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THE BANKS, BANKING AND THE
Article by David Brierley
The Sunday Telegraph
June 27, 1999
MONEY LAUNDERING - THE BANKS DO IT ALL THE TIME
AND NO ONE CALLS THEM ON IT UNTIL IT’S TOO LATE
- I WONDER WHY?
Given the cascade of regulations issued by the Treasury Department and the constant call from the Anglo-side of the G-8 countries for more restrictive laws, "the people" might believe that vigorous enforcement action against the biggest money launderers is swiftly launched. It can be proved however that most prosecutions don’t involve the big boys but a bank customer depositing or withdrawing slightly more than the reportable limit into or from a bank account. As was demonstrated in Congressional hearings in 1992, the biggest money launderers have been almost totally unaffected!
Example: The best known one is that of the BCCI (Bank of Credit and Commerce International), an $11 billion bank failure still being pursued thorough world courts by the liquidators. U.S. regulators had known for years that the bank had engaged in massive fraud and money laundering.
As far back as 1978, documents submitted to a federal court described a scheme by BCCI to illegally take control of a Washington DC bank. Nothing was done to investigate these charges which were linked to a former CIA director; nor was BCCI required to sell its illegally acquired interest in the bank.
In 1984 the IRS identified BCCI to the Federal Reserve as a world-scale money laundering venture and informed the Fed the bank was not completing CTR’s (Currency Transaction Reports). In 1987 more currency transaction violations were brought forcibly to the attention of the Fed and this time the Justice Department - again nothing was done. However in 1988 following a small-scale sting operation in Florida, several of the bank’s officials were convicted for laundering.
When a unit of the Justice Department pressed ahead with an investigation in 1989 though, senior officials quashed it. When Customs Commissioner W. Von Raab insisted on a full nationwide investigation of BCCI, the Treasury Secretary Nicholas Brady fired him.
It was only when the Bank of England (that country’s Central Bank) in May 1991 announced its own investigation, as its world-wide operations were run from a Crown Dependent Territory, that the cover-up finally unraveled.
What now? To start with "government officials" used BCCI’s illegal activities as a justification to call for even stricter anti-laundering regulations. They desisted from this example only when Col. Oliver North’s activities became common knowledge. As far back as 1984 the CIA knew the bank as the "Bank of Cocaine and Criminals" but it appears that this bank was used as one of the Agency’s many conduits for supporting and receiving income from its operations throughout the world. The Banking Money Power’s control over America is always subverting banks; banks are useful, indeed essential to cultivating contacts with the "right" people in Washington DC and elsewhere - they are often allowed to operate above the law.
Example(1): Intensively secretive operations are carried out by the Federal Reserve, America’s privately-controlled central bank; these are operations that could be construed as money laundering but cannot be verified as such because of the Fed’s legislatively-mandated secrecy in carrying out open market operations. For instance in November, 1989 the quasi-control Bank of Panama wire transferred $2.7 billion to the Federal Reserve Bank in Miami. Where did the money come from? Why wasn’t any one interrogated or arrested - or at least investigated for money laundering?
Example(2): An insignificant article in March, 1999 appeared in an American newspaper describing the 1990 operation of the Fed to salvage and recapitalise a "failed" Citibank, now known as Citicorp/Travellers; also described were individuals who benefited by the stock’s subsequent 1150% increase in price. In recent months (as of 7/99) there have been insightful articles on the "open/covert" market operations employed by the Fed to manipulate the New York stock market in the wake of the October 1998 devastation!
Example(3): Who owns The Depository Trust Corporation, a.k.a. the D.T.C., which is the clearing house for most of the nation’s traded securities and who are its shareholders? It is thought that all securities passing through the D.T.C. never belonged to the titled buyers and sellers, but in effect to this private corporation which appears to be privately owned by the Federal Reserve Bank of New York! A word of explanation on ownership...
WHO OWNS THE FED (SYSTEM)?
This is the time to deal with the troubling question of ownership (see Examples (1) and (3) above). The federal government does not own any stock in the Federal Reserve System. In that sense, the Fed is privately owned. That however is misleading because it implies a typical private-ownership relationship in which the stock holders own and control. In the case of the System, the stock carries no proprietary interest, cannot be sold or pledged as collateral, and does not carry ordinary voting rights.
To digress for a moment, the function of the twelve regional Reserve Banks is to hold cash reserves of the system, supply currency to member banks, clear checks, and act as a fiscal agent for the government. These 12 are corporations with stock held by the commercial banks which are members of the system.
