This makes a great conspiracy story assuming the
clowns could actually conspire in the first place. The real pressure on the global banking
system is the outright failure of progressive concentration of financial asset
beyond any reasonable capacity of the ‘market’ to handle the increasing size. Whenever it breaks generally or locally,
these assets simply lack a buyer able to handle the size.
The solution is a progressive de-sizing made
mandatory everywhere.
This will not halt a large worthy oversize
transaction, but it will have to be carefully underwritten and sold as they
should be anyway. At the same time, we
can demand that no single entity can own more than ten percent of a
derivative. These are both serious constraints,
but the equity business thrives on just that.
Making the World Safe for Banksters: Syria in
the Crosshairs
Iraq and Libya have been taken out, and Iran has been heavily
boycotted. Syria is now in the crosshairs. Why? Here is one overlooked
scenario.
In an August 2013
article titled “Larry Summers and the Secret
‘End-game’ Memo,” Greg Palast posted evidence of a secret
late-1990s plan devised by Wall Street and U.S. Treasury officials to open
banking to the lucrative derivatives business. To pull this off required the
relaxation of banking regulations not just in the US but globally. The vehicle
to be used was the Financial Services Agreement of the World Trade
Organization.
The “end-game” would
require not just coercing support among WTO members but taking down those
countries refusing to join. Some key countries remained holdouts from the
WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks
are largely state-owned; and “usury” – charging rent for the “use” of money –
is viewed as a sin, if not a crime. That puts them at odds with the Western
model of rent extraction by private middlemen. Publicly-owned banks are also a
threat to the mushrooming derivatives business, since governments with their
own banks don’t need interest rate swaps, credit default swaps, or
investment-grade ratings by private rating agencies in order to finance their
operations.
Bank deregulation
proceeded according to plan, and the government-sanctioned and -nurtured
derivatives business mushroomed into a $700-plus trillion pyramid scheme.
Highly leveraged, completely unregulated, and dangerously unsustainable,
it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking
a large segment of the global economy with it. The countries that managed to
escape were those sustained by public banking models outside the international
banking net.
These countries were not
all Islamic. Forty percent of banks globally are
publicly-owned. They are largely in the BRIC countries—Brazil, Russia,
India and China—which house forty percent of the global population. They
also escaped the 2008 credit crisis, but they at least made a show of
conforming to Western banking rules. This was not true of the “rogue” Islamic
nations, where usury was forbidden by Islamic teaching. To make the world safe
for usury, these rogue states had to be silenced by other means. Having failed
to succumb to economic coercion, they wound up in the crosshairs of the
powerful US military.
Here is some data in
support of that thesis.
The End-game Memo
In his August 22nd article, Greg Palast posted a screenshot of a
1997 memo from Timothy Geithner, then Assistant Secretary of International
Affairs under Robert Rubin, to Larry Summers, then Deputy Secretary of the
Treasury. Geithner referred in the memo to the “end-game of WTO financial services
negotiations” and urged Summers to touch base with the CEOs of Goldman Sachs,
Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom
private phone numbers were provided.
The game then in play
was the deregulation of banks so that they could gamble in the lucrative new
field of derivatives. To pull this off required, first, the repeal of
Glass-Steagall, the 1933 Act that imposed a firewall between investment banking
and depository banking in order to protect depositors’ funds from bank
gambling. But the plan required more than just deregulating US banks.
Banking controls had to be eliminated globally so that money would not flee to
nations with safer banking laws. The “endgame” was to achieve this global
deregulation through an obscure addendum to the international trade agreements
policed by the World Trade Organization, called the Financial Services
Agreement. Palast wrote:
Until the bankers began
their play, the WTO agreements dealt simply with trade in goods–that is, my
cars for your bananas. The new rules ginned-up by Summers and the
banks would force all nations to accept trade in “bads” – toxic assets like
financial derivatives.
Until the bankers’
re-draft of the FSA, each nation controlled and chartered the banks within
their own borders. The new rules of the game would force every nation to
open their markets to Citibank, JP Morgan and their derivatives “products.”
And all 156 nations in
the WTO would have to smash down their own Glass-Steagall divisions between
commercial savings banks and the investment banks that gamble with derivatives.
The job of turning the
FSA into the bankers’ battering ram was given to Geithner, who was named
Ambassador to the World Trade Organization.
