Monday
Mar232015

Presidents, Bankers, the Neo-Cold War and the World Bank 

 At first glance, the neo-Cold War between the US and its post WWII European Allies vs. Russia over the Ukraine, and the stonewalling of Greece by the Troika might appear to have little in common. Yet both are manifestations of a political-military-financial power play that began during the first Cold War. Behind the bravado of today’s sanctions and austerity measures lies the decision-making alliance that private bankers enjoy in conjunction with government and multinational entries like NATO and the World Bank.

It is President Obama’s foreign policy to back the Ukraine against Russia; in 1958, it was the Eisenhower Doctrine that protected Lebanon from a Soviet threat. For President Truman, the Marshall Plan arose partly to guard Greece (and other US allies) from Communism, but it also had lasting economic implications. The alignment of political leaders and key bankers was more personal back then, but the implications were similar to the present day. US military might protected its major trading partners, which in turn, did business with US banks. One power reinforced the other. Today, the ECB’s QE program funds swanky Frankfurt headquarters and prioritizes Germany's super-bank, Deutschebank and its bond investors above Greece’s future.

These actions, then and now, have roots in the American ideology of melding military, political and financial power that flourished in the haze of World War II.  It’s not fair to pin this triple-power stance on one man, or even one bank; yet one man and one bank signified that power in all of its dimensions, including the use of political enemy creation to achieve financial goals. That man was John McCloy, ‘Chairman of the Establishment’ as his biographer, Kai Bird, characterized him. The relationship between McCloy and Truman cemented a set of public-private practices that strengthened private US banks globally at the expense of weaker, potentially Soviet (now Russian) leaning countries.

John McCloy and the World Bank Twist

In 1947, President Truman selected then-partner at a Rockefeller law firm, John McCloy, to be the second president of the World Bank (or International Bank of Reconstruction and Development) that would provide financial aid to developing nations after WWII. McCloy demanded the ability to unilaterally restructure the nascent World Bank—absent Congressional debate –such that its bonds would be sold through Wall Street banks.

That linkage altered the future of global financial relationships, by  transforming the World Bank into a securities vending machine for private banks that would profit from distributing these bonds globally, while augmenting World Bank aid with private loans.

World Bank, IMF and other multinational entity decisions about aid vs. austerity or any other ‘reform’ requirements including opening border to private banks, would be controlled by the capital markets. Big private global banks arrange, underwrite and distribute World Bank bonds. Small banks in Greece did not. Financial assistance terms were established to follow a similar hierarchy.

During the Cold War, the World Bank provided funds for countries that leaned toward capitalism versus communism.  Political allies of the United States got better treatment (and still do). The Nations that private bankers coveted for speculative and lending purposes saw their debt loads increase substantially and their industries privatized.  Equally, the bankers decided which bonds they could sell to augment public aid funds, which meant they would have control over which countries the World Bank would support.  The World Bank did more to expand US banking globally than any treaty or entity that came before it.

The Marshall Plan and Eisenhower’s Rise

Another pillar of global reconstructive and foreign policy efforts, the Marshall Plan, would provide further a ide to “friendly” countries in the early years of the Cold War.  Truman unveiled the Marshall Plan in the spring of 1947. He presented it as a way to counter the threat of Communism, warning that Europe was disintegrating economically, and Truman feared Greece and Turkey would fall victim to Communist control. America’s new enemy was not Germany nor the Nazis but Communism and its associated countries.

Under the Marshall Plan, Congress approved $13 billion to aid Europe’s fight against Communism, and also to bolster prime trading partners for American industries and banks. As a result, more currencies became available for conversion into US dollars. The Marshall Plan wasn’t just about helping allies: but about spreading dollar domination.

Chase (now JPM Chase) Chairman, Winthrop Aldrich enthusiastically supported the Marshall Plan. To big banks, lending to developing nations and fighting Communism amounted to the same thing. Plus, the Marshall Plan effectively gave each major US bank its own European country to play in. From 1948 to 1952, Chase amassed the most deals in Europe, nearly $1 billion, followed by National City Bank (now Citigroup). 

