In an August 2013 article titled "Larry
Summers and the Secret 'End-game' Memo," Greg Palast posted
evidence of a secret late-1990s plan devised by Wall Street and U.S.
Treasury officials to open banking to the lucrative derivatives
To pull this off required the relaxation of banking
regulations not just in the US but globally. The vehicle to be used was
the Financial Services Agreement of the
World Trade Organization.
The "end-game" would require not just coercing
support among WTO members but taking down those countries refusing to
join. Some key countries remained holdouts from the WTO, including Iraq,
Libya, Iran and Syria.
In these Islamic countries, banks are largely
state-owned; and "usury" - charging rent for the "use" of money - is
viewed as a sin, if not a crime. That puts them at odds with the Western
model of rent extraction by private middlemen.
Publicly-owned banks are also a threat to the
mushrooming derivatives business, since governments with their own banks
don't need interest rate swaps, credit default swaps, or
investment-grade ratings by private rating agencies in order to finance
Bank deregulation proceeded according to plan, and
the government-sanctioned and -nurtured derivatives business mushroomed
into a $700-plus trillion pyramid scheme. Highly leveraged, completely
unregulated, and dangerously unsustainable, it collapsed in 2008 when
investment bank Lehman Brothers went bankrupt, taking a large segment of
the global economy with it.
The countries that managed to escape were those
sustained by public banking models outside the international banking
These countries were not all Islamic.
Forty percent of banks globally are publicly-owned.
They are largely
the BRIC countries - Brazil, Russia, India and China - which house
forty percent of the global population. They also escaped the 2008
credit crisis, but they at least made a show of conforming to Western
This was not true of the "rogue" Islamic nations,
where usury was forbidden by Islamic teaching. To make the world safe
for usury, these rogue states had to be silenced by other means. Having
failed to succumb to economic coercion, they wound up in the crosshairs
of the powerful US military.
Here is some data in support of that thesis.
The End-game Memo
In his August 22nd article, Greg Palast
posted a screenshot of a 1997 memo from Timothy Geithner, then
Assistant Secretary of International Affairs under Robert Rubin, to
Larry Summers, then Deputy Secretary of the Treasury.
Geithner referred in the memo to the "end-game of WTO
financial services negotiations" and urged Summers to touch base with
the CEOs of,
Bank of America
Chase Manhattan Bank,
...for whom private phone numbers were provided.
The game then in play was the deregulation of banks
so that they could gamble in the lucrative new field of derivatives. To
pull this off required, first, the repeal of
Glass-Steagall, the 1933
Act that imposed a firewall between investment banking and depository
banking in order to protect depositors' funds from bank gambling.
But the plan required more than just deregulating US
banks. Banking controls had to be eliminated globally so that money
would not flee to nations with safer banking laws.
The "endgame" was to achieve this global deregulation
through an obscure addendum to the international trade agreements
policed by the World Trade Organization, called the Financial Services
Until the bankers began their play, the WTO
agreements dealt simply with trade in goods - that is, my cars for
your bananas. The new rules ginned-up by Summers and the banks
would force all nations to accept trade in "bads" - toxic assets
like financial derivatives.
Until the bankers' re-draft of the FSA, each
nation controlled and chartered the banks within their own borders.
The new rules of the game would force every nation to open their
markets to Citibank, JP Morgan and their derivatives "products."
And all 156 nations in the WTO would have to
smash down their own Glass-Steagall divisions between commercial
savings banks and the investment banks that gamble with derivatives.
The job of turning the FSA into the bankers'
battering ram was given to Geithner, who was named Ambassador to the
World Trade Organization.
WTO members were induced to sign the agreement by
threatening their access to global markets if they refused; and they all
did sign, except Brazil.
Brazil was then threatened with an embargo; but its
resistance paid off, since it alone among Western nations survived and
the 2007-2009 crisis.
As for the others:
The new FSA pulled the lid off the Pandora's box
of worldwide derivatives trade.
Among the notorious transactions legalized:
Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman)
worked a secret euro-derivatives swap with Greece which, ultimately,
destroyed that nation.
Ecuador, its own banking sector de-regulated and
demolished, exploded into riots. Argentina had to sell off its oil
companies (to the Spanish) and water systems (to Enron) while its
teachers hunted for food in garbage cans.
Then, Bankers Gone Wild in the Eurozone dove
head-first into derivatives pools without knowing how to swim - and
the continent is now being sold off in tiny, cheap pieces to
That was the fate of countries in the WTO, but Palast
did not discuss those that were not in that organization at all,
These seven countries were named by U.S. General
Wesley Clark (Ret.)
in a 2007 "Democracy Now" interview as the new
"rogue states" being
targeted for take down after
September 11, 2001.
He said that about 10 days after 9-11, he was told by
a general that the decision had been made to go to war with Iraq. Later,
the same general said they planned to take out seven countries in five
What did these countries have in common?
Besides being Islamic, they were not members either
of the WTO
or of the Bank for International Settlements (BIS).
That left them outside the long regulatory arm of the
central bankers' central bank in Switzerland. Other countries later
identified as "rogue
states" that were also not members of the BIS included North Korea,
Cuba, and Afghanistan.
The body regulating banks today is called the
Financial Stability Board (FSB), and it is housed in the BIS in
In 2009, the heads of the G20 nations agreed to be
bound by rules imposed by the FSB, ostensibly to prevent another global
banking crisis. Its regulations are not merely advisory but are binding,
and they can make or break not just banks but whole nations.
This was first demonstrated in 1989, when the
Accord raised capital requirements a mere 2%, from 6% to 8%.
The result was to force a drastic reduction in lending by major
Japanese banks, which were then the world's largest and most powerful
creditors. They were undercapitalized, however, relative to other banks.
The Japanese economy sank along with its banks and
has yet to fully recover.
Among other game-changing regulations in play under
the FSB are Basel III and the new bail-in rules. Basel III is slated to
impose crippling capital requirements on public, cooperative and
community banks, coercing their sale to large multinational banks.
The "bail-in" template was first tested in Cyprus and
follows regulations imposed by the FSB in 2011. Too-big-to-fail banks
are required to
draft "living wills" setting forth how they will avoid insolvency in
the absence of government bailouts.
The FSB solution is to "bail in" creditors -
including depositors - turning deposits into bank stock, effectively
The Public Bank
Countries laboring under the yoke of an extractive
private banking system are being forced into "structural adjustment" and
austerity by their unrepayable debt.
But some countries have managed to escape. In the
Middle East, these are the targeted "rogue nations." Their state-owned
banks can issue the credit of the state on behalf of the state,
leveraging public funds for public use without paying a massive tribute
to private middlemen.
Generous state funding allows them to provide
generously for their people.
Whether these countries will succeed in maintaining
their financial sovereignty in the face of enormous economic, political
and military pressure remains to be seen.
As for Larry Summers, after proceeding through the
revolving door to head Citigroup, he became State Senator Barack Obama's
key campaign benefactor. He played a key role in the banking
that brought on the current crisis, causing millions of US
citizens to lose their jobs and their homes.
Yet Summers is President Obama's first choice to
replace Ben Bernanke as Federal Reserve Chairman.
He has proven he can manipulate the system to make
the world safe for Wall Street; and in an upside-down world in which
bankers rule, that seems to be the name of the game.