Global Research, March 30, 2009
Blogger’s Note: Here below I reproduce a condensed version of Engdahl’s important new article. You can read it in its entirety and original form by clicking here.
What Geithner does not want the public to understand, his ‘dirty little secret’ is that the repeal of Glass-Steagall and the passage of the Commodity Futures Modernization Act in 2000 allowed the creation of a tiny handful of banks that would virtually monopolize key parts of the global ‘off-balance sheet’ or Over-The-Counter derivatives issuance.
The five are, in declining order of importance: JPMorgan Chase which holds a staggering $88 trillion in derivatives (€66 trillion!). Morgan Chase is followed by Bank of America with $38 trillion in derivatives, and Citibank with $32 trillion. Number four in the derivatives sweepstakes is Goldman Sachs with a ‘mere’ $30 trillion in derivatives. Number five, the merged Wells Fargo-Wachovia Bank, drops dramatically in size to $5 trillion. Number six,
The Government bailouts of AIG to over $180 billion to date has primarily gone to pay off AIG’s Credit Default Swap obligations to counterparty gamblers Goldman Sachs, Citibank, JP Morgan Chase, Bank of America, the banks who believe they are ‘too big to fail.’ In effect, these five institutions today believe they are so large that they can dictate the policy of the Federal Government. Some have called it a bankers’ coup d’etat. It definitely is not healthy.
This is Geithner’s and Wall Street’s Dirty Little Secret that they desperately try to hide because it would focus voter attention on real solutions. The Federal Government has long had laws in place to deal with insolvent banks. The FDIC places the bank into receivership, its assets and liabilities are sorted out by independent audit. The irresponsible management is purged, stockholders lose and the purged bank is eventually split into smaller units and when healthy, sold to the public. The power of the five mega banks to blackmail the entire nation would thereby be cut down to size. Ooohh. Uh Huh?
This is what Wall Street and Geithner are frantically trying to prevent. The problem is concentrated in these five large banks. The financial cancer must be isolated and contained by Federal agency in order for the host, the real economy, to return to healthy function.
This is what must be put into bankruptcy receivership, or nationalization. Every hour the Obama Administration delays that, and refuses to demand full independent government audit of the true solvency or insolvency of these five or so banks, inevitably costs to the US and to the world economy will snowball as derivatives losses explode.
Blogger’s Note: Only two weeks ago, William Greider writing in The Nation also addressed Geithner’s relaunching of “the massive bailout of banking and finance” but, “Knowing how unpopular this is with the people at large, Geithner followed with his ‘sweeping’ plans to re-regulate the bankers and financiers.” Greider regarded those “sweeping plans” as smoke and mirrors and concluded his article with this challenge to We The People:
“Our first political challenge is to disturb business as usual in Washington and prevent Congress from taking hasty action to adopt Wall Street's ‘reform’ agenda. Congress is rattled by the exploding popular anger and listening nervously. The people need to speak louder--loud enough for the president to hear [emphasis mine].”
Oddly though, I’ve found only one national organization that has been protesting Geithner’s giveaway of our children’s and grandchildren’s hope of prosperity. Bail Out the People – Not the Banks was it. According to some e-mails I’ve received, it seems there were some demonstrations in Phoenix (outside the AIG Building) and in Tucson (outside a Morgan Chase Bank) corresponding to the nationally organized April 3rd March on Wall Street.
Blogger's PS: Thanks to the still ongoing discussion of my latest OpEdNews column on this subjet, I've learned of a second national organization demanding nationalization of the big banks who caused the present economic crisis. In fact A New Way Forward had organized a national demonstation that took place only two days ago (funny it wasn't reported in the MSM)! Please sign their pledge.