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View Diary: Joe Stiglitz' Scathing NYT Takedown: “Why Janet Yellen, Not Larry Summers, Should Lead the Fed” (90 comments)

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  •  Summers' role in WORLDWIDE financial deregulation (19+ / 0-)

    should - if we push Greg Palast's story - become a political bombshell. Palast obtained a copy of a November 24, 1997 memo from then Assistant Secretary of the Treasury for International Affairs Timothy Geithner, to his then boss at Treasury, Deputy Secretary Larry Friggin' Summers:

    "As we enter the end-game of the WTO financial services negotiations, I believe it would be a good idea for you to touch base with the [top 5 Wall Street] CEOs…."
    Palast is calling it "the end-game memo" and the implications he spells out are truly frightening. As Palast explains:
    ....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....  

    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....  The bankers' and Summers' game was to use the Financial Services Agreement, an abstruse and benign addendum to the international trade agreements policed by the World Trade Organization.

    Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas.  The new rules ginned-up by Summers and the banks would force all nations to accept trade in "bads" – toxic assets like financial derivatives.

    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.

    A century and a half ago, any such attempt to avoid the lawful regulation of sovereign nation states would have been instantly recognized as a typical ploy of Perfidious Albion (think, the British East India Company) and the officials involved would have been faced with a huge public outcry charging them with sedition, if not treason. Alas, now we even have a President - Democratic, no less - who is trying to get the Trans-Pacific Partnership rammed through Congress, secret provisions and all.

    Here is Palast being interviewed on The Real News Network:

    And what this memo is--they call it the "end game memo". Geithner calls it the "end game". And what's the game being played? The memo asks Summers to get back to the five biggest, most powerful bankers in the United States to act on and determine what our policy should be for world governance of the banking system. Basically, there were secret calls going between Larry Summers and the head of Bank of America, the head of Goldman Sachs, the head of Citibank and Merrill, the five big boys, to find out what should happen to the world financial policing order. And the answer was: smash it. Summers was holding secret meetings with the big bankers to come up with a scheme to eliminate financial regulation across the planet.

    It's quite an extraordinary process. This is one memo within the whole framework of this strange and what seems to be illegal gatherings. I can tell you that it's not against the law for the secretary of the Treasury to meet with big bankers. What you can't do is do it in secret and run secret negotiating positions past those bankers, who have a direct financial interest in the outcome. Their financial interest was to eliminate all policing of their activities, which they did.

    A conservative is a scab for the oligarchy.

    by NBBooks on Sat Sep 07, 2013 at 07:27:36 PM PDT

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