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BIS Headquarters in Basel
Buried on page 83 of the 89-page Report on Financial Regulatory Reform issued by the U.S. Administration on June 17 is a recommendation that the new Financial Stability Board strengthen and institutionalize its mandate to promote global financial stability. Financial stability is a worthy goal, but the devil is in the details. The new global Big Brother is based in the Bank for International Settlements, a controversial institution that raises red flags among the wary . . . .
“Big Brother” is the term used by George Orwell in his classic novel 1984 for the totalitarian state that would lock into place in the year of his title. Why he chose that particular year is unclear, but one theory is that he was echoing Jack London’s The Iron Heel, which chronicled the rise of an oligarchic tyranny in the United States. In London’s book, the oligarchy’s fictional wonder-city, fueled by oppressed workers, was to be completed by 1984. Orwell also echoed London’s imagery when he described the future under Big Brother as “a boot stamping on a human face – forever.” In Secret Records Revealed: The Men, the Money, and the Methods Behind the New World Order (1999), Dr. Dennis Cuddy asked:
“Could the ‘boot’ be the new eighteen-story Bank for International Settlements (BIS) which was completed in Basel, Switzerland, in 1977 in the shape of a boot, and became known as the‘Tower of Basel’?”
The boot-like shape of the building is strange enough to be thought-provoking (see photo), but more disturbing is the description by Dr. Carroll Quigley of the pivotal role assigned to the BIS in consolidating financial power into a few private hands. Professor Quigley, who was Bill Clinton’s mentor at Georgetown University, claimed to be an insider and evidently knew his subject. He wrote in Tragedy and Hope (1966):
“[T]he 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 feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
That helps explain the alarm bells that went off among BIS-watchers when the Bank was linked to the new Financial Stability Board (FSB) President Obama signed onto in April. When the G20 leaders met in London on April 2, 2009, they agreed to expand the powers of the old Financial Stability Forum (FSF) into this new Board. The FSF was set up in 1999 to serve in a merely advisory capacity by the G7 (a group of finance ministers formed from the seven major industrialized nations). The chair of the FSF was the General Manager of the BIS. The new FSB has been expanded to include all G20 members (19 nations plus the EU). The G20, formally called the “Group of Twenty Finance Ministers and Central Bank Governors,” was, like the G7, originally set up as a forum merely for cooperation and consultation on matters pertaining to the international financial system. But its new Financial Stability Board has real teeth, imposing “obligations” and “commitments” on its members.
The Shadowy Financial Stability BoardThe Report on Financial Regulatory Reform issued by the Obama Administration on June 17 includes a recommendation that the FSB “strengthen” and “institutionalize” its mandate. What is the FSB’s mandate, what are its expanded powers, and who is in charge? An article in The London Guardian addresses those issues in question and answer format:
“Who runs the regulator? The Financial Stability Forum is chaired by Mario Draghi, governor of the Bank of Italy. The secretariat is based at the Bank for International Settlements’ headquarters in Basel, Switzerland.”
Draghi was director general of the Italian treasury from 1991 to 2001, where he was responsible for widespread privatization (sell-off of government holdings to private investors). From January 2002 to January 2006, however, he was a partner at Goldman Sachs on Wall Street, another controversial player. As already noted, “basing” the FSB at the BIS is not a comforting sign, considering the dark and controversial history of the BIS. Dr. Cuddy, writing in 1999, quoted media sources describing the BIS and its behind-the-scenes leaders as “this economic cabal . . . this secretive group . . . the financial barons who control the world’s supply of money” (Washington Post, June 28, 1998); “some of the world’s most powerful and least visible men . . . officials able to shift billions of dollars and alter the course of economies at the stroke of a pen” (New York Times, August 5, 1995); men who can “move huge amounts of money into and out of markets in a nanosecond” and “topple politicians with the click of a mouse” (ABC’s “Nightline,” July 1, 1998).
“What will the new regulator do? The regulator will monitor potential risks to the economy . . . It will cooperate with the IMF, the Washington-based body that monitors countries’ financial health, lending funds if needed. . . .”
The IMF is an international banking organization that is also controversial. Joseph Stiglitz, former chief economist for the World Bank, charges it with ensnaring Third World countries in a debt trap from which they cannot escape. Debtors unable to pay are bound by “conditionalities” that include a forced sell-off of national assets to private investors in order to service their loans.
“What will the regulator oversee? All ‘systemically important’ financial institutions, instruments and markets.”
The term “systemically important” is not defined. Will it include such systemically important institutions as national treasuries, and such systemically important markets as gold, oil and food?
“How will it work? The body will establish a supervisory college to monitor each of the largest international financial services firms. . . . It will act as a clearing house for information-sharing and contingency planning for the benefit of its members.”
In some contexts, information-sharing is called illegal collusion. Would the information-sharing here include such things as secret agreements among central banks to buy or sell particular currencies, with the concomitant power to support or collapse targeted local economies? Consider the short-selling of the Mexican peso by collusive action in 1995, the short-selling of Southeast Asian currencies in 1998, and the collusion among central banks to support the U.S. dollar in July of last year – good for the dollar and the big players with inside information perhaps, but not so good for the small investors who reasonably bet on “market forces,” bought gold or foreign currencies, and lost their shirts.
