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Global Banking:
The Bank for International Settlements
Part 2 of 2
Wednesday, October 19, 2005
By Patrick M. Wood
NewsWithViews.com
Day-to-Day
Operations
Acting
as a central bank, the BIS has sweeping powers to do anything for
its own account or for the account of its member central banks. It
is like a two-way power-of-attorney – any party can act as agent for
any other party.
Article
21 of the original BIS statutes define day-to-day operations:
1,
buying and selling of gold coin or bullion for its own account
or for the account of central banks;
2, holding gold for its own account under reserve in central
banks;
3, accepting the supervision of gold for the account of
central banks;
4, making advances to or borrowing from central banks
against gold, bills of exchange, and other short-term obligations
of prime liquidity or other approved securities;
5, discounting, rediscounting, purchasing, or selling
with or without its endorsement bills of exchange, checks, and other
short-term obligations of prime liquidity;
6, buying and selling foreign exchange for its own account
or for the account of central banks;
7, buying and selling negotiable securities other than
shares for its own account or for the account of central banks;
8, discounting for central banks bills taken from their
portfolio and rediscounting with central banks bills taken from
its own portfolio;
9, opening and maintaining current or deposit accounts
with central banks;
10, accepting deposits from central banks on current or
deposit account;
11, accepting deposits in connection with trustee agreements
that may be made between the BIS and governments in connection with
international settlements.;
12, accepting such other deposits that, as in the opinion
of the Board of the BIS, come within the scope of the BIS’ functions.[1]
The
BIS also may
1,
act as agent or correspondent for any central bank
2, arrange with any central bank for the latter to act
as its agent or correspondent;
3, enter into agreements to act as trustee or agent in
connection with international settlements, provided that such agreements
will not encroach on the obligations of the BIS toward any third
parties.[2]
>Why
is "agency" an important issue? Because any member of the network
can obscure transactions from onlookers. For instance, if Brown Brothers,
Harriman wanted to transfer money to a company in Nazi Germany during
WWII (which was not "politically correct" at that time), they would
first transfer the funds to the BIS thus putting the transaction under
the cloak of secrecy and immunity that is enjoyed by the BIS but not
by Brown Brothers, Harriman. (Such laundering of Wall Street money
was painstakingly noted in Wall Street and the Rise of Hitler, by
Antony C. Sutton.)
There
are a few things that the BIS cannot do. For instance, it does not
accept deposits from, or provide financial services to, private individuals
or corporate entities. It is also not permitted to make advances to
governments or open current accounts in their name.[3]
These restrictions are easily understood when one considers that each
central bank has an exclusive franchise to loan money to their respective
government. For instance, the U.S. Federal Reserve does not loan money
to the government of Canada. In like manner, central banks do not
loan money directly to the private or corporate clients of their member
banks.
How
Decisions are Made
The
board of directors consist of the heads of certain member central
banks. Currently, these are:
Nout
H E M Wellink, Amsterdam (Chairman of the Board of Directors)
Hans Tietmeyer, Frankfurt am Main (Vice-Chairman)
Axel Weber, Frankfurt am Main
Vincenzo Desario, Rome
Antonio Fazio, Rome
David Dodge, Ottawa Toshihiko Fukui,
Tokyo Timothy F Geithner, New York
Alan Greenspan, Washington
Lord George, London
Hervé Hannoun, Paris
Christian Noyer, Paris
Lars Heikensten, Stockholm
Mervyn King, London
Guy Quaden, Brussels
Jean-Pierre Roth, Zürich
Alfons Vicomte Verplaetse, Brussels[4]
Of
these, five members ( Canada, Japan, the Netherlands, Sweden and Switzerland)
are currently elected by the shareholders. The majority of directors
are "ex officio," meaning they are permanent and are automatically
a part of any sub-committee.
The
combined board meets at least six times per year, in secret, and is
briefed by BIS management on financial operations of the bank. Global
monetary policy is discussed and set at these meetings.