The national Board of Governors, together with the Open Market Committee, with the New York regional Bank being more powerful than the other eleven, meet frequently. Decisions are made at secret meetings. A brief report of some of the proceedings is issued 6 weeks later, but transcripts of the deliberations are destroyed. [This has been policy since 1970 when the Freedom of Information Act was passed. Not even the CIA enjoys such secrecy].
So each bank in the system is entitled to one vote, regardless of the stock held. Stock Certificates are not evidence of "ownership" but of how much operating capital each shareholder bank has contributed to the system.
The Fed is not a government agency and it is not a private corporation in the normal sense of the words. It is subject to political control yet, because of its enormous power over politicians and the elective process, it has managed to remain independent from political oversight. Simply put, it is a cartel, and its organisational structure is uniquely structured to serve that end.
A RARE GLIMPSE INTO THE BAILOUT - THE BANKS’ GAME
Let us return, now, to the game called bailout as it is actually played today on the international scene. Begin with a glimpse into the inner workings of the Presidential Cabinet. James Watt was the Secretary of the Interior in the Reagan Administration. In his memoirs, he described an incident at a cabinet meeting in the spring of 1982. The first items on the agenda were reports by Treasury Secretary Donald Reagan and Budget Director David Stockman concerning problems the less-developed countries were having with their bank loans. Watt said:
"Secretary Reagan was explaining the inability of those destitute countries to pay even the interest on the loans that individual banks such as Bank of America, Chase Manhattan and Citibank had made. The President was being told what actions the United States "must" take to salvage the situation.
After the Reagan and Stockman briefings, there were several minutes of discussion before I asked, "Does anyone believe that these less developed countries will ever be able to pay back the principal on these loans?" When no one spoke up, I asked, "If the loans are never going to be repaid, why should we bail out the countries and arrange payment for their interest?"
The answer came from several voices at once, "If we don’t arrange for their interest payments, the loans will go into default, and it could put our American banks in jeopardy." Would the customers lose their money? No, came the answer, but the stockholders might lose their dividends.
In amazement, I leaned back in my large, leather chair, only two seats from the President of the United States. I realized that nothing in the world could keep these high government officials from scrambling to protect and bail out a few very large and sorely troubled American banks."
THE CARTER ADMINISTRATION’S TREATMENT OF PANAMA
The first major score in the game had been made under the Carter Administration when Panama fell in arrears on the payment of its loans. A consortium of banks including Chase Manhattan, First National of Chicago, and Citibank brought pressures to bear on Washington to give the Canal to the Panamanian government so it could use the revenue to pay the interest on its loans. Although there was massive opposition to this move among the American people, the Senate yielded to insider pressure and passed the give-away treaty. The Panamanian government inherited $120 million in annual revenue, and the interest payments to the bank were restored. As Congressman Philip Crane observed:
At the time of the Torrijos-backed coup in 1968, Panama’s total official overseas debt stood at a manageable and, by world standards, modest $167 million. Under Torrijos, indebtedness has skyrocketed nearly one thousand percent to a massive $1.5 billion. Debt-service now consumes an estimated 39 percent of the entire Panamanian budget... What it appears we really have here is not just aid to a tinhorn dictator in the form of new subsidies and canal revenues the treaties would give to the Torrijos regime, but a bailout of a number of banks which should have known better than to end in Panama and, in any event, should not escape the responsibility of having done so.
The Panama bailout was a unique play. In no other country did we have an income-producing property to give away, so from that point forward, the bailout would have to be done with mere money. To pave the way for that, Congress passed the Monetary Control Act of 1980 which authorized the Federal Reserve to "monetize foreign debt." That is banker language meaning that the Fed was now authorized to create money out of nothing for the purpose of lending to foreign governments. It classifies those loans as "assets" and then uses them as collateral for the creation of even more money here in the United States. That was truly a revolutionary expansion of the Fed’s power to inflate. Until then, it was permitted to make money only for the American government. Now, it was able to do it for any government. Since then, it has been functioning as a central bank for the entire world.
POPULISTS SWEEP INTERNATIONALISTS ASIDE
Several Third World countries are attempting to break free of shackles imposed on them by bosses of the International Money System.
Largely ignored amid the front page frenzy over NATO’s air assault of Yugoslavia, populist movements have stormed to sweeping electoral victories around the world this spring, thrashing Establishment politicians sponsored by the global financial elites from Austria to Venezuela.
In Malaysia, Dr. Mahathir Mohamed, the nation’s long-serving president, has survived a series of coup attempts believed to have been launched against him by the same coalition of international bankers and the CIA that ousted Philippine President Ferdinand Marcos in 1986.
