Thesis: create a
problem. Antithesis: bring opposition to the problem.
Synthesis: solve the problem.
The $money$ carnal power base of the world has
shifted…it is no longer in London, New York City, Washington D. C., or Tokyo.
Neither is it in Beijing or Moscow. It is Basel, Switzerland. In 1930, the Bank
for International Settlements-BIS was set up as a result of the Young Plan which
was named after the man who presided over the Allied Reparation Committee, Owen
Basel was chosen as its location because everyone could
get on a train from anywhere in Europe to attend its meetings. When you walk out
of the main train station, the BIS is within easy walking distance of one block.
A modern 18 story high building belies the power it extends globally. There is
nothing about the
building that calls anyone's attention to it other than the plaque near the
glass front doors that basically says it is private property. The world's power
brokers walk to the BIS without fanfare and are set apart from the citizenry by
their business suit and ID pass.
Yet within its walls the world's monetary system is being
designing and directed by many illuminated and brilliant people from inside and
from without, those who visit regularly from all over the world include: central
bank ministers, treasury secretaries, regulators, insurance supervisors, deposit
insurers and accountants. Truly the BIS is all powerful. Dr. Carroll Quigley in
his book, Tragedy and Hope, wrote that,
The powers of financial capitalism had another far
reaching aim, nothing less than to create a world
system of financial control in private hands able to dominate the political
system of each country and the economy of the world as a whole.
This system was to be controlled in a feudalistic fashion by the central banks
of the world acting in concert, by secret agreement, arrived at in frequent
meetings and conferences. The apex was to be the Bank for International
Settlements in Basel, Switzerland (pp. 324-25).
If this power was not evident before, it is in the
process of becoming greater and more immense. While the BIS has always been the
focal point of central bank activity globally, it now is finalizing the
structure Dr. Quigley wrote about. Bi-monthly, the Group of Ten central bankers,
along with those from majoring developing nations come together to discuss
global monetary policy, among other things. Over the years it has expanded to
the point that every aspect of banking, finance, insurance, deposit insurance,
and regulation now constitute its core workings.
In the mid-1990s the word globalization or new world
order came into our vocabularies as we were faced with naming the process
whereby the barriers between the countries of the world started to fall.
Beginning with the establishment of the International Monetary Fund and World
Bank in 1944, the financial barriers between countries fell; with the
establishment of the United Nations in 1945, the political barriers fell; with
the establishment of the World Trade Organization in 1994, the trade barriers
fell; with the establishment of the International Criminal Court in 1998, the
legal barriers fell; and with the pre planned September 11, 2001 attack on the
World Trade Center, the military and intelligence barriers fell ?
Similarly, during the 1990s, the Bank for International
Settlements started to set up its own level of globalization. In 1998, the
International Association of Insurance Supervisors was set up and is comprised
of insurance supervisors from all over the world. In 1999, the Financial
Stability Forum was set up which was comprised of the Group of Seven treasury
secretaries, central bankers, and regulatory agencies. Recently this
organization was expanded to include the Group of Twenty. Then in 2002 the
International Association of Deposit Insurers was set up. This organization is
comprised of the FDIC's of the world. Another organization which was set up in
1973 and then reconfigured in 1984 is the International Organization of Security
Commissions-IOSCO which is basically a global security and exchange commission
which has facilitated a global stock exchange.
What the 2008 Credit Crisis has provided is an
opportunity to further enhance and empower these organizations which will and
are in the process of transferring respective responsibilities from the national
level to the global level, thus completing the process of banking, insurance,
auditing, accounting, and regulatory globalization. It should be mentioned that
in order for the United States to play its role in this process, the Obama
Administration will have to set up a single national regulator over our seven
different regulators that currently work independently. This is so important a
step that the Financial Times recently ran an editorial on June 20 that warned
The need for thorough regulatory reform is still
pressing. One concern stands out: the risk of the whole financial system
breaking down, as it did last autumn. Those who want to give central banks the
power and responsibility to monitor systemic risks are right. They include the
US Treasury, whose proposals this week seek to turn the Federal Reserve into a
systemic super-regulator. These proposals are contested. They should not be; the
alternatives are worse. Reforms to rein in systemic risk must not now fall prey
to politics. They must be enacted before the memory of last autumn fades.
Let us examine what the first paragraph of the Bank for
International Settlements 79th Annual Report stated with regard to the credit
How could this happen? No one thought that the financial
system could collapse. Sufficient safeguards were in place. There was a safety
net: central banks that would lend when needed, deposit insurance and investor
protections that freed individuals from worrying about the security of their
wealth, regulators and supervisors to watch over individual institutions and
keep managers and owners from taking on too much risk. Since August 2007, the
financial system has experienced a sequence of critical failures.
While it provides their assessment of what went wrong,
the report summarizes the problem and the solution this way:
In summary, financial regulators, fiscal authorities, and
central bankers face enormous risks. Building a perfect, fail-safe financial
system—one capable of maintaining its normal state of operations in the event of
a failure is impossible. Standing in the way are both innovation and the limits
of human understanding, especially regarding the complexity of the decentralized
financial world. We have no choice but to take up the challenge of first
repairing and then reforming the international financial system.