It
was reported in 1983 that there is an inner club of the half dozen
central bankers who are more or less in the same monetary boat: Germany,
U.S., Switzerland, Italy, Japan and England.[5]
The existence of an inner club is neither surprising nor substantive:
the whole BIS operation is 100% secret anyway. It is not likely that
members of the inner club have significantly different beliefs or
agendas apart from the BIS as a whole.
How
the BIS works with the IMF and the World Bank
The
interoperation between the three entities is understandably confusing
to most people, so a little clarification will help.
The
International Monetary Fund (IMF) interacts with governments whereas
the BIS interacts only with other central banks. The IMF loans money
to national governments, and often these countries are in some kind
of fiscal or monetary crisis. Furthermore, the IMF raises money by
receiving "quota" contributions from its 184 member countries. Even
though the member countries may borrow money to make their quota contributions,
it is, in reality, all tax-payer money.[6]
The
World Bank also lends money and has 184 member countries. Within the
World Bank are two separate entities, the International Bank for Reconstruction
and Development (IBRD) and the International Development Association
(IDA). The IBRD focuses on middle income and credit-worthy poor countries,
while the IDA focuses on the poorest of nations. In funding itself,
the World Bank borrows money by direct lending from banks and by floating
bond issues, and then loans this money through IBRD and IDA to troubled
countries.[7]
The
BIS, as central bank to the other central banks, facilitates the movement
of money. They are well-known for issuing "bridge loans" to central
banks in countries where IMF or World Bank money is pledged but has
not yet been delivered. These bridge loans are then repaid by the
respective governments when they receive the funds that had been promised
by the IMF or World Bank.[8]
The
IMF is the BIS' "ace in the hole" when monetary crisis hits. The 1998
Brazil currency crisis was caused by that country's inability to pay
inordinate accumulated interest on loans made over a protracted period
of time. These loans were extended by banks like Citigroup, J.P. Morgan
Chase and FleetBoston, and they stood to lose a huge amount of money.
The
IMF, along with the World Bank and the U.S., bailed out Brazil with
a $41.5 billion package that saved Brazil, its currency and, not incidentally,
certain private banks.
Congressman
Bernard Sanders (I-VT), ranking member of the International Monetary
Policy and Trade Subcommittee, blew the whistle on this money laundry
operation. Sander's entire congressional press release is worth reading:
IMF
Bailout for Brazil is Windfall to Banks, Disaster for US Taxpayers
Says Sanders
BURLINGTON,
VERMONT - August 15 - Congressman Bernard Sanders (I-VT), the
Ranking Member of the International Monetary Policy and Trade
Subcommittee, today called for an immediate Congressional investigation
of the recent $30 billion International Monetary Fund (IMF) bailout
of Brazil.
Sanders,
who is strongly opposed to the bailout and considers it corporate
welfare, wants Congress to find out why U.S. taxpayers are being
asked to provide billions of dollars to Brazil and how much
of this money will be funneled to U.S. banks such as Citigroup,
FleetBoston and J.P. Morgan Chase. These banks have about
$25.6 billion in outstanding loans to Brazilian borrowers. U.S.
taxpayers currently fund the IMF through a $37 billion line of
credit.
Sanders
said, "At a time when we have a $6 trillion national debt, a growing
federal deficit, and an increasing number of unmet social needs
for our veterans, seniors, and children, it is unacceptable that
billions of U.S. taxpayer dollars are being sent to the IMF to
bailout Brazil."
"This
money is not going to significantly help the poor people of that
country. The real winners in this situation are the large,
profitable U.S. banks such as Citigroup that have made billions
of dollars in risky investments in Brazil and now want to make
sure their investments are repaid. This bailout represents
an egregious form of corporate welfare that must be put to an
end. Interestingly, these banks have made substantial campaign
contributions to both political parties," the Congressman added.
Sanders
noted that the neo-liberal policies of the IMF developed in the
1980's pushing countries towards unfettered free trade, privatization,
and slashing social safety nets has been a disaster for Latin
America and has contributed to increased global poverty throughout
the world. At the same time that Latin America countries such
as Brazil and Argentina followed these neo-liberal dictates imposed
by the IMF, from 1980-2000, per capita income in Latin America
grew at only one-tenth the rate of the previous two decades.