Mahathir became a target when he denounced the "criminal raids of currency speculators and Zionist financiers" who wrecked the currencies of several Southeast Asian nations in 1996-97.
The doughty Asian statesman raised a transcontinental furor when he pointed an accusing finger at the notorious New York currency manipulator George Soros as the "mastermind of the international conspiracy to ruin in a moment the currencies built up over decades with the agonizing labor and strain of our people."
As the national currencies of Thailand, South Korea, Malaysia and Indonesia came under speculative pressure by Wall Street hot-money syndicates and their worldwide allies, the economies of these rapidly developing nations collapsed, leaving mass unemployment, bloody riots, widespread upheaval and depression in their wake.
Some shaken regional leaders, among them President Suharto, Indonesia’s aging strongman, thought the way out of the crisis lay in a submissive deal accepting the domination of the International Monetary Fund (IMF) and its masters, the global mega-banks.
"They were wrong," said Dr. Paul Alder, an economic consultant. "Indonesia, with the world’s fourth-largest population, was swept by violent riots. The economy disintegrated. Suharto was overthrown and now faces investigation and possible prosecution on corruption charges."
Mahathir, however, did the opposite, explained
Adler. "Instead of kowtowing to the IMF and its financiers, he imposed strict controls on hot-money speculators, currency manipulators like Soros and his ‘herd,’ and foreign debt."
The result: Mahathir and his administration are still firmly in charge. The joint ‘covert-action’ attempts of the CIA and Wall Street to overthrow them by staging street riots, economic sabotage and promoting an opponent have been resisted and thwarted.
Best of all, Malaysia’s currency, once undermined by speculators, has now stabilized again. Interest rates are down, production is rising, and the Malaysian economy is staging a vigorous comeback.
Malaysia’s populist leadership is important because "it has shown the world that governments with the courage to say ‘no’ to the IMF don’t have to take orders from it," concluded Dr. Mark Weisbrot, director of a Washington, DC think-tank last month.
Impressed by Mahathir’s success, Hong Kong, Chile and Colombia have recreated populist capitalist controls and restrictions on hot-money speculation and currency trading, similar to the measures adopted by Malaysia last year.
PANAMA CANAL WATCH
In Panama’s presidential elections last month (May 1999), the CIA and the bankers’ federation both expected - and supported - an easy win for their shopworn front man. The landslide vote went to the dark-horse candidate with a name hated on Wall Street: The wife of the late Panamanian President Arnulfo Arias.
Panama’s president-elect is Mireya Moscoso Arias, the attractive, dynamic, widow of the late president. She is an unbending populist, whose name still rings alarm bells among one-world financiers and transnational corporations.
The people of Panama elected Arias their president by overwhelming majority three times between the mid-1940s and the late ’70s. Each time, he was overthrown by an armed coup. Many believe the coups were organized jointly by Wall Street, corrupt local military chieftains and eventually the CIA. (Panama now has disbanded its armed forces).
In Turkey, where the balloting took place in April, the populist National Action Party of former economics professor Devlet Bahceli scored a smashing victory.
In the last parliament the Nationalists, peevishly described by the Establishment media as "far-right extremists," had no seats at all. In the current one they have 130, making them the second-largest party in Turkey’s national legislature.
THE WORLD’S OLDEST BANK GOES PUBLIC.
The Banca Monte dei Paschi di Siena is living history as well as
central to the prosperity of its region of Italy - says David Brierley.
In 1472, just 16 years after Gutenberg published his first Bible and two decades before Columbus reached America, the world’s first bank was created in Siena. A new era had dawned.
Last Friday, some 500 years after its establishment, the banca Monte dei Paschi di Siena came successfully to market. Today, June 18, 1999, the very first bank is Italy’s sixth largest and its survival through half a millennium is little short of astonishing. The Rothschild banking empire, which is two centuries old, is a mere stripling by comparison.
"The common thread through time is that this bank has always been very prudent, very careful," said Divo Gronchi, chief executive of Monte dei Paschi. In the original statutes of 1472, the bank was named Monte di Pieta after the "monti di pieta", the mounds (of money) for pity or charitable funds created by Tuscan clerics.
The city state of Siena provided the initial capital for its bank from local taxes, assigned control to a charitable foundation and sited the bank in the Salimbeni Palace, in a remarkable three-sided square close to the Piazza del Campo and the towering Palazzo Pubblico.
In 15th century Tuscany, financial innovation was in the air and demand for credit was rising rapidly. The Medici had introduced paper currency, reducing the need of merchants to transport bullion. But credit was not widely available and its suppliers, money-changers and merchants, often demanded usurious rates.
