"Other News" is a personal initiative seeking to provide information that should be in the media but is not, because of commercial criteria. It welcomes contributions from everybody. Work areas include information on global issues, north-south relations, governance of globalization. Roberto Savio
SAN SALVADOR, The Bahamas, 08.13.2012 - Hardly a week goes by without the disclosure of some scandal related to banks. Now British Standard Chartered has been accused by an American regulator of having schemed with the Iranian government to launder billions of dollars for the potential support of terrorist activities. What gives an added value to this allegation is that Standard Chartered was, at least up until now, considered one of the cleanest banks, and was not associated with any scandal.
Not long ago, the American Senate had alleged that HSBC, another British financial giant, was supporting activities smacking of terrorism for which HSBC has apologized. HSBC has also put aside 700 million dollars for potential fines and sanctions.
But we are entering into a new development in this ceaseless flow of financial scandals. It is now starting to have an impact on some of the mightiest in the world of finance, much beyond the banks themselves.
It started in Spain, where former finance minister Rodrigo Rato, once an influential man at home and abroad (he was director of the International Monetary Fund), has been accused of permitting the Spanish banking system to spin out of control. There are various calls for bringing him to justice and he was questioned at a parliamentary hearing that turned out to be hostile, in spite of his political affiliations.
Far away in the United States, the Secretary of the Treasury (Finance Minister), Timothy Geithner, has been questioned over the fact that although he knew about the rigging of Libor (the interbank loaning rate), he did not do much to stop it. The House Financial Services Committee called him to a hearing, where he defended his call for new regulations but did not explain why he had not actively intervened to stop what he knew the Barclays bank was doing.
Draghi and the Group of 30
And now something unthinkable has happened! The European Union Ombudsman has announced that it is launching an investigation into allegations of Mario Draghi's membership in the so-called Group of 30, which it says "is incompatible with the independence, reputation and integrity of the ECB".
Draghi, currently president of the European Central Bank, was a vice chairman and managing director of Goldman Sachs, and a member of the Group of 30 (a private organization of influential regulators, financial executives and academics). He has been accused of gathering very important people, like the former managing director of Goldman Sachs, William Dudley, in order to make decisions on international issues of economic, financial and political governance.
Such accusations have, for years, accompanied the meetings of the Trilateral Commission, the Bilderberg Commission, and the World Economic Forum. The difference is that the Group of 30 is especially heavy on finance. An NGO that has denounced the close relations between lobbyists and senior decisions-makers in Europe and the EU, the Corporate Europe Observatory, has been quick to point out the case of another ex-Goldman Sachs man: the unelected Prime Minister Mario Monti of Italy, who was international adviser to Goldman Sachs from 2005 to 2011. In the Goldman Sachs job description, Monti's work was to "provide advice on European business and major public initiatives, worldwide."
Whether all this will lead anywhere is very doubtful. The web of finance, corporation and politics is so close knit that nothing short of a French revolution could decapitate that world.
Donors and Campaigners
The best example of where it is leading to is the United States where the costs of the presidential campaign will now probably surpass the staggering amount of 2 billion dollars. This is due, in a good measure, to the ruling of the very conservative Supreme Court that corporations have the same right of free speech as individuals, and therefore are no longer subject to limitations in their funding of electoral campaigns.
The money of secret donors increased from 1% in 2006 to 44% in 2010. This year a mere handful of 26 billionaires have given 61 million dollars to political action committees (PACs), which had stringent limits before. Those 26 billionaires possess a net worth equal to 42% of all American households, about 50 million people. Compare the freedom of speech enjoyed by a couple of dozen of super-rich people on the one hand and 50 million 'normal' citizens on the other!
One of the super donors is casino magnate Sheldon Adelson, who is putting 100 million dollars into the Mitt Romney campaign (if Romney is elected, better watch out for new casino regulations). There are many more donors of that campaign, whose identity is not known, because they donate to non-profits like structured PACs, whose donors can remain secret. According to Rick Maloney of the Committee to Protect Ethics, the largest part of that money comes from banks.
One clear result is that Romney is outspending Obama. The President has spent 400 million dollars in the last 18 months, and now, as we are approaching the day of the presidential elections, more money is needed. Meanwhile, the debate has shifted entirely to personal attacks, repeated a thousand times on radio and TV day in and day out, with little vision or policy issues as the centre of the debate.
Perhaps the awareness that all this is not sustainable is dawning on some minds. What was really surprising was to see Sanford Weill (an American banker, financier and philanthropist) declare on CNBC : "What we should probably do is go and split up investment banking from banking. Have banking do something that it's not going to risk the taxpayer dollars, that's not going to be too big to fail."
Weill, a former boss of the mega group Citibank, for years had a plaque in his office which read "The Shatterer of Glass-Steagall". The Glass-Steagall Act, created after the Great Depression of 1929, regulated a strict separation between banks of investments and banks of deposit, which could not use customers' money for speculation. That was abrogated by President Bill Clinton in 1999 to please Wall Street. Since then John Reed, the co-creator of the mega Citibank, has apologized for creating a lumbering giant that needed multibillion dollars bailout from the government. Philip Purcell, former chief executive of Morgan Stanley, and David Romansky, the onetime leader of Merrill Lynch, both major actors in getting the Glass-Steagall Act repealed, have also expressed similar concerns.
Now, let me just quote the ending lines of the editorial of the New York Times of the July 27: "We forcefully advocated the repeal of the Glass-Steagall Glass Act ... Having seen the results of this sweeping deregulation, we now think we were wrong to have supported it."
It is a pity that Weill and friends are no longer in power. Even a small harmless new measure, like a symbolic tax on financial transactions, the so-called Tobin Tax, is rejected by the City and Wall Street, in spite of respectable advocates like German Chancellor Angela Merkel, former French President Nicolas Sarkozy and now his successor Francois Hollande.
*Roberto Savio is founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News.