“The powers of financial capitalism had another far
reaching aim, nothing less than to create a world system of financial
control in private hands able to dominate the political system of each
country and the economy of the world as a whole.” —Prof. Caroll
Quigley, Georgetown University, Tragedy and Hope (1966)
Iraq and Libya have been taken out, and Iran has been heavily
boycotted. Syria is now in the cross-hairs. 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 22
nd 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.
________________________
Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling
Web of Debt. In
The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are
http://WebofDebt.com,
http://PublicBankSolution.com, and
http://PublicBankingInstitute.org.
