Global Financial Meltdown

Bloody Monday 15, September 2008

Bloody Monday, September 15, 2008. The Dow Jones
industrial average (DJIA) declined by 504 points (4.4%), its largest drop since
Sept. 17, 2001, when trading resumed after the 9/11 attacks.

The financial slide proceeded
unabated, leading to an 800 point decline of the Dow Jones in less than a week.
The World's stock markets are interconnected "around the clock" through instant
computer link-up. Volatile trading on Wall Street immediately "spills over"
into the European and Asian stock markets thereby rapidly permeating the entire
financial system.


[img1_dji1.png]



The Most Serious Financial Crisis since the 1929 Wall Street Crash

When viewed in a global context, taking into account the instability generated
by speculative trade, the implications of this crisis are far-reaching.

The crisis, however, has by no means reached its climax. It could potentially
disrupt the very foundations of the international monetary system. The
repercussions on people's lives in America and around the
world are dramatic.

The crisis is not limited to the meltdown of financial markets, the real economy
at the national and international levels, its institutions, its productive
structures are also in jeopardy.

As stock values collapse, lifelong household savings are eroded, not to mention
pension funds.

The financial meltdown inevitably backlashes on consumer markets, the housing
market, and more broadly on the process of investment in the production of goods
and services.


War and the Economic Crisis

What is of utmost significance is that this plunge in stock market values occurs
at the crossroads of a major military adventure. The global
financial crisis is intimately related to the war.

A spiraling defense budget backlashes on the civilian sectors of economic
activity. The war economy has a direct bearing on fiscal and monetary policy.
Defense expenditure is in excess of $500 billion. A separate $70 billion is
earmarked "to cover war costs into the early months of a new administration.
Those amounts combined would represent the highest level of military spending
since the end of World War II (adjusted for inflation)." (csmonitor.com
February 06, 2008) [1].

"War is Good for Business": The powerful financial groups which routinely
manipulate stock markets, currency and commodity markets, are also promoting the
continuation and escalation of the Middle East war. The financial crisis is
related to the structure of US public investment in the war economy versus the
funding, through tax dollars, of civilian social programs. "More broadly, this
also raises the issue of the role of the US Treasury and the US monetary system,
in relentlessly financing the military industrial complex and the Middle East war
at the expense of most sectors of civilian economic activity." (See Michel
Chossudovsky, The Democrats endorse the "Global War on Terrorism": Obama "goes
after" Osama [2], Global Research, August 29, 2008)

The war is profit driven, financed through the massive Worldwide expansion of
dollar denominated debt. War and Globalization go hand in hand. Wall Street, the
oil companies and the defense contractors have concurrent and overlapping
interests. The oil companies are behind the speculative surge in crude oil prices
on the London energy market.

In turn, resulting from the military agenda, the US civilian economy is in crisis
as the nation's resources including tax dollars are diverted into funding a
multibillion Middle East war.


The Speculative Onslaught

The Worldwide scramble to appropriate wealth through "financial manipulation" is
the driving force behind this crisis. It is the source of economic turmoil and
social devastation.

What are the underlying causes? What prevails is a totally deregulated financial
environment characterized by extensive speculative trade.

The history of deregulation goes back to the beginnings of the Reagan
administration.

In the wake of the 1987 stock market meltdown, the US Treasury was advised by
Wall Street not to meddle in financial markets. Free of government encroachment,
the New York and Chicago exchanges were invited to establish their own
regulatory procedures.

The authority to regulate the market no longer rests with the State but with
stock market officials who directly serve the interests of the institutional
speculators.

The crisis on Wall Street is part of a process of financial warfare.

Since the 1987 crisis, a new era of intense financial rivalry has unfolded.

Financial deregulation in the US has created an environment which favors an
unprecedented concentration of global financial power.

What we are dealing with is a major clash between competing financial
conglomerates.

The financial meltdown is intimately related to the unregulated growth of
highly leveraged speculative operations.

The hedge funds play a key role in this process of restructuring. These
speculative transactions (the panoply of derivatives, options, futures, index
funds, etc) often transacted through hedge funds overshadow the workings of
stock market transactions, and their relationship to real economic activity.

The hedge funds are private investment funds, which manage the pooled funds of
wealthy investors. While they are often linked to major financial institutions,
they are totally unregulated. They operate with a large pool of money capital,
which is used to undertake highly leveraged speculative transactions. The
latter have the characteristic that profits can be reaped when the market goes
up, but also when the market goes down.

