- There are those who have been talking about a single
global regulator for years and as a result of the 2008 Credit Crisis, there
have been calls to protect you and me from future banking crises through
new financial reform. However, we had better consider its real impact.
It is not about protecting you and me it is about changing the national
regulatory laws of America to conform to a world governmental system and
globalizing the last barrier separating individual nation-states. It is
about a major power grab of America's financial assets. As a result of
the high stakes, we should ask if Republicans are being told they had better
vote for financial reform so we don't have another September/October, 2008?
All of a sudden Senators McConnell and Shelby have had a sea change and
are willing to work together on changing our banking system. It is a ruse,
a con game when they say they are making the system safer. Let us review
some necessary points.
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- As we consider the events of the past 18 months, we are
confronted with a great deal of action, uncertainty, negativity, and pillaging
of wealth. In order to understand where we are today and where we are
going, we need to review the chicanery of the past eleven years.
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- One of the keynote events was the repeal of the 1933
Glass-Steagall Act in 1999 which we were told was necessary for banking
modernization. In June 1999 then Treasury Secretary Robert Rubin said,
"Reforming international financial institutions, strengthening the
international financial architecture and maintaining open markets are not
simply questions of economics but politics." That same year, after
a great deal of media and stock market hype and hysteria, Congress passed
the Gramm-Leach-Bliley Act-GLB which tore down all the protections that
the Glass-Steagall Act had put in place, including the separation of commercial
banking from investment banking to protect the investor. It also allowed
for U.S. banks to become "financial conglomerates" meaning they
could expand their services to sell insurance, stocks and bonds and perform
the once outlawed investment banking services, which opened the doors for
derivatives, now at the heart of the problem. It also allowed for American
banks, insurance companies and brokerage firms to buy foreign banks, insurance
companies and brokerage firms while allowing them to come in and buy ours.
Were there any regulatory changes? No. In fact it was known that the
SEC was not beefing up their forces to police and monitor the newly expanded
financial architecture.
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- On the international level, that same year, at the Bank
for International Settlements-BIS in Basle, Switzerland, set up a new global
entity. Called the Financial Stability Forum-FSF, it was comprised of regulators
from the Group of Seven countries with a mandate to police the global level
for problems. In an interview with Svein Andressen, its managing director,
he told me in response to a question I raised in 2000 that "there
was no guarantee" that they would be successful. Today, as a result
of the G20 meetings in 2009, it has been reinvented into a larger body
comprised of regulators from the G20 countries. It truly is more of a
global regulator than it once was with only seven countries.
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- At the BIS and other think tanks there was a myriad of
white papers calling for a consolidation of regulators and to change the
national regulatory laws, now that the U.S. had passed GLB. Federal Reserve
Board Vice Chairman Donald L. Kohn gave a speech in Sea Island, Georgia
in May, 2007 in which he discussed the rise of credit derivatives and their
marriage with securitization technologies called collateralized debt obligations-CDOs.
While stating that "these developments have made the financial system
more resilient to shocks", he also said,
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- We need to accept that accidents will happen-that asset
prices will fluctuate, often
- over wide ranges and those fluctuations will be driven
in part by trading strategies, by the cycles of greed and fear that have
always been with us and by the ebb and flow of
- competition for market share. The fluctuations will
result in redistributions of wealth,
- and on occasion, will confront us with financial crises.
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- He then went on to explain some of the changes that needed
to be made and commented,
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- In all of this work, coordination and cooperation among
regulators, domestically and internationally are critical because the same
firms are the core firms in each of the principal global financial centers.
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- Lastly, he stated, "In sum, there are good reasons
to think that financial innovation over the past few decades, including
the emergence and growth of the credit derivatives markets, has made the
financial system and the economy more resilient."
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- That year saw a number of headlines and articles calling
for a "global regulator". One written by Kenneth Rogoff read,
"No grand plans, but the financial system needs fixing." Another
headline read, "Wanted: a guardian of the world's financial system."
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- In 2007, there was what was considered at first a minor
problem in the subprime mortgage market-nothing to worry about. The market
dropped from a high in July, 2007 of 14,022 to 12,518 that August before
recovering that same year in October to the 14,198 level, an all time high.
The Dow had risen 94% or 6,878 points since the low point of October 9,
2002. By August, 2008 the market had dropped to 11,483.
-
- Hank Paulson, our second treasury secretary from Wall
Street, had issued his "Blueprint for a Modernized Financial Regulatory
System" in March, 2008. It called for a total revamping of all of
America's assets that were not under control of the Federal Reserve: the
entire mortgage industry, banks that were not regulated by the Fed, credit
unions, state chartered thrifts, and the insurance industry. The Fed was
at the center of all the newly proposed commissions. In other words, a
total take over of financial assets not under their control was at stake.
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- Is anyone putting two plus two together? The Federal
Reserve is a private corporation so they do not issue an annual report
and no one knows who their shareholders are. This company controls the
entire monetary system of the United States which means they create the
ups and the downs in the stock market and business cycle. They control
credit. If they want to destroy the small businessman, they just stop
issuing credit-like they are doing now. The Paulson Blueprint was blatant
about them seizing control over all the other major financial assets they
don't control.
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- September 2008 found Congress in a heap of distress.
When you consider the bombardment that we all went through, we have never
seen or experienced anything like this since the British bombed the Baltimore
Harbor in 1814 which is where the term "shock and awe" first
came from. In September, we saw: the U.S. government seize Fannie Mae
and Freddie Mac, Lehman Brothers collapsed and Merrill Lynch was purchased
by Bank of America, AIG was bailed out with government money, Morgan Stanley
and Goldman Sachs converted to bank holding companies, the government seized
Washington Mutual which became the largest banking failure in the U.S.,
and Wachovia was taken over by Wells Fargo.