Eisenhower, NATO & Bankers

In 1952, General Dwight D. Eisenhower was commander of the North Atlantic Treaty Organization (NATO), the new military alliance established between the United States, Canada, and leading Western European powers to deter Soviet expansion, and promote European political integration. NATO blended military, political, and economic power behind the mantra, “an armed attack against one or more of [the allied countries] shall be considered an attack against them all.”.  In practice, what held for military support, held for opening borders to dollar based trade and private banking business, too.

In the spring of 1952 Aldrich traveled to Europe with an entourage of power brokers to persuade Eisenhower to run for president on the Republican ticket. Upon election victory, Ike’s banker sphere of appointees included his secretary of war, Thomas Gates, who would later chair the Morgan Guaranty Bank (now JPM Chase), Aldrich who became Ike’s ambassador to Great Britain, and John McCloy, who would spend the Eisenhower years as chairman of the Chase National Bank (now JPM Chase) assuming Aldrich’s role.

Beside the Marshall Plan, the Truman and Eisenhower doctrines extended US military and economic support to nations that adopted US ideology and that were military allies. Overseas offices of major US banks subsequently swelled to accommodate all the private loan demand that accompanied government support.  

In 1956, W. Randolph Burgess, former National City Bank Vice President, left his Treasury Department post to become the US ambassador to NATO. By that time, the luster of NATO was fading. By 1963, Burgess noted that “the shine of postwar NATO was getting a little dull.” Stronger European countries felt less threatened by Soviet aggression and this made them less pliable to US policies. In addition, their European  banks began spreading their wings globally again. The financial end of the cold war was preceding the diplomatic end by decades.

The International Bank Race

US bankers sought to compete with strengthening European banks by opening more offices overseas and by fighting to eliminate New Deal regulatory restrictions so they could grow domestically and use their size as a broader lending springboard.

Fast forward sixty years later to today , and those seeds of political-military-financial partnerships against the threat of the Soviet Union (now Russia) have sprouted to support US banks and dollar, and US monetary and fiscal policy supremacy the world over.

Much has happened in between; mass deregulation of international banking, technological advancements in trading, and the use of the World Bank (and the IMF and various central banks) to subsidize bank led speculation by submitting weak countries to austerity measures or ‘bailouts’, thereby prioritizing payments to bondholder clients of mega-banks over economic stability. The Big Six banks in the US, a subset of the 30 G-SIBs (global systemically important banks) enjoy a magnitude of government, central bank and multinational entity support that would have been unimaginable back then.

Whether it’s a $17 billion bailout package for the Ukraine. or a $270 billion one for Greece, or Obama doing a 180 on Cuba to keep Russia out, the costs of power alignments are greater than ever for the smaller, weaker countries. Their economic coffers have been pried open by the Western super-powers still calling the political, military and financial shots and again using threats of Russian ‘aggression’ to camouflage expansionary intents.

Under Obama, the US is resurrecting the Cold War and invigorating NATO by promoting the threat notion, just as Truman and Eisenhower did.  Financial supremacy and currency dominance remain central to this strategy. But this time, there’s a more dangerous difference – a level of financial opposition that could become military opposition if sufficiently provoked. The counter-movement from a currency and financial perspective is comparatively small. But it’s growing.  The global position of super-powers and super-banks remains at play in this newly sanctioned financial Cold War.  

For more on historical foundations for present decisions, read: All the Presidents’ Bankers: The Hidden Alliances that Drive American Power (out now in paperback). Also, please watch my interview with Max Keiser

Saturday
Mar142015

The Volatility / Quantitative Easing Dance of Doom

The battle between the ‘haves’ and ‘have-nots’ of global financial policy is escalating to the point where the ‘haves’ might start to sweat – a tiny little. This phase of heightened volatility in the markets is a harbinger of the inevitable meltdown that will follow the grand plastering-over of a systemically fraudulent global financial system. It’s like a sputtering gas tank signaling an approach to ‘empty’.

Obscene amounts of central bank liquidity applauded by government leaders that have protected the political-financial establishment with failed oversight and lack of foresight, have coalesced to form one of the most unequal, unstable economic environments in modern history. The ongoing availability of cheap capital for big bank solvency, growth and leverage purposes, as well as stock and bond market propulsion has fostered a false sense of economic security that bears little resemblance to most personal realities.