Their recommendations include the BIS standard-setting
committees (the Basel Committee on Banking Supervision, the Central Bank
Governance Forum, the Committee on Payment and Settlement Systems, and the
Markets Committee) and the Financial Stability Board. For our purposes we will
discuss the newly centralized power of the Financial Stability Board.
First it should be noted that with this kind of total
economic and monetary failure, the entire system should be scrapped and perhaps
we should go back to being individual nation-states, but you see for their
purposes, they are expanding and empowering another level of control which will
move the assets of the entire world into their domain. No physical war, no guns,
no bullets—electronic financial warfare.
The Financial Stability Board was originally the
Financial Stability Forum-FSF. When it was set up in 1999, I interviewed its
Secretary-General, Svein Andresen who told me that there was no guarantee that
it would be able to protect the global system from problems. However, it was
believed that if you brought the central bank ministers together with the
treasury secretaries and the regulatory agencies from the Group of Seven
countries that it would provide a framework to protect the global financial
system. Obviously they failed in their mission. The alternative instead of
liquidating the FSF was to expand and empower it. When I asked FSB Chairman
Mario Draghi about the role and input of the international bankers like Sir
Evelyn de Rothschild, he replied,
We are in contact with various --say bankers association,
market association banks, hedge funds, securities for a and lots of other
bodies. We look at what they do and then we make up our own mind. So it is an
interesting context but in the end, ours is a forum where you have the
regulators—banking regulators, market regulators, financial ministries and
international organization and institutions and standard setters. So it is our
own mind in the end which we look at.
It is important to note that the internationalization or
globalization of the financial system is here. It constitutes tearing down the
final barrier between the countries of the world. It has been almost fully
operational for at least 10 years. At this point in the game, the integration
between a handful of international organizations is apparent.
The need to coordinate international accounting through
the International Accounting Standards Board with the American counterpart,
Financial Accounting Standards Board- FASB with the FSB and G20 is already
happening. IOSCO is working with the BIS Joint Forum and FSB. In order to
develop high quality international standards for auditing, assurance, ethics and
education for professional accountants, the Monitoring Group was set up and a
Charter was put in place in 2008 by Memorandum of Understanding. Those
participating include: IOSCO, the Basel Committee of Banking Supervision, the
European Commission, the International Association of Insurance Supervisors, the
World Bank, the Financial Stability Board and the International Forum of
Independent Audit Regulators.
There are so many working groups which now comprise a new
level of regulatory oversight operating internationally that it is almost
impossible to go back to the power of the individual nation-state. The number
and the oversight of these groups will make your head spin. Can we go back? Any
country who would dare say no would be completely destroyed—ask the 5 Asian
countries that chose to say no to the WTO Financial Services Agreement in the
mid-1990s. It is now the Financial Stability Board which is now empowered with
becoming the United Nations of Financial and Regulatory Control over countries.
WORLD GLOBALIZATION OF THE BANKING & REGULATORY STRUCTURE
Concentrating Total Financial Power at the Bank For
International Settlements and the Financial Stability Board
There are those who have been predicting a time when
there would appear a world government structure. That time is here. Many,
however, have predicted that it would be political in power. That is not
necessarily so. Although the United Nations has been an organizing power
worldwide to harmonize national law with international law, they do not issue or
print money—for that is the role of central banks. With the new and vast
empowerments being given to the central banks of the world and with the
restructuring of the Financial Stability Board, it appears that world government
is financial and economic. The old adage is true,
He who owns the gold makes the rules.
The entire banking system of the world, with the
exception of a few Muslim countries, is run by private corporations called
central banks. America's central bank, the Federal Reserve, was founded in 1913.
People should understand that it is not Congress which runs America but the
Federal Reserve because without the money and credit that it provides to banks
and subsequently home owners, farmers, and businesses, would not be able to
function. All one has to do is study the various past economic crises to know
that they occurred when the national banking system cut off credit. There is no
doubt that the 2008 Credit Crisis has helped everyone to see that it is the
banks—primarily the international banks and the central banks which run the
world. While the names of the shareholders of the Federal Reserve remain secret,
many people believe that the large international banks are some of its owners.
As a result of the Credit Crisis, the Bush Administration
proposed the Blueprint for a Modernized Financial Regulatory Structure which was
approved by current Treasury Secretary Timothy Geithner who then was president
of the New York Federal. He is now proposing the Obama regulatory blueprint.
Recently released, it calls for many of the same recommendations as the previous
blueprint, which can be summarized as a total centralization of power:
• A New Financial Services Oversight Couuncil of financial
regulators to identify emerging systemic risks and improve interagency
• New authority for the Federal Reserve to supervise all
firms that could pose a threat to the financial stability, even those that do
not own banks.
• Stronger capital and other prudential standards for all
financial firms, and even higher standards for large, interconnected firms.