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- In the midst of shock and awe, the front page of the
September 18, 2008 Washington Post read "Stocks Plummet as Lending
Freezes Up". It said that "Lawmakers left on the sidelines as
Fed, Treasury take Swift action." The text read,
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- The frenetic pace of the financial crisis has forced
the Treasury Department and Federal Reserve to make rapid-fire decisions
in recent days, leaving Capitol Hill lawmakers effectively impotent-and
frustrated. Lawmakers on both sides have expressed concern yesterday that
have had had no control over when and how federal money has been used to
curb the panic on Wall Street. Congressional leaders learned of the rescue
late Tuesday during a hastily called meeting. Paulson and Bernanke have
taken the lead, not only from lawmakers but from President Bush.
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- In order to get Congress to pass the TARP monies and
the additional powers for the Treasury Secretary, the stock market began
to drop. On September 29 when the House rejected the bailout plan, it
dropped more than 700 points. By October 10, the Dow had dropped to 7773.71.
The week of October 11, 2008 saw the Dow drop by 22% or $8.4T from 2007
market highs. This was its worst week ever in its 112 year history. Who
was boss? Those who control the monetary system including the stock market
of the United States. Could this happen again? I have maintained that
it could given the fact that the biggest change would be to pass the Paulson
Blueprint which has been reinvented as the Obama "New Foundation".
I am amazed that nineteen/twenty months after September/October, 2008,
the stock market is at a high: 11,125 which may mean if Congress does not
pass financial regulation, it could drop back to the March 9, 2009 low.
So how did we get in this position again?
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- On early October, Hank Paulson told and gave his word
to senators that he would only use his additional powers in an extreme
emergency. Eleven days later on October 14, he nationalized America's
banking system by giving $250B to Bank of America, Citigroup, Goldman Sachs,
Bank of New York Mellon, JP Morgan, Morgan Stanley, State Street Bank and
Wells Fargo. The Dow had dropped a total of 41% from the year earlier.
Talk about warfare. No guns, no bullets but trillions of dollars transferred
out of investors pockets, causing major destruction to America's middle
class. Throughout all of the various congressional sessions, both the
Treasury Secretary and the Federal Reserve Chairman Ben Bernanke called
for regulatory reform. This has been the mantra for a long time.
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- President Obama came into office in January, 2009. The
stock market reached a severe low of 6,547 on March 9. From this point,
the market started to rise. To date it is around 11,000, a rise of 4,453
points. Obama rolled out his version of Paulson's Blueprint on June 17.
It did not call for the Federal Reserve to chair all of the proposed committees
like Paulson's, but it did call for the Treasury Secretary to chair key
committees and, in Section V, it called for very strong international regulatory
standards and improved international cooperation. It stated that the
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- United States is playing a very strong leadership
role in efforts to coordinate
- International financial policy through the G20, the
Financial Stability Board, and
- the Basel Committee on Banking Supervision.
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- The Obama Financial Regulatory Reform called for the
Financial Stability Board to be restructured and institutionalized on the
international level and for national authorities to implement the G20 commitments
made in London in 2009 which included "supervisory colleges"
that would be able to assess danger.
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- For the first part of 2010, financial reform took a back
seat to health reform and on March 15, Senator Dodd rolled out his version
of regulatory reform, leaving behind any kind of bi-partisanship that junior
Senator Bob Corker had given earlier. A day after the passage of the healthcare
bill on March 21, Senator Dodd pushed through the Senate Banking Committee
a vote for the bill he authored six days earlier. This basically was a
coup d'état over the Republican Party.
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- Sadly, most Americans are not aware of the marketing
savvy that has gone into changing their minds and covering up the fraud
perpetrated on them. Regulatory reform has gone from a "Bailout of
Wall Street" to a "Bailout of Main Street." There is now
a movement by Republicans after the Security and Exchange Commissions first
indictment in ten years of the biggest bank on Wall Street, Goldman Sachs,
to move Congress into bi-partisanship. It has worked.
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- Sadly in light of the fact that Goldman Sachs has given
untold millions to our currently seated politicians in Congress and $1M
to Obama for his election campaign, the Republicans have decided to play
"nice" at the wrong time. Or is it the wrong time? Are they
being vigilant and protecting us against another 40% drop in the stock
market or are they part of the con game?
-
- Recently, in commenting on how Wall Street makes its
money, Jim Santelli from CNBC said, "Where does Wall Street make its
money? In murky deals. The more murkier, the more money they make."
In the April 23, 2010 Financial Times, their editorial commented on Obama's
legislation,
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- Prospects are good that the eventual reform will be a
big step forward. But one should not expect too much even of a significantly
improved system. As the economy recovers and financial markets' appetite
for risk revives, the chief danger may lie in placing too much confidence
in the new arrangements. Financial regulation is, and always will be,
a work in progress.
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- The truth is the stakes were very high for regulatory
reform or else we would not have had all the activities of September/October
2008. The bottom line is the consolidation of power by the central banks
all over the world. Through the enlarged structure of the Bank for International
Settlements and the newly restructured and empowered global regulatory
agency, the Financial Stability Board, all of the world's assets are being
shifted to a place where they are fair game for central bankers. All you
have to do is study the arrangements on the national and global level.
This is the con game of all the centuries--it is a colossal robbery of
our nation and people. If you cannot see from the above all of the boldfaced
lies and grab of America's financial assets, then you/we deserve what's
coming. Lastly, we can see that the next goal of these powerbrokers is
a national sales tax so that we can reduce our debt. America is being
stripped of her assets and her citizens are being put in greater and greater
bondage through usury and taxation! It is only heaven that can help us
now.
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