An "almost historic" compromise in London.

The leaders of the industrialized nations (more than twenty of them, at last count, but the low-ball term G20 has stuck) have packed up and left London with their respective retinues, and they'll each try to make their case back home that they got what they wanted and needed from this week's summit.

The governments of France and Germany went into this with a unified agenda. They wanted everyone to agree that the "shadow banks," i.e. the hedge funds, were the real problem, and that a new international scheme of regulation or at least of ensuring the transparency thereof will be some part of the solution.

In April 2005, during the national election campaign in Germany, the chairman of the German Social Democratic Party, Franz Müntefering, referred to hedge funds as "locusts." This has struck a chord with the public there, and Germany has been on a Mormon-like look-out for chances to shoo some seagulls in the locusts' direction ever since.

France is a more recent convert to the regulate-hedge-funds cause, but the country has long bridled at the dominance of the "Anglo-Saxons" of both London and New York in international finance, so this theme comes naturally enough to the fore there.

So, with the big conference in the history books, what did the Merkel/Sarkozy alliance achieve?

The G20 has agreed to turn the Financial Stability Forum, which has in essence been a wonkish study group, into the Financial Stability Board, which will work with the IMF "to identify and report on macroeconomic and financial risks and actions needed to address them." It still sounds rather like a wonkish study group to me.

There's also a general understanding that the countries of the G20 should extend regulation and oversight to all systemically-important financial institutions, instruments and markets, including the largest hedge funds.

In a somewhat related move, the G20 has agreed to crackdown on offshore tax havens and secret account. The wording of THAT bit of the communique darned near blew apart the necessary facade of amity. The Organization of Economic Cooperation and Development (OECD) was expected to release a list of rogue jurisdictions that have refused to co-operate with international efforts at financial transparency and other good things. The G20 communique said that the participating nations stood ready to "deploy sanctions" on behalf of their "public finances and financial systems." It also said that it would "take note" of the upcoming G20 list.

China, which is not a member of the OECD, objected to language in the communique that would have made it sound like the G20 was deferring to that body. President Obama brokered compromise language to the effect that the G20 would "take note" of the OECD list. The language was weak enough for China to accept, yet still the threat of sanctions against somebody-or-other was strong enough to make France and Germany happy.

All in all, the results are rather paltry. I'm happy about the fact that they are paltry. I don't think hedge funds are part of the problem and I don't think characteizing them as "locusts" is any part of the solution.

My point at the moment though is that I don't believe that in their heart of hearts either Merkel or Sarkozy believes that they've accomplished very much in the way of creating a grand new regulatory system on the global plane. Yet for their domestic audiences they need to pretend that they've accomplished a good deal.

Accordingly, Chancellor Merkel has put out a statement to the effect that the meeting has found "a very good, almost history, compromise in a unique crisis."

Almost historic? That blows my mind. Everything past is in some sense "history," and surely any meeting of more than 20 heads of states is "history" even in the narrowest of kings-and-battles understandings of the term. So this historic convocation produced an "almost historic" compromise?

I'm almost amused.