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The Confidential Memo at the Heart of the Global Financial Crisis
The year was 1997. US Treasury Secretary Robert Rubin was pushing hard to de-regulate banks. That required, first, repeal of the Glass-Steagall Act to dismantle the barrier between commercial banks and investment banks. It was like replacing bank vaults with roulette wheels.
Second, the banks wanted the right to play a new high-risk game: “derivatives trading”. JP Morgan alone would soon carry $88 trillion of these pseudo-securities on its books as “assets”.
Deputy Treasury Secretary Summers (soon to replace Rubin as Secretary) body-blocked any attempt to control derivatives.
But what was the use of turning US banks into derivatives casinos if money would flee to nations with safer banking laws?
The answer conceived by the Big Bank Five: eliminate controls on banks in every nation on the planet -- in one single move. It was as brilliant as it was insanely dangerous.
How could they pull off this mad caper? The bankers' and Summers' game was to use the Financial Services Agreement (or FSA), an abstruse and benign addendum to the international trade agreements policed by the World Trade Organisation.
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.
While billions of sorry souls are still hurting from worldwide banker-made disaster, Rubin and Summers didn’t do too badly. Rubin’s deregulation of banks had permitted the creation of a financial monstrosity called “Citigroup”. Within weeks of leaving office, Rubin was named director, then Chairman of Citigroup – which went bankrupt while managing to pay Rubin a total of $126 million.
China signed – but got its pound of flesh in return. It opened its banking sector a crack in return for access and control of the US auto parts and other markets. (Swiftly, two million US jobs shifted to China.)
Then Rubin took on another post: as key campaign benefactor to a young State Senator, Barack Obama. Only days after his election as President, Obama, at Rubin’s insistence, gave Summers the odd post of US “Economics Tsar” and made Geithner his Tsarina (that is, Secretary of Treasury). In 2010, Summers gave up his royalist robes to return to “consulting” for Citibank and other creatures of bank deregulation whose payments have raised Summers’ net worth by $31 million since the “end-game” memo.
That Obama would, at Robert Rubin’s demand, now choose Summers to run the Federal Reserve Board means that, unfortunately, we are far from the end of the game.
They covered that in the article he posted....as well as this point...
So i guess i don't really see your point, is this going to become another "Business and Banks" can't be bad because its a free market rant?
"Business and Banks" can't be bad because it should be a free market rant?
Originally posted by FortAnthem
In a properly regulated market, something like this could never happen and the parties responsible would end up in jail if they tried. Today, not only are these markets not regulated but, the government even lacks the ability to bring criminal charges for such blatant acts of theft.