A stock market meltdown can be highly profitable operation. With foreknowledge
and inside information, a collapse in market values constitutes
(through short-selling) a lucrative and money-spinning opportunity, for a
select category of powerful speculators who have the ability to manipulate the
market in the appropriate direction at the appropriate time.

There are indications of a carefully engineered conspiracy to trigger the
collapse of several major financial institutions through outright manipulation.
"Short selling" as well as the spreading of false rumors were used as strategy
to trigger the collapse of selected stocks on Wall Street including Lehman,
Morgan Stanley and Goldman Sachs.

"Short sellers aim to profit from share declines, usually by borrowing a stock,
selling it and buying it back after its price has decreased. In abusive "naked"
short selling, the seller does not borrow the stock and fails to deliver it to
the buyer.

Some market participants say abusive short sellers have contributed to the fall
of companies such as Lehman Brothers by forcing down share prices

John Mack,
chief executive of Morgan Stanley, told employees in an internal memo Wednesday:
"What's happening out there? It's very clear to me - we're in the midst of a
market controlled by fear and rumours, and short sellers are driving our stock
down." (Financial Times, September 17, 2008) [3]

Regulators have acknowledged that the collapse of Bear Stearns last March was
attributable to short selling. "Regulators have been looking into a combination
of short-sales and false rumors are part of the problem." (Wall Street Journal,
September 18, 2008 [4])

Merrill Lynch is bought, Lehman Brothers is pushed into bankruptcy. These are
not haphazard occurrences. They are the result of manipulation by powerful rival
financial institutions, using highly leveraged speculative operations to achieve
their objective, which consists in either displacing or acquiring control over a
rival financial institution.

The current financial meltdown has nothing to do with market forces: it is
characterized by financial warfare between competing institutional speculators.


The Market for Crude Oil

Leveraged speculative trade has pushed the price of crude oil to exceedingly high
levels, reaching a peak in July 2008. A turning point was reached and the
direction of speculative trade was rapidly reversed, leading to a dramatic plunge
in prices of crude oil (See Chart below)

Those financial institutions and/or investors who have the ability to manipulate
the movement of crude oil prices and had prior knowledge of the exact timeline of
the speculative surge and subsequent collapse, were able to reap large money
profits both during the upward and downward movement of the price of crude oil.


[img2_crudeoilchart.gif]



Global Economic Restructuring

This economic crisis is the outcome of a process of macroeconomic and financial
restructuring initiated in the early 1980s. It is the result of a policy
framework: trade and financial sector reforms under WTO auspices not to mention
the imposition of the IMF deadly macroeconomic reforms, commonly referred to as
the structural adjustment program. It is accompanied by the concurrent
impoverishment of large sectors of the world population.

The debt crisis of the early 1980s unleashed a wave of corporate mergers,
buy-outs and bankruptcies. These changes in turn paved the way for the
consolidation of a new generation of financiers clustered around the large
merchant banks, the institutional investors, stock brokerage firms, large
insurance companies, etc. In this process, commercial banking functions have
coalesced with those of the investment banks and stock brokers leading to the
consolidation of a handful of global financial conglomerates.

The unregulated use of complex speculative instruments has provided Wall Street
with the means to extend its global financial empire. The main thrust of this
process does not consist in overseeing the stock market per se. Rather it
resides in controlling the lucrative markets for speculative instruments
--derivatives, options, futures, hedges, etc.-- where the scope for manipulation
and insider trade is far greater.

Wall Street's financial dominance was to be achieved through its institutional
control over the channels of speculative trade. This control also provided, as
in the case of the Asian crisis, the basis for weakening the role of central
banks, taking control over the reigns of monetary policy, stock markets and
currency markets. In the 1997 Asian crisis alone, more than 100 billion dollars
were confiscated in a matter of months from the vaults of Asia's central banks;
similar speculative assaults were carried out in Russia in 1998 and in Brazil in
1999.

These events were followed by the dramatic bubble and bust of the dot.com
stocks, when the NASDAQ Composite index peaked at more than 5,000 in March 2000
and subsequently collapsed, triggering a chain of panic selling. (see below)


[img3_Nasdaq2.png]



The 1999 Financial Services Modernization Act. [1]

In 1999, The Financial Services Modernization Act (Gramm-Leach Bliley Act) [5],
was adopted by the US Congress. In the wake of lengthy negotiations, all
regulatory restraints on Wall Street's powerful banking conglomerates were
revoked "with a stroke of the pen".