Sanders
continued, "The policies of the IMF over the past 20 years advocating
unfettered free trade, privatizing industry, deregulation and slashing
government investments in health, education, and pensions has been
a complete failure for low income and middle class families in the
developing world and in the United States . Clearly, these policies
have only helped corporations in their constant search for the cheapest
labor and weakest environmental regulations. Congress must work
on a new global policy that protects workers, increases living standards
and improves the environment."
One
can surmise that a financial circle exists where the World Bank helps
nations get into debt, then when these countries can't pay their massive
loans, the IMF bails them out with taxpayer money -- and in the middle
stands the BIS, collecting fees as the money travels back and forth
like the ocean tide, while assuring everyone that all is well.
BIS
dumps gold-backed Swiss Francs for SDR's
On
March 10, 2003, the BIS abandoned the Swiss gold franc as the bank's
unit of account since 1930, and replaced it with the SDR.
SDR
stands for Special Drawing Rights and is a unit of currency originally
created by the IMF. According to Baker,
"The
SDR is an international reserve asset, created by the IMF in 1969
to supplement the existing official reserves of member countries.
SDR's are allocated to member countries in proportion to their IMF
quotas. The SDR also serves as the unit of account of the IMF and
some other international organizations. Its value is based on a
basket of key international currencies."[9]
This
"basket" currently consists of the euro, Japanese yen, pound sterling
and the U.S. dollar.
The
BIS abandonment of the 1930 gold Swiss franc removed all restraint
from the creation of paper money in the world. In other words, gold
backs no national currency, leaving the central banks a wide-open
field to create money as they alone see fit. Remember, that almost
all the central banks in the world are privately-held entities, with
an exclusive franchise to arrange loans for their respective host
countries.
Regional
and Global Currencies: SDR's, Euros and Ameros
There
is no doubt that the BIS is moving the world toward regional currencies
and ultimately, a global currency. The global currency could well
be an evolution of the SDR, and may explain why the BIS recently adopted
the SDR as its primary reserve currency.
The
Brandt Equation, 21st Century Blueprint for the New Global Economy
notes, for instance, that
Since
the SDR is the world's only means of meeting international payments
that has been authorized through international contract, "The
SDR therefore represents a clear first step towards a stable and
permanent international currency"[10]
[bold emphasis added]
As
to regional currencies, the BIS has already been hugely successful
in launching the euro in Europe. Armed with new technical and social
know-how, the BIS' next logical step is to focus on America and Asia.
For
instance, according to BIS Papers No. 17, Regional currency areas
and the use of foreign currencies,
"Canada,
Mexico and the United States are members of the trade group NAFTA.
Given the high proportion of Canada and Mexico’s trade with the
United States, a NAFTA dollar or “Amero” has been proposed by some
Canadian academics such as Grubel (1999). See also Beine and Coulombe
(2002) and Robson and Laidler (2002)."[11]
Assuming
that NAFTA permanently identifies Canada, the U.S. and Mexico as one
trading block, then North America will look like the European Union
and the Amero will function like the Euro. All of the work put into
the SDR would be perfectly preserved by simply substituting the Amero
for the U.S. dollar when they choose to bring the Amero to ascendancy
over the dollar.
For
those American readers who do not grasp the significance of the adoption
of the euro by European Union countries, consider how one American
globalist describes it.
C.
Fred Bergsten is a prominent and core Trilateral Commission member
and head of the Institute for International Economics. On January
3, 1999, Bergsten wrote in the Washington Post
"The
adoption of a common currency is by far the boldest chapter of European
integration. Money traditionally has been an integral element
of national sovereignty ...and the decision by Germany and France
to give up their mark and franc ...represents the most dramatic
voluntary surrender of sovereignty in recorded history. The
European Central Bank that will manage the euro is a truly supranational
institution".[12]
[bold emphasis added]
Bergsten
will have to rephrase this when the U.S. gives up the dollar for the
amero -- that will become the most dramatic voluntary surrender of
sovereignty in recorded history!
Conclusions
Our
credo is "Follow the money, follow the power." This report has endeavored
to follow the money. We find that:
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