• A new National Bank Supervisor to supervise all
federally chartered banks (and other financial institutions currently not under
Federal Reserve oversight).
• Elimination of the federal thrift charter and other
loopholes that allowed some depository institutions to avoid bank holding
company regulation by the Federal Reserve.
• The registration of advisors of hedge funds and other
private pools of Capital with the SEC.
Since most are not acquainted with our financial and
regulatory structure, they will not appreciate the incredible transfer of power
being given to the Federal Reserve, a private corporation. Once Congress passes
the necessary law, the Fed will be given massive powers over the entire
financial and economic industry, the insurance industry, non-banking
institutions as well as the mortgage industry.
While most Americans are hardly aware of the United
Nations or World Bank, let alone the World Health Organization, it will be
difficult to understand the two-pronged frontal attack: changing U.S. regulatory
laws to correspond to global regulatory laws which are in the process of being
strengthened and re-configured.The complexity is enormous and the areas affected
are hardly known or at this time or truly understood. Sadly, Congress is so busy
adjusting their togas, they do not understand that they no longer have the real
power as it was given to the Federal Reserve in 1913.
A very major piece of the new international architecture
is the newly configured Financial Stability Board-FSB. At the spring meeting of
the IMF/World Bank, NWV had asked former BIS Managing Director, Sir Andrew
Crockett, now with JP Morgan, what the role, power and function would be of the
FSB. He explained that while the chairs were still being arranged at the table,
that it would act at the global level to oversee national stability risks, it
would work with other regulators, it would review standards set by various board
on the national level, and it would employ a college of regulators that would
define methodologies. At the inaugural meeting held on June 26-27 in Basel, FSB
Chairman Mario Draghi, Governor of the Bank of Italy,
provided a detailed report on its new structure. He explained,
The FSB's mandate is to assess vulnerabilities affecting
the financial system; identify and oversee action needed to address them;
promote coordination and information exchange among authorities responsible for
financial stability; monitor and advise on market developments and their
implications for regulatory policy; advise on and monitor best practice in
meeting regulatory standards; undertake joint strategic reviews on the policy
development work of the international standards setting bodies; set guidelines
for and support the establishment of supervisory colleges; manage contingency
planning for cross-broader crisis management; and collaborate with the IMF to
conduct Early Warning Exercises.
The FSB was given an official plenary structure which
would be like the structure of any other international body, like the plenary of
the United Nations. It will be comprised of G20 central bank ministers, treasury
secretaries, and regulatory authorities. It will have a Steering Committee and
three Standing Committees: for Vulnerabilities Assessment; Supervisory and
Regulatory Cooperation; and Standards Implementation.
The Standing Committee for Supervisory and Regulatory
Cooperation will address coordination issues that arise among supervisors and
regulators and set guidelines for and oversee the establishment and effective
functioning of supervisory colleges.
A number of questions have been raised with regard to the
college of supervisors which will be a key component of the FSB. In April, 2008,
the G7 welcomed the idea of the college of supervisors to make the world's
financial markets less risky. Paulson's blueprint and his recommendation to
bring all of the different U.S. regulatory bodies under one agency is key to
making the supervisory colleges work. Many on the international level wanted to
be the one responsible for suggesting it, Gordon Brown of the UK being one of
them. The supervisory college would monitor the world's top 30 financial firms
in order to have effective cross-border supervision. This would be formally
agreed to by Memorandum of Understanding which would describe how it will
function, be organized and coordinate between supervisors, banks, and countries.
The FSB will be comprised of the Group of Seven plus:
Argentina, Australia, Brazil, China, Hong Kong SAR, India, Indonesia, Korea,
Mexico, Netherlands, Saudi Arabia, South Africa, Spain, Switzerland, and Turkey.
In addition the European Central Bank and the European Commission, as well a
host of international financial institutions and international standard setting,
regulatory and supervisory groups with participate.
The above constitutes a total restructuring of the entire
financial system, mortgage system, insurance industry, non-banking institutions,
and any other entity connected with money on a worldwide basis. While the
central banks control the monetary system, they are now being given complete
centralization of these financial powers. Congress can argue about whether or
not they will put all of our regulatory agencies under one roof, but the real
truth is that they don't have the power to do that for he who owns the gold
makes the rules. The Federal Reserve, along with Treasury has already been
playing a major role to help set in place the new financial and regulatory
In short, what comes after this will probably be a global
currency that will lead to a time of total control under a cashless system. The
BIS would not answer Nephos.com's questions about a change to the Special
Drawing Right from the dollar. BIS Managing Director Jaime Caruana commented,
Repairing the financial system and building a more resilient one for the future
also requires broad-based efforts involving cooperation between government and
the private sector. At the same time, we need to resist the move towards
protectionism; mounting that resistance puts a premium on international
cooperation and a heightened sense of shared responsibility.
It is ironic that here in Basle, the home of the Bank for
International Settlements, the Rathaus,
built in the early 1500s which was the center of town at that time, has
written in gold a statement that reads, Freedom is better than gold and silver.