Under the new rules ratified by the US Senate and approved by President Clinton,
commercial banks, brokerage firms, institutional investors and insurance
companies could freely invest in each others businesses as well as fully
integrate their financial operations. The legislation repealed the
Glass-Steagall Act of 1933, a pillar of President Roosevelt's "New Deal" which
was put in place in response to the climate of corruption, financial
manipulation and "insider trading" which resulted in more than 5,000 bank
failures in the years following the 1929 Wall Street crash. (See Martin
McLaughlin, Clinton Republicans agree to deregulation of US banking system,
World Socialist Website, 1 November 1999).


The Merger Frenzy

Several mammoth bank mergers (including NationalBank Corp with Bank America
and Citibank with Travelers Group) were carried out and approved by the Federal
Reserve Board (in blatant violation of the existing legislation) prior to the
passage of the 1999 Financial Modernization
Act..

In the years prior to the inauguration of the Bush administration, a process of
intense financial rivalry had unfolded. The New World Order largely under the
dominion of American finance capital was intent on dwarfing rival banking
conglomerates in Western Europe and Japan as well as sealing strategic
alliances with a "select club" of German and British banking giants.


The Shape of Things to Come

The bank mergers (carried out prior to the 1999 legislation in violation of the
Glass Steagall Act) were but "the tip of the iceberg", the shape of things to
come. The repeal of the Glass-Steagall Act had created an environment which
favored an unprecedented concentration of global financial power.

Effective control over the entire US financial services industry had been
transferred to a handful of financial conglomerates.

What prevails today is a de facto system of private regulation. The evolving
"global financial supermarket" is to be overseen by the Wall Street giants.
State level banks across America were displaced or swallowed up by the
financial giants, leading to a deadly string of bank failures.

In turn, the supervisory powers of the Federal Reserve Board, increasingly under
the direct dominion of Wall Street, were significantly weakened. The financial
giants have the ability to strangle local level businesses in the US and
overshadow the real economy. In fact, due to the lack of competition, the 1999
legislation, which was an initiative of Senator Phil Gramm, also entitled the
financial services giants (bypassing the Federal Reserve Board and acting in
tacit collusion with one another) to set the structure of interest rates as they
please:

"Despite impending danger signals, the 1999 legislation seems totally to
disregard the history of stock market failures since the onset of the "Asian
crisis" in mid-1997. The economic and social repercussions in an integrated
Worldwide financial system, --not to mention the risks of a global financial
meltdown resulting from the absence of financial regulation-- are far more
serious today [1999] than during the years following the 1929 Wall Street crash.
(Michel Chossudovsky, unpublished notes on the 1999 Financial Services
Modernization Act, Legislation, November 1999).


Global Financial Architecture

The Financial Services Modernization Act should not be viewed in isolation as a
domestic procedure, limited to the US financial landscape.

The impacts of the legislation extended well beyond the borders of the US
financial system. The institutional changes which it brought about, including
the concentration and centralization of power in the hands of a small number of
financial giants, largely contributed to Wall Street's unswerving quest for
global financial domination.

The Worldwide scramble to appropriate wealth through "financial manipulation"
was the driving force behind this restructuring of the global financial
architecture of which the 1999 US legislation was an integral part, setting the
pattern of financial reform in different parts of the World.

While the 1999 Legislation does not in itself break down the barriers to capital
movements, in practice it empowers Wall Street's key players to enter the
financial services markets of developing countries and consolidate a hegemonic
position in global banking, overshadowing and ultimately destabilizing financial
systems in Asia, Latin America and Eastern Europe...


The International Monetary Fund (IMF) and The World Trade Organization (WTO).

Financial deregulation in the US exerted a decisive influence in "setting the
pace" of global financial reform under the auspices of the IMF and the World
Trade Organization (WTO). The 1999 Legislation was part of a global financial
agenda, consisting in deregulating capital movements, liberalizing domestic
banking and capital markets Worldwide under WTO auspices and opening up national
financial services markets to the global financial conglomerates.

The legislation was implemented alongside the concurrent reshaping of the global
trade and financial architecture under the WTO agenda. Under the GATS,
developing countries have committed themselves to full liberalization of
financial services. In other words, national governments, which are already
controlled by their external creditors, would be unable to deflect the Wall
Street giants from entering and swallowing up national banks and financial
institutions. .

In conjunction with the provisions of the Financial Services Agreement and the
GATS, the 1999 banking legislation adopted in the US empowered a handful of
banking conglomerates with the ability of destabilizing the domestic financial
landscape of developing countries.

The sweeping deregulation of US banking imparted unprecedented powers to Wall
Street's financial conglomerates to acquire and take overbanking institutions
all over the World..

