Financial Storm of the Century, or a Turning of the Tide?

by Stefan Fobes

Ladies and gentlemen, what you have just witnessed is an op carried out on the world. Previously, in The Beginning of A World Centralization Whirlwind, I wrote about how banks, legally able to treat credit card, student, auto, and house loans as assets, and then bundled them up into financial packages called asset backed securities and structured finance collaterilized debt obligations, since the risk was too great for them, they sold them to investors, who sold them on the stock markets for profit. All the banks that have crumbled and being bailed out were buying up and holding these securities. And so here we are, facing the storm.

I call this an op, or more accurately, an attack, for several reasons. But first, as reported by the Asia Times, there’s a little something called the BIlderberg Group.

“It would have been quite impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries …
- David Rockefeller, Bilderberg club permanent member, 1991

This conversation never happened. Well, it actually did. Date: March 5 to 8, 2005. Location: the isolated, fully-booked Dorint Sofitel Seehotel Ueberfahrt in Rottach-Egern, 60 kilometers east of Munich, Germany. Essential amenities: luxury rooms, a lake, a golf course, no suits – and no wives. Participants: 120-odd Western movers and shakers – politicians, tycoons, bankers, captains of industry, so-called strategic thinkers – invited for the 2005 meeting of the ultra-secretive Bilderberg club. Security: absolutely draconian. Global media coverage: non-existent.

But the world is most definitely not prepared for a world government. These people know that, though. So to put in a one world government, they have to do it by using forceful stealth tactics, one of which is known now as the global financial crisis. This “intellectual elite” seem to be on some sort of deadline by the speed at which things are being centralized this year, which I believe is around the time of the mistakenly believed by New Agers and others to be the magical ascension year 2012. We have seen the emergence of the new South American and Mediterranean Unions, and no doubt an Asian and a Pacific nation Union will follow in the coming months, if the backstory of this plot is anything to go by.

I found it strikingly interesting that this year’s Bilderberg gathering in Chantilly, Virginia was loaded with dozens of bankers, including the European Central Bank president, Jean-Claude Trichet, all the EU Commissioners in the areas of trade and business, and…..America’s own New York Fed President Timothy Geithner, Fed Chairman Ben Bernanke and the demon of the hour himself, Henry Paulson. Whaddya think of that? It would be just that by itself — interesting. But when Tony Fratto, Deputy White House Press Secretary Tony Fratto goes up and admits that the bailout bill was written months before the domino bank crashes in September, then the interesting starts looking like the suspicious. More so when Congressman Brad Sherman blew the whistle on Congress being threatened with martial law being imposed if the bailout bill was not passed in the House. So…thug intimidation tactics used if you sign, and thug intimidation tactics if you don’t? Does that look like the actions of a healthy, ethical government to anyone with a brain on the clock?

Henry Paulson, himself was CEO of Goldman Sachs before he left to become Treasury Secretary in 2006, and during his tenure he was at the center of the asset backed securities game there. Him being there in government is a living insult not only to Americans anymore, but to the entire world that is being affected by this because of the rampant economic damage that has ensued from the speculators and the banks crooked ways. Everyone knows that Bush & Co. are crooks, and criminals only work closely with other criminals. The mainstream puppet (for the most part) media are fearmongering, and also emphasizing fluff like the pittance of a $150,000 extra from the FDIC if the bank it’s in tanks. Well, what if you have a million? The rest is gone with the wind. Paulson, in his push for the first version of the bailout bill, refused to even consider giving homeowners a chance. ABC reports:

Paulson resisted suggestions being made by Democrats that the program be changed to include further relief for homeowners facing mortgage foreclosures and to include an additional $50 billion stimulus effort. Some Democrats have also suggested capping compensation of executives at firms who get the bailout help.

Paulson said he was concerned that debate over adding all of those proposals would slow the economy down, delaying the rescue effort that is so urgently needed to get financial markets moving again.

Helping thousands from potentially being homeless would be slowing things down? Look at that. Gracious man, him. Homeowners are the economy. Without them the banks wouldn’t be able to survive. Small business owners and the rest of middle income earners aren’t living on canoes. All crazy if you come from the perspective of this being the latest pathetic effort of a government vainly struggling to help America, but on target if you see from the angle of all this being the result a preplanned strategy of a cold group of people making power grabs at every point they’re allowed to by the people. The banking institutions are given all the cash they want, and the guy to oversee the bailout money handouts is even named Neel Kashkari, a Treasury assistant secretary for international affairs and before that, he was with Paulson as Goldman Sachs’s IT security investment banking division head. While all that is going on, credit is given freely to the banks, and the masses are facing a tightening of credit. Which means heavier prices at the supermarkets and everywhere else since no one really pays the trucks without credit anymore, which it now costs more to get. In every policy statement out of their tax exempt foundations and in public, those in power in and behind the scenes say we must stop eating meat, the middle class is living too well, doing too good, they have to be stopped. Is it then any wonder when the G8 heads of state made speeches on poverty, the horrible plague of hunger across Africa, everyone around the world needs to cut back, and waste, they and their wives had afterwards an 18 course banquet? It’s all about greedy people who are so desperate to have control over others that anything even slightly more than a beaten down demeanor, a skeletal body, and a flea infested Japanese coffin-bed causes them to have insane amounts of jealousy and fear. That’s the mentality of these bloodlines that rule the world, and unless people stand together in these times, it will go on, and that boot will stamp in everyone’s face. 1984 style.

The thing is, the $700 billion isn’t nearly enough, as if that can be imagined. Out of Newsmax::

Gross told CNBC that the government’s current plan will help clear up bank balance sheets but leaves just $50 billion in free cash to lend out.

“The plan goes far but it doesn’t go far enough in terms of recapitalization,” Gross said.

“The banking system and the investment banking system in total really requires about $500 billion more. Where that comes from is still up in the air.”

