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July 21st 2009
The honest banker

As the Global Financial Crisis affects all of the world, including Magnetic Island, Magnetic Times takes pleasure in publishing a recent article by one of Australia's most engaging finance writers, Planet Wall Street's David Hirst, whose work is syndicated by independent business news service, News Bites.

The honest banker

In June 2007, just as the world was to plummet into the most catastrophic financial collapse since 1929, due to President Clinton’s decision to remove the remaining restraints on the financial industry (the Glass-Steagall Act of 1933), Lloyd Blankfein, CEO of Goldman Sachs, proved that bankers can be honest men.

In a statement brimming with unbridled arrogance he told the New York Times that with the end of the Glass-Steagall, “we have come the full circle, because that is exactly what the Rothschild’s or J.P. Morgan’s, the bankers, were doing in their heyday.  What caused this aberration was Glass –Steagall.”

The choice of the word “heyday” and “aberration” were wonderfully appropriate. Glass-Stegall, more than any other legislation, created the modern American middle class – in reality a prosperous working class. The “heyday” had been when JP Morgan and the bank “trusts” had unbridled rule and could manipulate the economy to create financial panics or busts that impoverished working and middle class people. During the “heyday”, or days or decades, thousands of banks could be closed and millions of depositors lose all. Farmers could be thrown from their land, poverty stalked and the rich made hay, always due to financial panics.

Then when the crisis passed, and people rebuilt, a new “panic” was ushered in and the struggles of men and women across the world were more hay for the Goldmanites of the day.

We tend to think of 1929 and the crash and subsequent depression, forgetting that in 1921 J.P. Morgan and his cohorts made fortunes in yet another panic that impoverished millions of hard working people. Or we think of the terrible depression of the 1890s, or many others instigated by the masters of money until the “aberration” of Glass – Steagall levelled the playing field.

Now, pressure is mounting for an investigation like those that were launched by a vigorous democracy after the panic of 1907 and the great panic of 1929, this time into the US Federal Reserve. The bill, (HR1207), intends to audit the Federal Reserve but has, “other purposes.” 

Jim Bianco of Bianco Research wrote in his News Clips/Daily Commentary service yesterday: "The amount of bad news that Goldman Sachs is generating with its record earnings is incredible. We cannot remember a company that has received so much scorn for making money.”

The influential journalist Peter Brimelow added fuel to the blazing fire surrounding Goldman and added, “The scale (of a full investigation) that would be involved is so spectacular that it dwarfs another issue … whether the gold price has been systematically suppressed. Manipulating gold is an afterthought compared to what was allegedly going on.

“I've been reporting for years that key investment letters had come to the conclusion that the financial markets have been manipulated.” Brimelow, who is mainstream these days writes. “Now this suspicion is all over the mainstream media. Hmmm.”

 “And I'm increasingly confident all this will end with the appointment of another Pujo Committee, paralleling the one which investigated the so-called 'Money Trust' in the wake of the Panic of 1907."

Brimelow is just one of many journalists amazed that at last people in power are looking at what the new “bank trusts” of today have done and what they are doing.

Two weeks ago I would not have given bill HR1207 (which has comfortably passed Congress), to audit the Fed, a snowflake's chance in hell of passing the Senate and then the Goldmanites that surround, and have appeared to capture President Obama, thereby giving “regulatory capture” a whole new meaning. The stench from Wall Street and Washington is rising to high heaven and only President Obama’s political genius is keeping the lid on an explosive situation. Americans have come to believe that, through vast injections of funds from their savings and their future, has the banking system been saved.

Now Goldman is seen to have sacked the land for personal private wealth. It’s not the profits, Americans will never be weaned from profit, it’s the bonuses I believe that is driving public revulsion by rich and poor. Fairness still is believed, in the US to be a national characteristic. Goldman could not have announced their profits, lauding them as bonuses, at a worse time. 

And, as the very mild mannered, John Mauldin writes: "European banks including Societe Generale SA and BNP Paribas SA hold almost $200 billion in guarantees sold by New York-based AIG allowing the lenders to reduce the capital required for loss reserves." (Bloomberg). Want to think about the US taxpayer paying to bail out Europeans banks? Think that might be a tad controversial? This could be explosive.”

Historically if politicians face either inquiry or a revolt they chose the former.

What would an inquiry and audit of the Federal Reserve possibly reveal? Enough, Mr. Bernanke has told us, to threaten the financial system.

Such an inquiry would study the entwined embrace of the too-big-to-fail banks and the Fed. The focus would undoubtedly become the relationship between the Fed, Goldman and perhaps JP Morgan. 

Brimelow mentions the manipulation of gold prices. The coffers of Fort Knox and West Point, where America’s and much of the world’s gold has been stashed since WWII, have not been audited since 1954 and the Fed has consistently refused an audit.  A growing body of observers believe the gold may be greatly depleted as part of a price manipulation scheme to strengthen the US dollar and paper money in general. If the gold is missing from Fort Knox it would be undoubtedly the greatest financial and political sensation of our and maybe all time. The fact that this theory is so widely believed by so many distinguished Americans is a horrific condemnation of trust.

The burr under the Fed's saddle has been the Republican Texas Congressman and almost anti-cult figure Ron Paul who stood for the Presidency mostly on the question of the activities of the Federal Reserve. HR1207 is his baby but passed Congress with 271 handmaidens despite the lobbying power of the financial industry, which believed the matter could be contained in the more easily manipulated Senate. It calls for the US, “To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes.”

Other purposes. The principal “other purpose” will be to examine collusion and manipulation in high places of a kind that would do J.P. Morgan and Baron Rothschild proud. But could it be that Goldman, so foolish as to deride the chance the American working class were once given – a fair go – might have given the forces that want this viperous nest examined, their chance. If so there will be a great levelling and, perhaps, the link of hand cuffs upon the wrists of the high and mighty.
“Other purposes” means everything.

It may also mean an examination into the high frequency trading of Goldman and other masters of manipulation.

Aberrant behavior, like that of controls on bankers gone bad, might become the norm – again.

David Hirst

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The honest banker
 
1 comments
 
Chris C
July 21st 2009
Excellent post George


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