We are entering the seventh year of US initiated zero-interest-rate policy. Biblically, Joseph only gathered wheat for seven years before seven years of famine. Quantitative easing, or central bank bond buying from banks and the governments that sustain them, has enjoyed its longest period of existence ever. If these policies were about fortifying economic conditions from the ground up, fostering equality as a force for future stability, they would have worked by now. We would have moved on from them sooner.

But they aren’t. Never were. Never will be. They were designed to aid big banks and capital markets, to provide cover to feeble leadership. They are policies of capital creation, dispersion and global reallocation.  The markets have acted accordingly. 

What began with the US Federal Reserve became a global phenomenon of subsidizing the financial system and its largest players.  Most real people - that don’t run hedge funds or big banks or leverage other peoples’ money in esoteric derivatives trades - have their own meager fortunes at risk. They don’t have the power of ECB head, Mario Draghi to issue the 'buy' order from atop the ECB mountain. Nor do they reap the benefits.

Retail sales are down because people have no extra money and can’t take on excess debt through credit cards forever. They aren’t governments or central banks that can print when they want to, or big private banks that can summon such assistance at will.

Federal Reserve Chair, Janet Yellen recently chastised these bankers. This, while the Fed has become their largest client and the world’s biggest hedge fund.  While she wags her finger, the Fed is paying JPM Chase to manage the $1.7 trillion portfolio of mortgage related assets that it purchased from the largest banks. In other words, somewhere along the line, the public is both paying to buy nefarious assets from the big banks at full value, thereby supporting an artificially higher price and demand for these and similar assets, and paying the nation’s largest bank for managing them on behalf of the Fed. Yellen says things like “poor values may undermine bank safety” and all of a sudden she’s on an anti-bank rampage?  What about the fact that just six banks control 97% of all trading assets in the US banking system and 95% of derivatives? Or that 30 banks control 40% of lending and 52% of assets worldwide?

Think about the twilight zone squared logic of this. Yellen’s predecessors, Alan Greenspan and Ben Bernanke, enabled the path of the US banking system to become more concentrated in the hands the Big Six banks, which have legacy connections to the Big Six banks that drove the country to disaster during the 1929 Crash, and have been at the forefront of the nexus of political-financial power policies for more than a century. Yellen had a seat at the Clinton administration banking deregulation table when Glass-Steagall was summarily dismantled thereby enabling big banks to become bigger and more complex and risky. Those commercial banks that didn’t hook up with investment banks back then, got their chance in the wake of the financial crisis of 2008. They also concocted 75% of the toxic assets that were spread globally and the associated leverage behind them in the lead up to 2008.

Rather than show meaningful initiative to engender safety in the financial system (which if she had, or wanted to, would have rendered her a non-viable candidate for her position), she reprimanded the banks while providing them cheap capital. That’s like egging people with a tendency toward excess on as they gorge on multi-course gourmet dinners, making disparaging comments about their girth, and being dubbed their coach for The Biggest Loser while serving them the next course. Political theatre is its own end.

This latest rise of market volatility, however, is foreshadowing the real end of global QE as a proxy bond investor packaged for political purposes as necessary to combat deflation, increase liquidity, or whatever the reason-du-jour providing the QE program legitimacy beyond its true function of providing cheap capital to the private banking system, is.

The reason that the artificial resuscitation of the entire global financial system has worked as long as it has is due to the collaboration of major governments, central banks, and powerful private banks behind it. These three pillars of power have been mutually reinforcing.  Since early 2009, the bond and stock market have soared on the back of external capital from the central banks supported by the elite government leaders of the countries with the largest banks.

Just this year, 23 central banks have cut rates due to ‘sluggish growth’ – as if this cheap money has helped main populations anywhere. In the process their currencies will weaken. The US may have a strong dollar on the back of having had the largest and first QE / ZIRP program which is why  (behind the banks’ need) there’s no particular reason – yet - for the Fed to raise rates. Plus, the labor situation is barely improving even if the headline unemployment figures based on low job-market participation and poorly paying jobs appears better. Also, the ‘lower demand’ for oil amidst higher production (and some big commodity trading desks slamming oil prices and blaming Saudi Arabia) has made inflation (outside of the cost of living and the stock market) look tame enough to make rates hikes unnecessary.  But the big market players think (or say, anyway) that rate hikes could happen soon. This uncertainty begets higher volatility.