Separately, banking experts already predict that the Federal Deposit Insurance Corporation (FDIC) could need an additional $150 billion to cover coming bank failures.

That comes to $1.3 trillion! Imagine the bankers, the media saying, we need a trillion+ bucks to get us through this. Now you know why cops coast to coast are dressing up in skull outfits and black uniforms. Just like the corporate media, don’t think Obama will tell you about any of that, or help once he gets in. He has already said he wants the Treasury given as broad authority as possible. But even FrankenCain (who would just bait and switch it in the end) put out his proposal for the government to buy up mortgages and arrange for American homeowners to get lower mortgage payments and stay in their houses, Obama bashed it as socialist. Rasmussen Reports, one of the biggest pollers next to Zogby’s found that 52% of Americans favor this proposal. I don’t favor government gifts because it always means government control, but if the bill is going to be passed, at least do it right. The smart dictator’s tactic. When you want to attack and don’t want to be seen as a dictator, don’t use bullets, just give bullshit excuses for why people have to start starving, or dying, or fighting wars, and then have your puppet media orchestrate a gigantic campaign making you look racist or inept or anything that draws attention away from your true nature and agenda. Look at that smirk on his face, that was also on his face all throughout the debate last week. As soon as the spell wears off, and all the people all over the world slowly start to see what a dictatorial lemon they worshipped and shilled for, they’ll wonder how they didn’t notice it before.

The final bailout bill passed contains these provisions:

  • Section 8 of the bill says: “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
  • Carbon tax audit provisions hidden deep in section 116 and 117.
  • IRS Gestapo provisions, giving the agency immunity from several federal laws, allowing agents to open bank accounts with taxpayer dollars, conduct sting operations posing as business owners, and to share all info gathered in the course of any of these spy operations with any intelligence agency they want. The intelligence agencies all will be merged into one in the future, the preconditioning for that has already been laid out. There’s a reason they have a National Intelligence Director with a whole agency devoted to all that stuff. Watch for it.

Even Bush, as reported by Fortune Magazine, called Henry Paulson his wartime general. Because this was an attack on the middle income earners, as I’ll get to shortly. But all this is planned to extend far beyond America’s shores because it is planned to have at the least, a central authority which controls all banking activity worldwide, and at most, a world central bank. The World Bank’s full name is the World Bank Group. Another example of preconditioning. This is a coordinated assault on the world, and Iceland, its currency and financial system on ice, and having to ask the IMF to bail them out, is the first major fatality. We can see this by the coordinated actions being taken.

  • France’s president Nicolas Sarkozy, speaking along similar lines as other heads of state at the UN General Assembly, has called for capitalism to be rebuilt to control global financial markets when necessary. Britain’s Gordon Brown called for a new global financial order, and Brazil’s Luis Ignacio di Silva, said, “The global nature of this crisis means that the solutions we adopt must also be global,”
  • The G7 countries, which includes the US, have endorsed and will go ahead with the idea of central governments officially buying stakes in banks.
  • Coordinated interest rate cuts by world central banks

The people won’t like it when they finally get it that printing all this money by their respective central banks to fund wars and bailout bills is what is really causing the prices of everything to go up. Therefore, something needs to be set up to contain them. Is it really a coincidence that starting October 1, proudly announced by the Army Times, several brigades have been deployed domestically to “help in disasters”, and are also being trained to use crowd control weapons, in total violation of Posse Commitatus and the Constitution, just like Paulson’s unilateral abilities in that bill? Over to the east, the German government wants to change their constitution to allow the military to be deployed domestically as well. And more countries will announce they want to do the same. More restrictive legislation such as the Patriot Act, Military Commissions Act, and the Violent Radicalization And Homegrown Terrorism Prevention Act will be rolled out. They have to, to protect their sorry criminal butts from what will be a rightfully angry population. This is just what Alex Jones has been pressing out all these years, especially in his seminal work on the subject, Police State 2000 where he has actual footage of US troops training in mock drills where Americans are being forced to the ground, tied up, in concentration camps with full mock check-in procedures, and bullhorns of “American troops are here to help” are all there. The video is at the bottom of this article.

This is spilling over even to the insurance and auto industries, who are also feeling the credit tightening. GM and Chrysler, two of America’s biggest auto companies, are suffering from the Stearns Syndrome so badly that the company that owns majority stock in Chrysler is considering merging with GM. Ford’s doing badly too. It won’t solve much, because as Ken Thomas, the writer, aptly notes, it’ll just make one big company that’s not doing too good, centralizing the problem. And if they fall, before or after a merger, of course the solution will be to get the Supergovernment in the mix to fix things, the same as with the insurance companies. The latest that I’ve found is that Prudential’s shares have fallen 42% in the last week, Metlife had to raise $2 billion by selling off stock, and Hartford Services Group had to do the same, raising $2.5 billion to a German company. I thought Morgan Stanley might get out of this all right since it was on the sidelines of all this, but now, since their stock has dropped 60% in the past week, Moody’s Investor Service is considering a credit ratings downgrade, and a recent estimate is that they need to raise $60 billion to reassure investors and customers. Good luck.

The president of the Organization of American States, itself a stepping stone to a Union of the Americas, called for a new global financial organ to control all the financial markets, and: “Insulza said the current financial organism does not work, and the circulation of money, like the flow of goods and people, must be regulated.” Yeah? I’d love to “regulate” your money, Mr. Insulza. Where do I sign up??? .”Silvio Berlusconi, the Italian prime minister put out the wildest statement ever two days ago: “The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.” Ah, global solutions to global problems. There are just two simple questions that when answered, that will always tell that an attack was carried out, who did it, and why in these times on a population. Who stands to gain the most? Are there unreasonable rewards, praise, bonuses, or prmotions being handed out when the situation demands that the opposite be done?