The new Siennese bank made cheap credit available to small traders and businessmen for the first time in history. A host of similar institutions sprang up around Italy around the same time. It became possible to fund industrialisation.
In 1624, after Siena fell to the Grand Duch of Tuscany, the bank was renamed Monte dei Paschi di Siena. It issued paper to the Grand Duke backed by the income of pastures (Paschi) adjacent to the city. This increased the bank’s liquidity and gave it a recognisably modern structure. And careful management ensured the land pledged by the good burghers of Siena was never subject to an enforced sale.
From its very beginning, the bank has been at the centre of Siennese life, financing communal projects and supporting local artisans and farmers. Health, education, scientific research and the arts all continue to benefit from its philanthropy. Such was the bank’s local power and standing that its deputies (board members) were given the right to pronounce death sentences.
The bank’s role as the leading patron of Siennese arts is reflected in its magnificent buildings and remarkable art collection.
In 1481, to celebrate the creation of the bank a fresco entitled Madonna della Misericordia was commissioned from Giovanni del Guasta for the Palazzo Salimbeni. Thereafter, works were regularly commissioned from local artists such as Arcangelo Salimbeni, Vincenzo Rustici, Francesco Vanni to mark significant stages in the bank’s history.
The bank’s collection of painting and sculpture ranges from the 14th to the 20th century, tracing the artistic development in this remarkable town. It includes works by Pietro Lorenzetti, Andrea di Bartolo and Sassetta and has regularly been enhanced by significant local donations, including the Chigi Saracini collection, housed in a palazzo close to the Piazza del Campo.
Many of the 13,000 works of art belonging to the bank hang in Siena’s world-famous public museums. They have been insured for a very nominal $20 million. A spokesman admitted "Their real value is actually only hinted at."
Every aspect of the cultural life of Siena has benefited from the bank which remains the largest taxpayer in the city. It sponsors national and international exhibitions of Siennese art, supports music festivals in Tuscany and funds the restoration of historic Siennese buildings, including the medieval hospital, the Santa Maria della Scala, the Palazzo Publico and the Torre del Mangia. It also sponsors the dare-devil race on horseback, the medieval Palio.
The nature of the bank’s business, which has remained much the same over the centuries, has also sustained its local reputation. Most of its deposits are still drawn from the local community and most of its loans are still granted to individuals and small businessmen in Sienna.
This innate conservatism has enabled Monte dei Paschi to survive crises and crashes that devastated others. The bankruptcy of the French government in 1789, the Argentine default in 1890 and the Wall Street crash of 1929 left it unscathed. The Monte dei Paschi has not indulged in heavy exposure to the equities market or overseas trade; it has not been hit by the recent economic crisis in the Far East. It has been content to fund the local economy of one of the most remarkable town in Europe.
The affection in which the bank is held locally is reflected in the enthusiasm for the offering, which was 10 times oversubscribed.
"Monte dei Paschi is a central part of Siennese life and touches everything to do with the city. It is held in particular affection by the Siennese and the inhabitants of Tuscany. We had over 2.1m applications, making it the most popular offering ever in Italy, surpassig even Telecom Italia," said Charles Kirwan-Taylor, managing director of Credit Suisse First Boston, who jointly led the deal. The shares were trading at a significant premium to their flotation price on Friday.
It is a deal of some size. Monte dei Paschi still ranks among the world’s top 100 banks and Friday’s share sale raised $2.1 million for its charitable foundation, making it the biggest public offering in Italy this year.
The Monte dei Paschi Foundation, which holds over 70% of the bank, is faced with an embarrassment of riches. Filippo de Nicolais of Schroders, who advised the Foundation and jointly led the offering, said: "They will invest the money in the region of Siena which is not large".
The 60,000 people living in the area will benefit from the Foundation’s enlarged munificence. Some $43 million is being spent this year and more is certain to be disbursed. Delighted, a local newspaper proclaimed: "The warm rain of billions [of lire] is coming!"
The flotation of the bank was brought about by the so-called Dini Directive. This is forcing the charitable foundations that traditionally control many of Italy’s local and regional banks to sever their ties, freeing the banks to act on a purely commercial basis! Consolidation of a fragmented sector is inevitable as banks seek to cut costs and improve returns.
Monte dei Paschi is an eager participant in this process. It has already bought other regional banks, including the Banca Toscana. A merger with Banca di Roma was rumoured but flatly denied by both parties.
Whether Monte dei Paschi will be the buyer or the bought in the coming shakeout remains to be seen. The Monte dei Paschi foundation has no urgent need to sell. But it is also true that every era draws to a close.
Continued in part two of ten
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