The tendency was towards a Worldwide financial supermarket controlled by a
handful of global financial institutions which penetrate and permeate the fabric
of national economies.

Two major agreements (negotiated under the WTO) contributed to "entrenching the
rights" of the global banks" in international law, tantamount (according to
critics) to granting "fundamental rights" to the banks which override those
contained in national constitutions. The provisions of both the General
Agreement on Trade in Services (GATS) and the Financial Services Agreement (FTA)
formally break down remaining impediments to the movement of capital meaning
that Bank of America or Citigroup can go wherever they please, triggering the
bankruptcy of national banks and financial institutions.

Moreover, with the support of the IMF, the Wall Street conglomerates and their
European and Japanese partners reinforced and consolidated their role as the
World's major creditor institutions, routinely underwriting the public debt,
overseeing the conduct of State budgetary policy, issuing syndicated loans to
troubled industrial corporations, overseeing the privatization of State
corporations which have been put on the auction block in the context of an IMF
bailout agreement, etc.


Financial Warfare: The Powers of Deception

The weapons used on Wall Street are prior knowledge and inside information, the
ability to manipulate with the capacity to predict results, the spreading of
misleading or false information on economic occurrences and market trends.
These various procedures are best described as the "powers of deception", which
financial institutions routinely use to mislead investors.

The art of deception is also directed against their banking competitors, who are
betting in the derivatives and futures markets, in stocks, currencies and
commodities.

Those who have access to privileged information (political, intelligence,
military, scientific, etc.) will invariably have the upper hand in the conduct
of these highly leveraged speculative transactions, which are the source of
tremendous financial gains. The CIA has its own financial institutions on Wall
Street.

In turn the corridors of private banking and offshore banking, enable financial
institutions to transfer their profits at ease, from one location to another.
This procedure is also used as a safety net which protects the interests of key
financial actors including CEOs, major shareholders, etc of troubled financial
institutions. Large amounts of money can be moved out at an opportune moment,
prior to the company's demise on the stock market. (e.g. Lehman, Merrill Lynch
and AIG).

The Federal Reserve Bank of New York and its powerful stakeholders have "inside
information" on the conduct of US monetary policy. They are thereby in a
position to predict outcomes and hedge their bets in highly leveraged
operations on the futures and derivatives markets. They are in an obvious
conflict of interest because their prior knowledge of particular decisions by
the Federal Reserve Board enables them as private banking institutions to make
multibillion dollar profits.

Links to US intelligence, to the CIA, Homeland Security, to the Pentagon are
crucial in the conduct of speculative trade, since it allows the speculators to
predict events, through prior knowledge of foreign policy and/or national
security decisions which directly affect financial markets. An example: the put
options on airline stocks in the days preceding the 9/11 attacks.

An internal war within the financial system is unfolding.

Lehman Bros goes bankrupt, Merrill Lynch is bought up...

Mortgage giants Fannie Mae and Freddie Mac are taken over by the government.

Bear Stearns collapses, America's largest insurance company AIG's share collapse
from $22.19 on September 9, to less than $4.00 at the close of trading on
September 16, a decline of more than 80 percent of its value.

Goldman Sachs together with JP Morgan Chase are negotiating with the Treasury
to arrange for a $85 billion secured loan to AIG, which would be financed by the
Federal Reserve Bank of New York.

Who picks up the pieces? What lies ahead?

The process of mergers and acquisitions is likely to proceed to new heights
leading to an unprecedented centralization of financial power, with Bank of
America, JP Morgan Chase and the Federal Reserve Bank of New York playing a
dominant role.

The meltdown will be conducive to the demise of numerous banking and financial
institutions, which will either be driven out of the financial landscape
altogether or acquired by the financial giants.

Bank of America is slated to purchase Merrill Lynch, leading to the formation of
the world's largest financial institution, clashing with Citigroup and JP Morgan
Chase. It should be noted that while Citigroup and JP Morgan Chase are competing
institutions, they are nonetheless entwined through intermarriage between the
Rockefeller and Stillman families.

Bank of America in the last two decades has developed into a financial giant
through a series of mergers and acquisitions. In 2004, Bank of America acquired
FleetBoston Financial, in 2005 it purchases credit card giant MBNA and in 2007
it acquires LaSalle Bank Corporation and Corporate Finance from the Dutch bank
ABN AMRO. And on September 14, 2008, Bank of America announced its intention to
acquire Merrill Lynch for $50 billion.

What we are dealing with is a clash between a handful of major financial
institutions, which have developed through mergers and acquisitions into
Worldwide financial giants.