Called problem-reaction-solution, the technique used by this group running the world is to create aproblem or let one exacerbate, wait for the something must be done reaction from the population, and introduce the solutions that they want after they hear that cue. Here’s how the problem was allowed to fester.

Here’s how and why the people really hold the power, explained in a way even a three year old can understand. Literally. Just watch, you’ll see.

And what awaits if this great power is given away.

It won’t be done today, or even tomorrow or next week. This is much too big for that. But even posting this on one message board or myspace can have an unexpected positive effect far beyond what the logical mind can concieve. Hell, give it to your husband or wife or boyfriend or girlfriend with your name on it and say you wrote it. I don’t care if my name’s on it or not, as long as the info gets out. This is not just a call to action, it’s a call back to power. Yours.

One Response to “Financial Storm of the Century, or a Turning of the Tide?”

  1. pat Says:

    If only all of America could read Financial Tsunami and this…..

    The Glass-Steagall Act was instituted to separate Brokers and Bankers so 1929-36 would never happen again–guess what? Greenspan and Robert Rubin lobbied to repeal the act in 1999—Bill Clinton[Council on Foreign Relations] signed the repeal—-Empowering big Wall Street to cause the mess we are in now—enabling the wealthy elite to probably take over our Financial System.

    Robert Ruben [Council on Foreign Relations]and Bill /Hillary Clinton[Council on Foreign Relations]—Virtually all the people involved on the revocation of Glass-Steagall are all Council on Foreign Relations:Greenspan [Council on Foreign Relations] , Bernanke [Council on Foreign Relations], Paulson [Council on Foreign Relations].

    Citigroup and JPM-Chase–Council on foreign Relations Banks who happen to own 51% of the FED–A PRIVATE CORPORATION OWNED BY BIG US AND FOREIGN BANKS.

    So who is defending the Constitution of the United States? Bush family? [Council on Foreign Relations] Joe Biden-[Council on Foreign Relations]

    Why are the very people who want to have unsupervised power and back a PRIVATE CORPORATION expropriating taxpayer moneys are all organized with the big business names in the Council on Foreign Relations….

    –about 2 years ago Stephen Roach reported in his article that he had just given a briefing at the Council of foreign Relations HQ in Georgetown where they were conducting computerized “Financial War Games”

    –It was JPM/Chase-Rockefellers [Council on Foreign Relations]who forced the beginning of this mess with Bear Stearns..

    ..Just a large stretch of Coincidence, eh?

    I think the United States is being taken over by a group of 6000 people using the method preferred by the Baron Rothschild….Take over the money supply and the politics don’t matter—-Obama is no hope as he is surrounded–Robert Ruben[Council on Foreign Relations] and Joe Biden [Council on Foreign Relations]

    WHY SHOULD 100 MILLION PEOPLE HAVE THEIR LIVES AND RETIREMENT RUINED SO THE FEW THOUSANDS OF WEALTHY ELITE CAN GET MORE POWER THEY DO NOT DESERVE, AND MORE MONEY THEY DO NOT NEED…

    Tax the rich who have preyed on the population to pay for this debacle that they caused…

    A SIMPLE FACT IS THERE CAN BE NO VIBRANT AND GROWING ECONOMY WHERE THE WEALTH IS CONCENTRATED IN THE HANDS OF A FEW….

    NOTE WHO BACKERS OF THE BAIL OUT ARE:
    Jack Welch–GE–[Council on ForeignRelations]
    T.Boone Pickens–[Council on ForeignRelations]

    The Wealthy Elite are organized, the middle class and working classes are not–guess who is going to win—–The Bush tax cuts are 94% tax cuts for net worths over 5 million or so, and the other 298 million Americans share only 6%. So who is looking after our interests??

    A Few Simple Truths about this failing economy—Protect Your Family.

    Behind every important government , media, and business entity you will find a Council on Foreign Relations Member. Please read this complete email as it addresses where we are, where we are going and who is responsible…

    The simple truth is that the smart money wants the little guy to hold the bag “for the long term” while the wealthy elite passes on the wooden nickel. Then when the situation is so dire the little investor has to have some money left, he will sell for pennies on the dollar to the wealthy elite [who incidentally got out intact and has the money to buy]. Then the manipulation is complete…

    What the Wall Street sharks don’t tell you is that a 33% loss will require a 50% gain just to break even…a 50% loss requires a 100% gain ti get even. A broker or sell side rep is a natural conflict of interest. Look at Quest or Intel –Still in a big hole since 2001-2…..

    Investing “for the long term” has never and will never work. This was explicitly stated by Richard Doll on NBR, and Paulsen capital in USA Today. The old timers who really know how the markets work “move to the sidelines” when the markets reach the incoherent phases and preserve their profits for another day.

    The Consumer [70 % of the economy is toast- spent up and in deep debt] can no longer buy what he don’t need with money he doesn’t have. Stock market earnings fall, and economy is in recession….

    The bogus economic numbers [growth, labor, and inflation] put out by the Bush Administration hide the fact we have been in a Real Recession for some time.

    The bond market is doomed when our creditors tire of holding paper falling in value on a daily basis and will capitulate causing long term rates to climb–the Fed cannot stop this.

    The increase in Interest rates will cause another Derivative crash in Interest Rate Swaps–more bail out money, dollar falling ad nauseaum…deeper and deeper economic problems…

    The following easily verifiable facts will confirm that the second phase of an even deeper Real Estate crash is near, cannot be avoided, and will cause an even more serious cut back in consumer spending.

    I hope that you will give these facts the serious consideration and treatment they are worth.

    Ask the question of yourself–What will happen to me? My family? My Friends? My Freedoms? My constitution? My Bill of Rights? If this is allowed to continue…..

