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Greed Kills

A Mistral-class ship in harbor
A Mistral-class amphibious assault ship in harbor in Toulon, France. Photo by Olivier Duquesne

On May 4, 1982, a French-made Exocet missile skimmed above the South Atlantic and struck the British destroyer HMS Sheffield amidships, killing 20 sailors and starting a fire that eventually took the ship to the bottom.

The Sheffield was part of the task force London dispatched to recover the Falkland Islands after Argentina invaded the British territory. The missile came from an Argentine Naval Aviation patrol aircraft. Another Exocet sunk a British cargo ship that, like Sheffield, was part of the British Falkland task force. Yet another Exocet that had been fired at Sheffield missed its target. Another had been used in testing. Of the five Exocet missiles Argentina’s military junta received prior to the islands’ invasion, only one was left in its arsenal.

The Argentines were desperate to restock their most feared weapon. The British were equally desperate to stop them. An eight-man Special Air Service team was dispatched on a near-suicidal mission to attack an Argentine air base on Tierra del Fuego. Plagued by bad luck and logistical mistakes, the SAS unit never even made it into Argentina, though it did make it to safety, eventually hitching a ride on a Chilean logging truck.

Elsewhere, the British launched a worldwide intelligence campaign to intercept Exocet shipments. They even considered, but rejected, the idea of attacking a suspected shipment that was on the airport tarmac in Recife, Brazil. But British Prime Minister Margaret Thatcher reserved most of her considerable fury for French President Francois Mitterrand, who seemed more concerned with preserving the French arms business than with supporting his NATO ally Britain in its effort to recover territory Argentina had seized from it by force. The determination to directly or indirectly resupply Argentina, Thatcher warned, could poison the Anglo-French relationship - or even tear NATO apart.

Now jump ahead a generation. The French are once again on the verge of supplying a potent weapon to the nation posing the greatest immediate threat to the North Atlantic alliance. France wants to provide Russia with two Mistral-class amphibious assault ships, designed for the specific purpose of launching invasions from the sea. Invasions of places like Georgia, where Russian forces arrived in 2008, supporting separatists loyal to Moscow in their attempt to slice off two portions of turf. And of places like Crimea, which Russian forces surreptitiously seized from Ukraine, and which Russian President Vladimir Putin and his irredentist tovarishchi have chosen to keep for themselves.

Neither Georgia nor Ukraine are NATO members, but Poland and its Baltic neighbors are. Article 5 of the NATO charter commits each member to treat an attack on one as an attack on all. If the two Mistrals are someday called to action on the coast of Lithuania, for example, France will have supplied the Russians with the weapons they used to project their forces from the sea against a loyal NATO member. While no one, including the French government, can know whether this will happen, the fact that such a scenario is plausible should set red lights flashing in Paris.

Yet France’s president, Francois Hollande, seems determined to continue, full-speed ahead. The French have said that the sale will go forward unless further European Union sanctions against Russia come into effect.

The problem is that we have no Margaret Thatcher in sight to counter this folly. The U.K. instead has David Cameron, who, like Hollande, chose to meet with Putin during D-Day commemorations in France earlier this month. And the United States has President Obama, who also attended, though he merely granted (or was granted) an informal 15-minute conversation with Putin.

Obama has tried, like Thatcher before him, to persuade a French president not to arm the prospective enemy. Obama, however, lacks the flair of Thatcher and her contemporary, Ronald Reagan, for promising serious consequences and actually delivering them. The United States also is in a poor position to ask France to do much of anything at a moment when prominent French bank BNP Paribas is on the verge of being penalized $10 billion - prosecutors have floated numbers as high as $16 billion, but this has apparently served as a scare tactic - for the serious offense of violating financial sanctions. Not sanctions against what we might call a front-line threat, such as North Korea or Iran, however; the sanctions violations primarily involved Sudan.

Without minimizing Paribas’ misconduct, a $10 billion penalty has no relationship to the alleged offense. Instead, it serves as a reflection of prosecutors’ apparently insatiable desire to play “can you top this?” when it comes to penalizing financial institutions. JPMorgan paid $13 billion last year to settle allegations of real or imagined offenses. Reportedly Bank of America is in talks to pay $12 billion, on top of $6 billion already paid, for the sin of having issued and sold mortgages during the last decade, at a time when everyone in the financial world called on institutions to issue and sell mortgages.

Meanwhile, the European Central Bank is trying to get banks back into the business of making loans. Earlier this month, the ECB announced an unprecedented move for a major central bank: It will actually charge money, rather than paying interest, on funds deposited with it by commercial banks. The central bank wants banks to resume lending to businesses, backed by business assets. Those loans could then be packaged into securities and sold in the financial markets - just as mortgages made a decade ago were packaged and sold. Banks are now being asked to pay penalties in the tens of billions of dollars for doing just that, because it turns out that when you make loans, not all of them get repaid.

No wonder the ECB and other central banks are having trouble getting banks to lend money to all but the most seemingly riskless customers. And no wonder that seven years after the financial crash, economic growth remains anemic in the United States and almost nonexistent in Europe. You just can’t do business without taking a degree of risk. But overzealous regulators sent a message that banks received loud and clear in the wake of the 2008 crisis: the price tag that comes with that risk is now astronomically high. The fact that banks are taking regulators at their word is beginning to have serious political, as well as financial, ramifications internationally.

Regulatory greed is killing economic growth and job opportunities, and thus the financial futures of millions of people on both sides of the Atlantic. Economic greed may also end up killing actual soldiers and civilians, if the Mistrals France plans to sell to Russia are ever employed for the purposes for which they were designed, built and bought. Those soldiers and civilians could potentially be citizens of NATO countries, France’s own allies.

Greed kills, in more ways than one.

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