WTO members were induced
to sign the agreement by threatening their access to global markets if they
refused; and they all did sign, except Brazil. Brazil was then threatened with
an embargo; but its resistance paid off, since it alone among Western nations
survived and thrived during the 2007-2009 crisis. As for the others:
The new FSA pulled the
lid off the Pandora’s box of worldwide derivatives trade. Among the
notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin
had been Co-Chairman) worked a secret euro-derivatives swap with Greece which,
ultimately, destroyed that nation. Ecuador, its own banking sector
de-regulated and demolished, exploded into riots. Argentina had to sell
off its oil companies (to the Spanish) and water systems (to Enron) while its
teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the
Eurozone dove head-first into derivatives pools without knowing how to swim–and
the continent is now being sold off in tiny, cheap pieces to Germany.
The Holdouts
That was the fate of
countries in the WTO, but Palast did not discuss those that were not in that
organization at all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and
Iran. These seven countries were named by U.S. General Wesley Clark
(Ret.) in a 2007 “Democracy Now” interview as
the new “rogue states” being targeted for take down after September 11, 2001.
He said that about 10 days after 9-11, he was told by a general that the
decision had been made to go to war with Iraq. Later, the same general said
they planned to take out seven countries in five years: Iraq, Syria, Lebanon,
Libya, Somalia, Sudan, and Iran.
What did these countries
have in common? Besides being Islamic, they were not members either of the
WTO or of the Bank for International
Settlements (BIS). That left them outside the long
regulatory arm of the central bankers’ central bank in Switzerland. Other
countries later identified as “rogue states” that were also not members of the BIS included
North Korea, Cuba, and Afghanistan.
The body regulating
banks today is called the Financial Stability Board (FSB), and it is housed in
the BIS in Switzerland. In 2009, the heads of the G20 nations agreed to be
bound by rules imposed by the FSB, ostensibly to prevent another global banking
crisis. Its regulations are not merely advisory but are binding, and they can
make or break not just banks but whole nations. This was first demonstrated in
1989, when the Basel I Accord raised capital requirements a mere 2%, from 6% to
8%. The result was
to force a drastic reduction in lending by major Japanese banks, which were
then the world’s largest and most powerful creditors. They were
undercapitalized, however, relative to other banks. The Japanese economy sank
along with its banks and has yet to fully recover.
Among other
game-changing regulations in play under the FSB are Basel III and the new
bail-in rules. Basel III is slated to impose crippling capital requirements on
public, cooperative and community banks, coercing their sale to large
multinational banks.
The “bail-in” template
was first tested in Cyprus and follows regulations imposed by the FSB in 2011.
Too-big-to-fail banks are required to draft “living wills” setting
forth how they will avoid insolvency in the absence of government bailouts. The
FSB solution is to “bail in” creditors – including depositors – turning
deposits into bank stock, effectively confiscating them.
The Public Bank Alternative
Countries laboring under
the yoke of an extractive private banking system are being forced into
“structural adjustment” and austerity by their unrepayable debt. But some
countries have managed to escape. In the Middle East, these are the targeted
“rogue nations.” Their state-owned banks can issue the credit of the state on
behalf of the state, leveraging public funds for public use without paying a
massive tribute to private middlemen. Generous state funding allows them to
provide generously for their people.
Like Libya and Iraq
before they were embroiled in war, Syria provides free education at all levels and
free medical care. It also provides subsidized housing for everyone (although
some of this has been compromised by adoption of an IMF structural adjustment
program in 2006 and the presence of about 2 million Iraqi and Palestinian
refugees). Iran too provides nearly free higher education and primary health care.
Like Libya and Iraq
before takedown, Syria and Iran have state-owned
central banks that issue the national
currency and are under government control. Whether these countries will succeed
in maintaining their financial sovereignty in the face of enormous economic,
political and military pressure remains to be seen.
As for Larry Summers,
after proceeding through the revolving door to head Citigroup, he became State
Senator Barack Obama’s key campaign benefactor. He played a key role in the
banking deregulation that brought on the current crisis, causing millions of US
citizens to lose their jobs and their homes. Yet Summers is President Obama’s
first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He has
proven he can manipulate the system to make the world safe for Wall Street; and
in an upside-down world in which bankers rule, that seems to be the name of the
game.
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