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Wednesday, December 7, 2022
SAN SALVADOR, BAHAMAS, Aug 20 2012 (IPS) - Hardly a week goes by without the disclosure of some new banking scandal. The most recent is the New York State Department of Financial Services’ accusation of Britain’s Standard Chartered of laundering 250 billion dollars in transactions considered potentially supportive of terrorist activities. Standard Chartered, until now believed to be one of the cleanest banks, agreed on August 14 to pay a gigantic fine of 340 million dollars to stop criminal prosecution.
But we are entering a new phase in which this ceaseless flow of financial scandals is now beginning to affect some of the mightiest figures in the world of finance as opposed to simply the banks themselves. It started in Spain, where former finance minister and one-time managing director of the International Monetary Fund, Rodrigo Rato, was accused of letting the Spanish banking system spin out of control. Now there are calls to bring him to justice. He was questioned at a parliamentary hearing that turned hostile in spite of his political kinship with members.
And now something unthinkable has happened: the office of the European Union (EU) Ombudsman has announced that it is launching an investigation into allegations regarding Mario Draghi’s membership in the so-called Group of 30, which it says “is incompatible with the independence, reputation, and integrity of the European Central Bank”, which he heads. Draghi was a vice chairman of Goldman Sachs. The Group of 30 (a private organisation of influential regulators, financial executives, and academics) is accused of putting together very important people, like the former managing director of Goldman Sachs, William Dudley, to take decisions on international issues of economic, financial, and political governance.
For years such accusations have 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 prominent in finance. An NGO dedicated to denouncing the tight relations between lobbyists and senior decisions-makers in Europe and the EU, the Corporate Europe Observatory, was quick to point out the case of another ex-Goldman Sachs man: Italy’s unelected prime minister, Mario Monti, who was international adviser to Goldman Sachs from 2005 to 2011.
Whether these developments will lead to improvements in the situation is very doubtful. The web of finance, corporations, and politics is so closely knit that nothing short of a revolution could bring about the sort of change needed.
Unfortunately the best example of where things are heading is the U.S., where spending on the current presidential campaign will now probably top the staggering figure of two billion dollars. This is largely due to the recent ruling of the very conservative Supreme Court that corporations have the same right to free speech as individuals and therefore are no longer subject to limitations on their funding of electoral campaigns.
Secret donor contributions soared from one percent in 2006 to 44 percent in 2010. This year 26 billionaires have given 61 million dollars to PACs (political action committees), which had previously been subject to stringent limits. Those 26 billionaires have a net worth equivalent to the combined average income of 50 million Americans. Compare the freedom of speech enjoyed by 26 super-rich on the one hand and 50 million ‘normal’ citizens on the other!
One of the superdonors is casino magnate Sheldon Adelson, who is putting 100 million dollars into Mitt Romney’s campaign. (If he is elected, better watch out for new casino rules.) There are many more contributors to that campaign whose identity is not known because they give to non-profit organisations whose donors can remain secret. According to Rick Maloney of the Committee to Protect Ethics, the majority of that money comes from banks.
One clear result is that Romney is outspending Barack Obama. The president has spent 400 million dollars in the last 18 months, and now as we are approaching election day, even more money is needed.
Maybe the awareness that this is not sustainable is dawning on some people. In a major surprise, U.S. banker, financier, and philanthropist Sanford Weill declared on TV: “What we should probably do is go and split up investment banking from banking. Have banking do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”
Weill, former boss of the megagroup Citibank, for years had a plaque in his office that read: “The Shatterer of Glass-Steagall”, the law passed after the Great Depression of 1929 imposing a strict separation between investment banks and commercial banks, which could not use customers’ deposits for speculation.
The law was abrogated by President Bill Clinton in 1999 to please Wall Street. Since then, John Reed, the co-creator of the mega Citibank, apologised for creating a lumbering giant that needed a multibillion-dollar bailout from the government. Philip Purcell, former chief executive of Morgan Stanley, and David Romansky, the one-time leader of Merrill Lynch, both major actors in getting the Glass-Steagall repealed, have expressed similar concerns.
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 Wall Street, in spite of respectable advocates like German chancellor Angela Merkel, former French president Nicolas Sarkozy and now his successor, Francois Hollande. (END/COPYRIGHT IPS)
* Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News.
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