    Study this information closely—-It is crucial for what is coming

    The Option ARMs and Interest Only (IOs) loans scheduled to reset in the next few years will add more trouble. These loans represent about 15% of securitized loans and some have negatively amortized, increasing the payments and making refinancing more difficult. According to data from Barclay’s, about $300 billion in option ARMs and $820 billion in IO’s are set to recast. The results could be payment shocks over 80% for option ARMs and over 60% for IOs according to Barclay’s.
    Option ARM Recast and Payment Shock Forecast

    See Credit Suisse graph below:

    Putting it all together……the months with the green tops were mostly the subprime arm resets which is about $615 billion till may 2009, which have caused all the problems we now have.

    —the orange/pink tops are another whole set of resets just starting in 2009 which is about another $820 billion between 5/2009 and 6/2012. Anyone calling a “bottom” in real estate or the home construction industry simply is lying or do not know what they are talking about and should be treated as inept.

    THE CONSUMER IS TOAST–UP TO THE NECK IN DEBT–CAN NOT SUPPORT THE WORLD ANYMORE

    CORPORATE EARNINGS WILL FALL

    What is all this going to do to your retirement savings? The consumer is broke–the real inflation is > 10%, the wealthy elite has taken too much again and lost control just as in 1929-36….
    FINANCIAL TSUNAMI
    The End of the World as we Knew it
    by F. William Engdahl
    October 1, 2008

    The unexpected US Congress’ rejection of the Bush Administration financial rescue plan, TARP on September 29 has opened up the spectre for the first time of a 1931-style domino wave of worldwide bank failures. That is already underway across the US banking spectrum with the failure, nationalization or forced liquidation in the past two weeks of Fannie Mae and Freddie Mac, of the giant Washington Mutual mortgage lender, of the nation’s fourth largest deposit bank, Wachovia. That was on top of a wave of smaller bank failures that began with IndyMac in the spring. For some it is appealing and more simple to grasp the magnitude of these titanic events in the US-centered financial world by assuming it is all part of a pre-planned grand conspiracy by the Money Masters, what in the 1920s in the USA was termed the Money Trust, to control the entire financial world.

    As the details of the present crisis reveal, there are huge ideological fault lines making for chaos and a potential meltdown of the Laissez Faire financial system. That present system, which was built on the back of Wall Street financial and banking deregulation since 1987 when Alan Greenspan, a devout follower and close friend of radical individualist Ayn Rand, became Wall Street’s man at the Federal Reserve for almost 19 years, is over now with the failure of the Henry Paulson $700 billion bailout scheme. Governments worldwide now face no alternative but to begin the painful process of putting the financial genie back in the bottle and re-regulating an out-of-control financial system. The failure of the UK Government and the US Government to address that fundamental issue is behind the present crisis of confidence.

    A brief look at history

    The Great Depression in Germany in 1931 began with a seemingly minor event—the collapse of a bank in Vienna, Creditanstalt, that May. For readers interested in more on the remarkable parallels between that crisis and that of today, I recommend the treatment in my earlier volume, A Century of War: Anglo-American Oil Politics and the New World Order.

    That Vienna bank collapse in turn was triggered by a political decision in Paris to sabotage an emerging German-Austrian economic cooperation agreement by pulling down the weakest link of the post-Versailles system, the Vienna Creditanstalt. In the process, Paris triggered a series of tragic events that led to the failure of the German banking system over a period of several weeks. The post-1919 Versailles System, much like the post-1999 US Securitization System, was built on a house of cards with no foundation. When one card was removed, the entire international financial edifice crumbled.

    Then, in 1931, there was an inept Brüning government in Germany, which believed severe austerity was the only solution, merely feeding unemployment lines to pay the Young Plan German reparations to the new Bank for International Settlements in Basle.

    Then, in 1931 George Harrison, a Germano-phobe, was the inexperienced Governor of the powerful New York Federal Reserve. Harrison was a member of the anglophile Skull & Bones, the elite Yale University secret society which also included George H.W. Bush and George W. Bush as initiates. Harrison, who went on to coordinate the secret Manhattan Project on the development of the Atomic bomb under fellow Skull & Bones member, War Secretary Henry Stimson, believed the crisis had started not from abroad but with German bankers trying to make a profit at the expense of others.

    Within weeks of rumor and jitters, the New York Bankers Trust, ironically today a part of Deutsche Bank, announced it would be forced to cut the credit line to Deutsche Bank and by July 1931 began to pull its deposits from all big Berlin banks. Harrison insisted the Reichsbank dramatically raise interest rates to stabilize things, only turning bad into worse as a credit crisis across the German economy ensued.

    The Bank of England Governor, Montagu Norman, while somewhat more supportive of Luther argued that his friend Hjalmar Schacht was better suited to manage the crisis. On July 13, 1931, a major German bank, Darmstädter-und Nationalbank (Danat) failed. That triggered a general a depositors’ run on all German banks. The Brüning government merged the Danat with a weakly capitalized Dresdner Bank, and made large state guarantees in an effort to calm matters. It didn’t.

    New York Fed governor, Harrison, who was personally convinced it was a ‘German’ problem, barked orders to Reichsbank chief Hans Luther on how to manage the crisis according to archival accounts. A foreign drain on Reichsbank gold reserves ensued.

    The rest is history, the tragic history of the greatest most destructive war of the 20th Century, with all the suffering that ensued. At that time in history, the American banking elite saw itself, despite a stock market crash and Great Depression in America, as standing at the dawn of a new American Century.

    The decline of the American Century

    Today, in 2008, some 77 years later, a German Finance Minister stands before the Bundestag announcing the end of that American Century. Today the German government encourages a fusion of Dresdner with Commerzbank. Today Deutsche Bank, which some years ago acquired Bankers Trust in New York in a merger wave, appears to be in a stronger position than its American counterparts as Wall Street investment banks, some more than 150 years old as the venerable Lehman Bros., simply vanish in a matter of days. The American financial Superpower crumbles before our eyes.