Meanwhile, the Euro is tanking against the dollar because Mario Draghi's ECB is on a QE roll, buying covered bonds from the likes of Deutschebank, ING, and BNP while pummeling Greece for not wanting to further crucify its population in order to repay funds that had egregious terms to begin with. Their ‘bailout’ had nothing to do with helping Greece attain a stronger economy and everything to do with validating speculators and the banks that sold them bonds. The IMF even sort of admitted this. But the Troika has made plutocratic finance a blood sport.

All this is fodder for triple digit market swings. Somewhere in the madness, lies the notion that this particular policy of speculation subsidization for the upper banking class can’t last forever. There are only so many entities that can buy so many bonds and filter so much cheap capital into the system for so long. At some point the ECB program will run its stated course. Rates around the world will head to zero or somewhat negative. And then what?  There will be no more powder in the QE / ZIRP global keg. That’s when it gets really bad.

Meanwhile, the rising volatility we will face this year (to the downside) in the financial markets, will signal this unraveling. The best course for mere individuals is to reduce their exposure to the insanity.  “Know when to hold ‘em, know when to fold ‘em, know when to walk away” as the lyrics to the old gambling song go. Because rest assured, the big boys are going to be on the financial life rafts first…economic Titanic style. That volatility – it’s the iceberg finally looming. 

Wednesday
Mar112015

Let’s talk about Hillary Clinton and the Historical Record

On March 10th, after eight days of anticipation, media and political uproar, the world fell privy to Hillary Clinton “breaking her silence” (aside from the stray tweet beforehand) regarding her decision to conduct government business from her personal clintonmail.com email address while Secretary of State - for ‘convenience’ purposes.

There are basically two opinion camps that have formed around email-gate. They break down, as these things too often do, across partisan lines. The GOP camp professes, absent any self-reflection of say, the 22 million lost-then-found emails deleted from a non-government domain during the George W. Bush administration, that this is another example of the Clintonian belief that laws and words are mere obstacles subject to manipulation.

The second, largely progressive Democrat camp believes that Hillary Clinton is being harpooned unfairly over this oh-so-minor issue in the scheme of matters of much greater gravitas. Hey, what is ‘is’ anyway? And what’s wrong with convenience – after all, two phones are so heavy and cumbersome?

But the historical record has an opinion, too. The capture of history is predicated on the preservation of information, preferably as much information as possible. Regarding American Presidential records, sometimes that information remains classified for “national security” or other reasons, or only released after decades of dormancy once said threat is deemed gone.

Other times, it will be made available to the public once it has been processed by archivists, neatly divided into folders and boxes and marked under official category names and numbers. It is then either accessed quickly (as the Oprah interview was at the Clinton library) or awaits years to be requested by a wayward historian. (This was the case for many of the items I was fortunate to unearth through my own recent presidential records analysis.)

When I was probing presidential archives throughout the country for All the Presidents' Bankers, classified, and then unclassified, information included items like former Chase head, David Rockefeller and Henry Kissinger’s melding of private banking and state department activities leading to the Iran Hostage Crisis during the Carter administration. Still classified information included pages of redactions in the George H W Bush archives regarding his son, Neil Bush’s role in the late 1980s Silverado S&L scandal. 

But even though I focused on the relationships and related policy decisions of presidents with key bankers, history pushed every Secretary of State associated with the 19 presidents I investigated to the surface as well. Their actions happened to intersect with those of the presidents and bankers; domestic and foreign policies thereby intertwined throughout the years in a detectable, and often repetitive, pattern. If those Secretaries of State had taken it upon themselves to divvy up and classify their own correspondence trails, the truth behind their actions, associations, and motivations would have been similarly diffused.

For the most part, before the advent of emails, presidential documents resided in the form of typed letters, handwritten notes, telegrams, and taped recordings (until after Nixon’s presidency). From Teddy Roosevelt through Ronald Reagan, the documents I examined were pre-email technology, as were the George HW Bush documents I was able to view.

