“No bank must grow to a size that puts it in a position in which it can blackmail governments.”
- German Chancellor Angela Merkel (August 31st, Bloomberg)
“These excesses cannot be allowed to be repeated as if nothing has happened.”
- French President Nicolas Sarkozy (August 31st, Reuters)
It didn't qualify as a news story when I repeatedly characterized the $10 trillion in hand-outs, loans and guarantees which the U.S. financial crime syndicate squeezed out of the U.S. government as “blackmail”. However, when the chancellor of Germany makes that same observation, it suddenly becomes newsworthy.
With the G-20 poised to meet in Pittsburgh next month, notice has been served on the U.S. government (and to a lesser extent, the U.K. government as well): either take control of your government back from the bankers, or expect to become an economic pariah in the global economy.
The two European leaders were focused on regulation as the solution to the bankster problem, which is centered in the United States. They insist on “full implementation” of a set of reforms which were agreed upon last April. Specifically, the agreement calls upon the G20 members to provide regulation and oversight over “all systemically important financial institutions, instruments, and markets” - including hedge funds, derivatives, and the derivatives market.
Merkel and Sarkozy were also adamant that action needed to be taken over what Sarkozy termed the “bonus scandal”. Merkel added, “The riskier banks' business is, the higher the capital requirement should be.”
The United States was not mentioned by name, although there was little doubt about whom the two European leaders were talking. While their intentions are laudable, their approach is both naïve and unrealistic.
The U.S. government is thoroughly corrupt, its so-called regulators even more so. Effectively this would mean expecting one corrupt body (the U.S. government) to draft a set of effective and comprehensive regulations for other corrupt bodies (the regulators), and then also provide sufficient oversight of the regulators to ensure they fully implement the new regulations – not just for a few weeks or a few months, but permanently.
As I have written on a number of previous occasions, the supposed U.S. “democracy” is a two-party dictatorship where neither party can ever be totally removed from power. If centuries of history with democracies has taught our species anything it's that totally removing a political party from power is the only means of purging corruption.
Americans are not more inherently corrupt than the peoples of other nations, but rather they designed a flawed system of government which is more vulnerable to corruption than any other major democracy on Earth. With the Republicans and Democrats having been jointly in power for more than two centuries, corruption has reached a saturation level.
As those with the most money, the banksters own this government – which has been demonstrated on a near-daily basis throughout this banker-created financial crisis. Among the obvious indications of the irredeemable state of the U.S. government:
1) The appointment of Tim-the-tax-cheat Geithner as Treasury Secretary
This is a man who was caught under-paying his taxes. If there was any uncertainty that this was willful tax-evasion (i.e. a crime), Geithner eliminated that uncertainty, himself. Knowing that he had failed to pay his full taxes in other years as well, Geithner did nothing about that for years – until immediately after he was named as the Treasury Secretary nominee.
Geithner was also president of the New York Fed, the administrative body with the sole and direct responsibility to regulate Wall Street financial firms – at exactly the same time they were engaged in the greatest crime-spree in financial history. Yet this same bankster-lackey had the audacity (or stupidity) to testify before Congress that he “was not a regulator”. This is the person to whom Barack Obama handed the keys to the U.S. Treasury.
2) The reappointment of Ben Bernanke
At the height of the U.S. housing and financial bubbles (the largest asset-bubbles in the history of humanity), Bernanke proclaimed that the U.S. had a “Goldilocks economy” - one that would only keep soaring higher and higher.
Immediately after the housing bubble burst, Bernanke promised Americans (and the world) a “soft landing” for the U.S. economy – insisting that the collapse of the largest asset-bubble in history would have no impact on the broader economy.
To aid us further in evaluating the performance of Bernanke, we can refer to recent remarks by Sir Alan Greenspan (see "Greenspan: spotting a bubble is easy"). We can also refer to a study by the U.K.'s Financial Services Authority - which knew there was a substantial risk of a financial sector meltdown as far back as 2004 (see "Financial sector meltdown was no surprise").
There can only be two interpretations of Bernanke's performance. Either he was (is) the most-incompetent central banker in the history of the global economy (worse even than “Bubbles” Greenspan), or he was lying: a shameless shill for Wall Street who pumps U.S. markets for all he is worth – irrespective of the damage caused to the U.S. economy (and his own reputation).