    In March 2008 there were five giant Wall Street investment banks, banks which underwrote Mortgage-Backed Securities (MBS), corporate bonds, corporate stock issues. They were not deposit banks like Citibank or Bank of America; they were known as investment banks—Morgan Stanley, Merrill Lynch, Goldman Sachs, Lehman Brothers, Bear Stearns.

    The business of taking deposits and lending by banks had been split during the Great Depression from the business of underwriting and selling stocks and bonds—investment banking—by an act of Congress, the Glass-Steagall Act of 1933. The law was passed amid the collapse of the banking system in the United States following the bursting of the Wall Street stock market bubble in October 1929.

    That Glass-Steagall act was a prudent attempt by Congress to end the uncontrolled speculative excesses of the Roaring Twenties by New York finance. It established the Federal Deposit Insurance Corporation to guarantee personal bank deposits to a fixed sum that restored consumer confidence and ended the panic runs on bank deposits.

    In November 1999, after millions spent lobbying Congress, the New York banks and Wall Street investment banks and insurance companies won a staggering victory. The US Congress voted to repeal that 1933 Glass-Steagall Act. President Bill Clinton proudly signed the repeal act with Sandford Weill, the chairman of Citigroup.

    The man whose name is on that repeal bill was Texas Senator Phil Gramm, a devout advocate of ideological free market finance, finance free from any Government fetters. The major US banks had been seeking the repeal of Glass-Steagall since the 1980s. In 1987 the Congressional Research Service prepared a report which argued the case for preserving Glass-Steagall. The new Federal Reserve chairman, Alan Greenspan, just fresh from J.P. Morgan bank on Wall Street, in one of his first speeches to Congress in 1987 argued for repeal of Glass-Steagall.

    The repeal allowed commercial banks such as Citigroup, then the largest US bank, to underwrite and trade new financial instruments such as Mortgage-Backed Securities (MBS) and Collateralized Debt Obligations (CDOs) and establish so-called structured investment vehicles, or SIVs, that bought those securities. Repeal of Glass-Steagall after 1999, in short, enabled the Securitization revolution so openly praised by Greenspan as the “revolution in finance.” That revolution is today devouring its young.

    That securitization process is at the heart of the present Financial Tsunami that is destroying the American credit structure. Citigroup played a major part in the repeal of Glass–Steagall in 1999. Citicorp had merged with Travelers Insurance company the year before, using a loophole in Glass-Steagall that allowed for temporary exemption. Alan Greenspan gave his personal blessing to the Citibank merger.

    Phil Gramm, the original sponsor of the Glass-Steagall repeal bill that bears his name, went on to become the chief economic adviser to John McCain. Gramm also went on to become Vice Chairman of a sizeable Swiss bank, UBS Investment Bank, in the USA, a bank which has had no small share of troubles in the current Tsunami crisis.

    Gramm as Senator in 2000 was one of five co-sponsors of the Commodity Futures Modernization Act of 2000. A provision of the bill was referred to as the ‘Enron loophole’ because the it was later applied to Enron to allow them unregulated speculation in energy futures, a key factor in the Enron scandal and collapse. The Commodity Futures Modernization Act, as I described in my earlier piece in May, Perhaps 60% of Today’s Oil Price is Pure Speculation, allowed investment bank Goldman Sachs (coincidentally the former bank of Treasury Secretary Paulson), to make a literal killing in manipulating oil futures prices up to $147 a barrel this summer.

    Paulson’s impressive interest conflicts

    The actions of Treasury Secretary Paulson since the first outbreak of the Financial Tsunami in August of 2007 have been directed with one apparent guiding aim—to save the obscene gains of his Wall Street and banking cronies. In the process he has taken steps which suggest more than a mild possible conflict of interest. Paulson, who had been chairman of Goldman Sachs from the time of the 1999 Glass-Steagall repeal to his appointment in 2006 as Treasury head, had been one of the most involved Wall Street players in the new securitization revolution of Greenspan. Under Paulson, according to City of London financial sources familiar with it, Goldman Sachs drove the securitization revolution with an endless rollout of new products. As one London banker put it in an off-record remark to this author, “Paulson’s really the guilty one in this securitization mess but no one brings it up because of the extraordinary influence Goldmans seems to have, a bit like the Knights Templar order of old.’ Naming Goldman chairman Henry Paulson to head the Government agency now responsible for cleaning up the mess left by Wall Street greed and stupidity was tantamount to putting the wolf in charge of guarding the hen house as some see it.

    Paulson showed where his interests lay. He is by law is the chairman of something called the President’s Working Group on Financial Markets, the Government’s financial crisis management group that also includes Fed Chairman Bernanke, the Securities & Exchange Commission head, and the head of the Commodity Futures Exchange Commission (CFTC). That is the reason Paulson, the ex-Wall Street Goldman Sachs banker, is always the person announcing new emergency decisions since last August.

    Two weeks ago, for example, Paulson announced the Government would make an unprecedented $85 billion nationalization rescue of an insurance group, AIG. True AIG is the world’s largest insurer and has a huge global involvement in financial markets.

    AIG’s former Chairman, Hank Greenberg—a close friend of Henry Kissinger, a former Director of the New York Fed, former Vice Chairman of the elite New York Council on Foreign Relations and of David Rockefeller’s select Trilateral Commission, Trustee Emeritus of Rockefeller University—was for more than forty years Chairman of AIG. His AIG career ended in March 2005 when AIG’s board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism and legal action for cooking the books, in a prosecution brought by Eliot Spitzer, then Attorney General of New York State.

    In mid September, in between other dramatic failures including Lehman Bros., and the bailout of Fannie Mae and Freddie Mac, Paulson announced that the US Treasury, as agent for the United States Government, was to bailout the troubled AIG with a staggering $85 billion. The announcement came a day after Paulson announced the Government would let the 150-year old investment bank, Lehman Brothers, fail without Government aid. Why AIG and not Lehman?