As I reached the William J. Clinton Library in Little Rock, Arkansas, on a blustery mid-January day in 2013, fewer documents of any kind were available for my requested inspection compared to the prior presidential archives I had visited. First, because they had not been processed yet. Fewer historians and researchers are requesting information and fewer staffers work at these libraries (the money is made at the museum part of the libraries from busloads of tourists, not from those of us digging through the archives.) Second, the advent of emails and the masses of extra correspondence they produce, means that more procedures and protocol are harnessed to determine what can be released to the public, or whether these Automated Records Management System (ARMS) emails, as they are called, will remain hidden under the cloak of  ‘national security.’

The FOIA requests on bankers that I submitted to the Reagan Library for as yet uncategorized, but not classified information were processed within a few months. I have yet to hear back from the FOIA’s on bankers that I submitted to the Clinton Library in January 2013.

By using external email addresses and servers, Hillary Clinton didn’t just rob the records process of its ability to evaluate and categorize information; she robbed the public and even future public servants of the chance to examine her communications for analysis or relevant decision-making. Hillary Clinton chose to self-segregate her correspondence. She asserted she was not violating any rules or seeking to hide her communications in the process. Yet, rules were violated whether she sought to hide anything or not.

Before reporters at the UN, Clinton admitted that, "Looking back, it would've been better if I had simply used a second email account and carried a second phone but at the time this didn't seem like an issue…The vast majority (italics mine) of my work emails went to government employees at their government addresses which meant they were captured and preserved immediately on the system at the State Department."

She took “unprecedented steps” to make “all work-related emails public."  Yet, these steps weren’t hers to take.

According to White House Press Secretary Josh Earnest, President Obama had corresponded with Clinton via her private email address, “But”, Earnest said, “the president was not aware of the fact that this was a personal email server and that this was the email address that she was using exclusively for all her business."

It’s hard to imagine President Obama wasn’t aware that 'clintonmail.com' didn’t look like 'state.gov.' But if he had not been too busy to notice such minor discrepancies, he might have wondered whether or not she was using this email address for all of her business, government or otherwise. At some point, during her years working for him, he might have asked her to come on over to the state.gov side. But, he didn’t. Perhaps it served neither of them to have done so.

Yet, the Presidential Records Act of 1978, that President Obama himself amended, as did President George W. Bush, to give the White House more latitude in determining security issues for disclosures, is very clear in its definitions regarding what consitutes necessary information.

First, consider that on the White House’s website, under Executive Branch, it states:

“The power of the Executive Branch is vested in the President of the United States, who also acts as head of state and Commander-in-Chief of the armed forces. The President is responsible for implementing and enforcing the laws written by Congress and, to that end, appoints the heads of the federal agencies, including the Cabinet.” (Bold is mine.)

Then, under the heading Department of State, we see confirmation that:

The Secretary of State serves as the President's top foreign policy adviser.

Now, reading the definition of “Presidential Records”, from the National Archives website as per the Presidential Records Act of 1978 (44 U.S.C. Chapter 22), we see that:

"Presidential records" means documentary materials…created or received by the President, the President’s immediate staff, or a unit or individual of the Executive Office of the President whose function is to advise or assist the President, in the course of conducting activities which relate to or have an effect upon the carrying out of the constitutional, statutory, or other official or ceremonial duties of the President. “

True, these documentary materials don’t include “personal records” (such as yoga classes or wedding plans) or those “of a purely private or nonpublic character which do not relate to or have an effect upon the carrying out of the constitutional, statutory, or other official or ceremonial duties of the President.

But equally, records are only considered "personal" if they are “not prepared or utilized for, or circulated or communicated in the course of, transacting Government business.” 

This was clearly not the case with Hillary Clinton's emails that did just that. The act also does not exclude government business conducted on a personal email, regardless of whether associated emails were incoming to, or outgoing from the President and captured in that manner. Therefore, conducting any government business on a personal email is a technical violation of the act.

According to Hillary Clinton, all government business related emails have been reverted to the State Department. Whether that is true or not is a conclusion she has robbed history of the ability to make. In other words, she didn't just exercise shady judgment for the sake of convenience, she disrespected American history and its rules for preserving information on behalf of journalists, academics, historians and the American and global public.