Firing Bernanke would have left open the possibility that Bernanke was only incompetent – and not a willful accomplice to Wall Street's crime spree, as asserted by former U.S. banking regulator William Black (see “U.S. bank-fraud SYSTEMIC and INTENTIONAL: William Black”). Reappointing Bernanke eliminates all such doubt.
3) “Mark-to-fantasy” accounting
Not only has the U.S. government done nothing to attempt to rehabilitate the Wall Street crime syndicate, instead it has engaged in regressive measures. The U.S. Financial Accounting Standards Board was intimidated into relaxing the U.S.'s already-loose accounting rules at the beginning of April (see “FASB strong-armed into mark-to-fantasy accounting”) - just in time for the Wall Street fraud-factories to claim “miraculous” reversals on their balance sheets when they reported 1st quarter results.
This was followed by the infamous Geithner “stress tests”, and that was followed by Wall Street once again successfully scamming investors for tens of billions more in capital investments at precisely the same time that all categories of U.S. bank loans were soaring to all-time records for delinquencies. In short, it is absurd to believe that a government which is still assisting Wall Street in perpetrating scams could be relied upon to create effective regulations – let alone actually enforce such regulations.
4) Maintaining and increasing the powers of the Federal Reserve
As was previously noted, the Federal Reserve has been the primary banking regulator during the largest financial sector crime-wave in history. While some might be charitable enough to claim that these private bankers were merely “asleep at the wheel” while Wall Street ran amok, consider this.
During 2008, after the U.S. housing bubble had burst, and after the world had become aware of the multi-trillion dollar Wall Street “Ponzi-scheme” (see again “U.S. bank-fraud SYSTEMIC and INTENTIONAL...”), mortgage-fraud increased in the U.S. by 23%. Yet Ben Bernanke claims the Fed is “the best” institution to continue to provide “consumer protection” with respect to the financial sector (yes, the best for Wall Street).
As of this date, the Obama regime has shown no inclination to strip the Federal Reserve of consumer-protection oversight, indeed Obama has made it clear that he favors expanding the authority of the Federal Reserve – by making it the explicit guardian against “systemic risk”.
By “systemic risk”, what Obama is referring to is the risk which existed (for example) when former Fed Chairman Alan Greenspan created the U.S. housing bubble through his reckless policies, and then “Helicopter” Ben pretended that bubble didn't exist. Yes, the Federal Reserve is a perfect choice as a “guardian”.
It is unrealistic – to the point of absurdity – to expect the U.S. government to effectively terminate the reckless gambling of Wall Street, given that they continue to demonstrate their servitude to these bankers. There is, in fact only one realistic solution.
As many have observed, “too big to fail” means “too big to exist”. There is nothing shocking about this doctrine, given that it dates all the way back to the origins of capitalism – where the same theorists we revere to this day warned of the dangers of monopolies and oligopolies. Indeed, if we look back to the era where the United States was the genuine champion of capitalism, at that time it had the world's strongest and most-effective anti-combines legislation.
It should not be seen as a coincidence that the U.S. economy has been steadily deteriorating at exactly the same time that the U.S. has effectively ended its enforcement of those rules.
Smashing the Wall Street crime syndicate into little pieces is obviously the only practical solution – since it simultaneously addresses several problems. First, it eliminates systemic risk by eliminating too-big-to-fail institutions. Secondly, severely reducing the size of Wall Street firms severely reduces the amount of money they can use to buy the U.S. government. This can only mean a reduction of their influence/control over Washington.
Most importantly, it addresses a subject about which U.S. politicians have talked endlessly, yet done nothing: “moral hazard”. If you want to discourage bankers from engaging in reckless gambling, then obviously handing them $10 trillion in loans, hand-outs, and guarantees is the wrong way to do that. “Warning” Wall Street that if they ever engaged in such behavior again that the U.S. government would be forced to hand them another $10 trillion will not discourage unacceptable behavior.
Conversely, taking the Wall Street mega-banks, and turning them into two dozen or three dozen smaller (and much less powerful) institutions is something which the banksters would remember – for a very long time. It remains to be seen if anything constructive will be accomplished at the Pittsburgh summit.