hank Paulson, Tim Geithner, Larry Summers, and Robert Rubin; bank executives such as Lloyd Blankfein and Robert Zoellick of Goldman Sachs, Paul Achleitner of Deutsche Bank, and Ana Botín of Banco Santander; and big investors such as Philipp Hildebrand of BlackRock, Peter Thiel of Thiel Capital, Ken Griffin of Citadel, Roger Altman of Evercore, and Henry Kravis and General David Petraeus of KKR.

The program remains undisclosed, and discussions are subject to the Chatham House Rule,5 according to which participants may use the information received, but are prohibited from revealing the speaker’s identity and affiliation, or that of any other participant for that matter. Attendees may neither bring partners nor personal assistants, and security detail is kept at a distance. Since participants do not attend the private meetings in their official capacity, they are able to interact more informally, affording them the luxury to brainstorm and speak freely. Constantly in the public eye, they usually must be vigilant of what they say, because their every utterance is scrutinized and can move markets. At Bilderberg, they can interact with their peers in a relaxed atmosphere and get a better sense of geoeconomic issues, impending developments, and business opportunities. I have never attended but know many people who have. Participants take the confidentiality surprisingly seriously, although most of them do drop hints here and there, adding pieces to the puzzle. The consensus seems to be that the Bilderberg meetings are far less exciting than commonly supposed, as nothing politically actionable and implementable is decided.