    What has since emerged are details of a meeting at the New York Federal Reserve bank chaired by Paulson, to discuss the risk of letting AIG fail. There was only one active Wall Street banker present at the meeting—Lloyd Blankfein, chairman of Paulson’s old firm, Goldman Sachs.

    Blankfein later claimed he was present at the fateful meeting not to protect his firm’s interests but to ‘safeguard the entire financial system.’ His claim was put in doubt when it later emerged that Blankfein’s Goldman Sachs was AIG’s largest trading partner and stood to lose $20 billion in a bankruptcy of AIG. Were Goldman Sachs to go down with AIG, Secretary Paulson would have reportedly lost $700 million in Goldman Sachs stock options he had, an interesting fact.

    That is a tiny glimpse into the man who crafted the largest bailout in US or world financial history some days ago, the failed TARP—Troubled Asset Relief Program—a proposed $700 billion financial stabilization scheme which, in Paulson’s original version would have allowed him or his Treasury successor to use $700 billion, with no oversight or accountability, to buy bad or worthless assets from financial institutions he deems worthy of help.

    As respected economist, Nouriel Roubini pointed out, in almost every case of recent banking crises in which emergency action was needed to save the financial system, the most economical (to taxpayers) method was to have the Government, as in Sweden or Finland in the early 1990’s, nationalize the troubled banks, take over their management and assets, and inject public capital to recapitalize the banks to allow them to continue doing business, lending to normal clients. In the Swedish case, the Government held the assets, mostly real estate, for several years until the economy again improved at which point they could sell them onto the market and the banks could gradially buy the state ownership shares back into private hands. In the Swedish case the end cost to taxpayers was estimated to have been almost nil. The state never did as Paulson proposed, to buy the toxic waste of the banks, leaving them to get off free from their follies of securitization and speculation abuses.

    Paulson’s plan, the one essentially rejected on September 29 by the House of Representatives, would have done nothing to recapitalize the troubled banks. That recapitalization could cost an added hundreds of billions on top of the $700 billion toxic waste disposal.

    Serious bankers I know who went through the Scandinavian crisis of the 1990’s are scratching their head trying to imagine how crass the Paulson TARP scheme is. That politically obvious bailout of Wall Street by the taxpayers, what some refer to as ‘Bankers’ Socialism—socialize the costs of failure onto the public, and privatize the profits to the bankers—is a major factor behind the defeat of the TARP compromise version. Under Paulson’s scheme, which seems likely to get very little alteration by Congress in coming days, the Treasury Secretary, initially Paulson, would have sole discretion, with minimal oversight, to use a $700 billion check book, courtesy of taxpayer generosity, to buy various Asset Backed Securities held not only by Federal Reserve regulated banks like JP Morgan Chase or Citicorp, or Goldman Sachs, but also by hedge funds, by insurance companies and whomever he decides needs a boost.

    ‘The Paulson plan is unworkable,’ noted Stephen Lewis, chief economist with the London-based Monument Securities. ‘No one has an idea how to set a price on these toxic securities held by the banks, and in the present market a lot of them likely would be marked to zero.’ Lewis like many others who have examined the example of the temporary Swedish bank nationalization, called Securum, during their real estate collapse in the early 1990’s, stresses that ultimately only a similar solution would be able to resolve the crisis with a minimum of taxpayer cost. ‘The US authorities know very well the Swedish model, but it seems in the US nationalization is a dirty word.’

    But there is an added element. John McCain decided to boost his flagging Presidential campaign by trying to profile himself as a ‘political Maverick’ one who opposes the powerful Washington vested interests. He flew into Washington days before the TARP was to be approved by a panicked Congress and conspired with a handful of influential Republican Senate friends, including Banking Committee ranking member, Senator Shelby, to oppose the Paulson TARP. What emerged, with McCain’s backing, was a political power play that may well have brought the United States financial system to its knees, and McCain’s Presidential hopes with it.

    Power and greed are the only visible juice driving the decision-makers in Washington today. Acting in the long-range US national interest seems to have gotten lost in the scramble. As I wrote last November in my Financial Tsunami five part series on the background to today’s crisis, all this could be foreseen. It is what happens when elected Governments abandon their public trust or responsibility to a cabal of private financial interests. It will be interesting to see if anyone in Washington realizes that lesson.

    Whatever next comes out of Washington, however, one thing is clear, as reflected in what German Finance Minister Peer Steinbrück told the Bundestag. This is the end of the world as we knew it. The American financial Superpower is gone. The only important question will be what and how will the alternative be.

    Associated Press, Two charges against AIG’s Greenberg dropped
    Spitzer aide says four left concerning deception are ‘heart of the case’, September 6, 2006, in http://www.msnbc.msn.com/id/14704060/.
    Gretchen Morgenson, Behind Insurer’s Crisis, Blind Eye to Web of Risk, The New York Times, September 28, 2008.

    Nouriel Roubini, Is the Purchasing of $700 billion of Toxic Waste the Best Way to Recapitalize the Financial System?, September 28, 2008, in http://www.rgemonitor.com

    BEHIND THE PANIC:
    Financial Warfare over future of global bank power
    by F. William Engdahl
    October 9, 2008

    What’s clear from the behavior of European financial markets over the past two weeks is that the dramatic stories of financial meltdown and panic are deliberately being used by certain influential factions in and outside the EU to shape the future face of global banking in the wake of the US sub-prime and Asset-Backed Security (ABS) debacle. The most interesting development in recent days has been the unified and strong position of the German Chancellor, Finance Minister, Bundesbank and coalition Government, all opposing an American-style EU Superfund bank bailout. Meanwhile Treasury Secretary Henry Paulson pursues his Crony Capitalism to the detriment of the nation and benefit of his cronies in the financial world. It’s an explosive cocktail that need not have been.

    Stock market falls of 7 to 10% a day make for dramatic news headlines and serve to foster a broad sense of unease bordering on panic among ordinary citizens. The events of the last two weeks among EU banks since the dramatic state rescues of Hypo Real Estate, Dexia and Fortis banks, and the announcement by UK Chancellor of the Exchequer, Alistair Darling of a radical shift in policy in dealing with troubled UK banks, have begun to reveal the outline of a distinctly different European response to what in effect is a crisis ‘Made in USA.’

    There is serious ground to believe that US Goldman Sachs ex CEO Henry Paulson, as Treasury Secretary, is not stupid. There is also serious ground to believe that he is actually moving according to a well-thought-out long-term strategy. Events as they are now unfolding in the EU tend to confirm that. As one senior European banker put it to me in private discussion, ‘There is an all-out war going on between the United States and the EU to define the future face of European banking.’

    In this banker’s view, the ongoing attempt of Italian Prime Minister Silvio Berlusconi and France’s Nicholas Sarkosy to get an EU common ‘fund’, with perhaps upwards of $300 billion to rescue troubled banks, would de facto play directly into Paulson and the US establishment’s long-term strategy, by in effect weakening the banks and repaying US-originated Asset Backed Securities held by EU banks.

    Using panic to centralize power

    As I document in my forthcoming book, Power of Money: The Rise and Decline of the American Century, in every major US financial panic since at least the Panic of 1835, the titans of Wall Street—most especially until 1929, the House of JP Morgan [Council on Foreign Relations]—have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power.

    Now they must do something similar on a global scale to be able to continue to dominate global finance, the heart of the power of the American Century.

    That process of using panics to centralize their private power created an extremely powerful, concentration of financial and economic power in a few private hands, the same hands which created the influential US foreign policy think-tank, the New York Council on Foreign Relations in 1919 to guide the ascent of the American Century, as Time founder Henry Luce called it in a pivotal 1941 essay.

    It’s becoming increasingly obvious that people like Henry Paulson, who by the way was one of the most aggressive practitioners of the ABS revolution on Wall Street before becoming Treasury Secretary, are operating on motives beyond their over-proportional sense of greed. Paulson’s own background is interesting in that context. Back in the early 1970’s Paulson started his career working for a rather notorious man named John Erlichman, Nixon’s ruthless adviser who created the Plumbers’ Unit during the Watergate era to silence opponents of the President, and was left by Nixon to ‘twist in the wind’ for it in prison.

    Paulson seems to have learned from his White House mentor. As co-chairman of Goldman Sachs according to a New York Times account, in 1998 he forced out his co-chairman, Jon Corzine ‘in what amounted to a coup’ according to the Times.

    Paulson, and his friends at Citigroup [Council on Foreign Relations] and JP Morgan Chase[Council on Foreign Relations], had a strategy it is becoming clear, as did the Godfather of Asset Backed Securitization and deregulated banking, former Fed Chairman Alan Greenspan, as I have detailed in my earlier series here, Financial Tsunami, Parts I-V.

    Knowing that at a certain juncture the pyramid of trillions of dollars of dubious sub-prime and other high risk home mortgage-based securities would come falling down, they apparently determined to spread the so-called ‘toxic waste’ ABS securities as globally as possible, in order to seduce the big global banks of the world, most especially of the EU, into their honey trap.

    They had help. In recent testimony under oath by Eric Dinallo, the Superintendent of the New York Insurance Department at the AIG Bailout Oversight Hearing, into the AIG rescue by Paulson, Dinallo testified that funding cutbacks in recent years directed by the Bush-Cheney Administration had reduced the responsible department that should regulate or watch over the $80 trillions in Asset Backed Securities (ABS), which included the toxic sub-prime and Alt-A mortgage securities and much more. The Bush Administration took the staff from more than one hundred people down to one—yes that was not a typo. One as in ‘uno.’

    Was that just ideological budget cutting fervor, or was it deliberate? Was former Goldman Sachs man, the man who convinced the President to hire Paulson, Bush’s former Director of the Office of Management and Budget (OMB), Joshua Bolten, now the President’s Chief of Staff [Council on Foreign Relations], responsible for insuring there was no effective government oversight on the exploding securitization of mortgage assets?

    These are perhaps some questions which the good Congressmen ought to be asking people like Henry Paulson and Josh Bolten, and not such red herring questions as how large Richard Fuld’s bonus pay at Lehman was. Are Mr Bolten’s fingerprints on the corpse here? And why is no one questioning the role of Paulson as CEO of Goldman Sachs, then the most aggressive promoter of exotic and other Asset Backed Securitization products on Wall Street?

    It now would appear that the Paulson strategy was to use a crisis—a crisis that was pre-programmed and predictable as far back as 2003 when Josh Bolten became head of OMB—when it exploded, to panic the more conservative European Union governments into rushing to the rescue of US toxic waste assets.

    Were that to have happened, it would in the process destroy what was left of sound EU banking and financial institutions, bringing the world one step closer to a global money market controlled by Paulson’s cronies—US-style Crony Capitalism. Crony Capitalism is certainly appropriate here. Paulson’s predecessor at both Goldman Sachs and at Treasury, Robert Rubin[Council on Foreign Relations] , liked to accuse the Asian bankers of Thailand, Indonesia and other lands hit with the speculative attacks of US-financed hedge funds in 1997 of ‘crony capitalism,’ leaving the impression the crisis was home grown in Asia and not the result of a deliberate executed attack by US-financed financial institutions to eliminate the Asia Tiger model among other goals, and turn Asia into the funder of US debt.

    Interesting to note is that Rubin is now a Director of Citigroup , obviously one of Paulson’s crony bank ‘survivors,’ and the bank which to date has had to write off the largest sum in toxic waste securitized assets. [Council on Foreign Relations]

    If the allegation of pre-planned panic, a la the Panic of 1907 is accurate, and it is a big if, then the plan worked…up to a point. That point came over the weekend of October 3, coincidentally the national unification holiday of Germany.

    Germany breaks with US model

    In closed door talks well into the evening of Sunday October 5, Alex Weber the hard-nosed head of the Bundesbank, BaFin head Jochen Sanio and representatives of the Berlin coalition Government of Chancellor Merkel came up with a rescue package for Hypo Real Estate of a nominal €50 billion. However, behind the dramatic headline number, as Weber pointed out in a September 29 letter to Finance Minister Peer Steinbrück that has been made public, not only did the private German banks have to come up with 60% of that figure, the state with 40%. But also, given the careful manner in which the Government in cooperation with the Bundesbank and BaFin, structured the rescue credit agreement, the maximum possible loss, in a worst case scenario, to the state would be limited to €5.7 billion, not €30 billion as many believed. It’s still real money but not the blank check for $700 billion that a US Congress under duress and a few days of falling stock market prices agreed to give Paulson.

    The swift action by Finance Minister Steinbrück to fire the head of HRE, in stark contrast to Wall Street where the same criminal fraudsters remain at their desks reaping huge bonuses, indicates as well a different approach. But that does not cut to the heart of the issue. The situation of HRE arose as noted previously, from excesses in a wholly-owned daughter bank of HRE subsidiary DEPFA in Ireland, an EU country known for its liberal loose regulation and low tax regime.

    A British policy shift

    In the UK, after the costly and foolish bailout of Northern Rock earlier in the year, the Government of Prime Minister Gordon Brown has just announced a dramatic change in policy in the direction of Germany’s position. Britain’s banks will get an unprecedented 50 billion-pound (€64 billion) government lifeline and emergency loans from the Bank of England.

    The government will buy preference shares from Royal Bank of Scotland Group Plc, Barclays Plc and at least six other banks, and provide about 250 billion pounds of loan guarantees to refinance debt, the Treasury said. The Bank of England will make at least 200 billion pounds available. The plan doesn’t specify how much each bank will get.

    That means the UK Government will at least partially nationalize its most important international banks, rather than buy their bad loans as under the unworkable Paulson plan. Under such an approach, costs to UK taxpayers once the crisis abates and business returns to more normal conditions, the Government can sell the state shares back to a healthy bank at perhaps a nice profit to the Treasury. The Brown Government has apparently realized that the blanket guarantees it gave to Northern Rock and Bradford & Bingley merely opened the floodgates of government costs without changing the problem.

    The new nationalization policy is a dramatic contrast to the Paulson ideological ‘free market’ approach of buying the worthless bonds held by the select banks Paulson chooses to save, rather than recapitalize those banks to allow them to continue to function.

    The battle lines drawn

    What has emerged are the outlines of two opposite approaches to the unfolding crisis. The Paulson plan is now clearly part of a project to create three colossal global financial giants—Citigroup [Council on Foreign Relations], JP MorganChase [Council on Foreign Relations] and, of course, Paulson’s own Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the US taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead. So long as the world’s largest financial credit rating agencies—Moody’s and Standard & Poors—are untouched by the scandals and Congressional hearings, the reorganized US financial power of Goldman Sachs, Citigroup and JP Morgan Chase could potentially regroup and advance their global agenda over the coming several years, walking over the ashes of a bankrupt American economy made bankrupt by their follies.

    By agreeing on a strategy of nationalizing what EU finance ministers deem are ‘EU banks too systemically strategic to fail,’ while guaranteeing bank deposits, the largest EU governments, Germany and the UK, in contrast to the US, have opted for what will in the longer run allow European banking giants to withstand the anticipated financial attacks from the likes of Goldman or Citigroup.

    The dramatic selloff of stocks across European bourses and across Asia is in reality a secondary and far less critical issue. According to market reports, the selloff is being driven mainly by US hedge funds desperate to raise cash as they realize the US economy is going into economic depression, that they are exposed and that the Paulson Plan does nothing to address that.

    A functioning solvent banking and interbank system is far the more strategic issue. The ABS debacle was ‘Made in New York.’ Nonetheless, its effects have to be isolated and viable EU banks defended in the public interest, not just the interest of Paulson’s banking cronies as in the US. Unregulated offshore vehicles such as hedge funds, unregulated banking, unregulated insurance all went into building the $80 trillion ABS Tsunami as I have called it. Certain more conservative EU hands are not about to buy the remedy being offered by Washington.

    The coordinated interest rate cut by the ECB and other European central banks while grabbing headlines, in effect do little to address the real problem: banks fear to lend to each other until their solvency is assured.

    By initiating state partial nationalizations across the EU, and rejecting the Berlusconi/Sarkozy bailout scheme, the governments of the EU, interestingly enough this time led by the German, are laying a more sound foundation to emerge from the crisis.

    Stay tuned, it’s far from over. This is a fight for the survival of the American Century which has been built since 1939 on the twin pillars of American financial dominance and American military dominance—Full Spectrum, Dominance.

    Asian banks, badly burned by Wall Street’s manipulated 1997-98 Asia Crisis, are apparently very little exposed to the US problem. European banks are exposed in different ways, but none so serious as in the US banking world.

    © 2008 F. William Engdahl
    Editorial Archive

    F. William Engdahl is the author of A Century of War: Anglo-American Oil Politics and the New World Order (Pluto Press) and Seeds of Destruction: The Hidden Agenda of Genetic Manipulation, http://www.globalresearch.ca. The present series is adapted from his new book, now in writing, The Rise and Fall of the American Century: Money and Empire in Our Era. He may be contacted through his website, http://www.engdahl.oilgeopolitics.net.


Leave a Reply