The financial meltdown on Wall Street largely benefits Bank of America and JP
Morgan Chase, which is part of the Rockefeller empire, at the expense of Lehman
Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley. Lehman Brothers filed
for Chapter 11 bankruptcy on Bloody Monday, September 15. Lehman's assets are of
the order of
$639 billion.


Potential Losers

Citigroup Inc., declined 15 percent to $15.24 for the steepest drop
since July 2002. [Sept 15]

American Express Co., the biggest U.S. credit card company by purchases,
fell 8.9 percent to $35.48. [Sept 15]

Goldman Sachs fell 12 percent, the most since April 2000, to $135.50.
The decline was the result of short selling. [Sept 15]

Morgan Stanley, the biggest U.S. securities firm other than Goldman
Sachs, fell 14 percent to $32.19." The decline was the result of short
selling. [Sept 15]

(See Bloomberg, Sept 16, 2008)


In 2000, J.P. Morgan merged with Chase Manhattan, leading to the integration of
J.P. Morgan, Chase, Chemical and Manufacturers Hanover into a single financial
entity. Bear Stearns was acquired in 2008 by JP Morgan Chase following its
collapse. This banking empire controlled by the Rockefeller family has assets of
more than 1.6 trillion dollars.

With assets of $1.7 trillion, Citigroup's future remains undecided. It is facing
serious financial difficulties which could lead it into bankruptcy. Citigroup
share prices have in recent months collapsed alongside those of Fannie Mae. The
Lehman debacle has precipitated a further decline of Citigroup stock prices.

It is the trustee "for unsecured creditors who are owed some $155 billion by
Lehman Brothers", but according to Citgroup statements they "have little or no
exposure to the failed investment bank."

What this means is that the collapse of Lehman will lead to massive loan default
in relation to the portfolios of Citigroup and NY Mellon clients, namely client
banking institutions as well as individual investors.


Note.

1. This section relied on a series of unpublished notes, on the 1999 Financial
Services Modernization Act, Legislation, which I wrote in November 1999.



----------------------------------------------------------------------------



United States' Largest Banks

(in millions of U.S. dollars)

Rank Name (city, state) Consolidated
assets

1. Citigroup (New York, N.Y.) 2,199,848
2. Bank of America Corp. (Charlotte, N.C.) 1,743,478
3. J. P. Morgan Chase & Company (Columbus, Ohio) 1,642,862
4. Wachovia Corp. (Charlotte, N.C.) 808,575
5. Taunus Corp. (New York, N.Y.) 750,323
6. Wells Fargo & Company (San Fransisco, Calif.) 595,221
7. HSBC North America Inc. (Prospect Heights, Ill.) 493,010
8. U.S. Bancorp (Minneapolis, Minn.) 241,781
9. Bank of the New York Mellon Corp. (New York, N.Y.) 205,151
10. Suntrust, Inc. (Atlanta, Ga.) 178,986
11. Citizens Financial Group, Inc. (Providence, R.I.) 161,759
12. National City Bank (Cleveland, Ohio) 155,046
13. State Street Corp. (Boston, MA) 154,478
14. Capital One Financial Corp. (McLean, Va.) 150,608
15. Regions Financial Corp. (Birmingham, Ala.) 144,251
16. PNC Financial Services Group, Inc. (Pittsburg, Pa.) 140,026
17. BB&T Corp. (Winston-Salem, N.C.) 136,417
18. TD Bank North, INC. (Portland, Maine) 118,171
19. Fifth Third Bankcorp (Cincinatti, Ohio) 111,396
20. Keycorp (Cleveland, Ohio) 101,596
21. Northern Trust Corp. (Chicago, Ill.) 77,480
22. Bancwest Corp. (Honolulu, Hawaii) 74,808
23. Harris Financial Corp. (Wilmington, Del.) 69,172
24. Comerica Incorporated (Dallas, Tex.) 67,167
25. M&T Bank Corp. (Buffalo, N.Y.) 66,085
26. Marshall & Ilsley Corp. (Milwaukee, Wis.) 63,432
27. BBVA USA Bancshares, Inc. (The Woodlands, Tex.) 59,953
28. Unionbancal Corporation (San Fransisco, Calif.) 57,933
29. Huntington Bancshares, Inc. (Columbus, Ohio) 55,985
30. Zions Bancorporation (Salt Lake City, Utah) 53,597

NOTE: As of May 30, 2008.
Source: Federal Reserve System, National Information Center.



----
References

[1]  http://www.csmonitor.com/2008/0206/p02s02-usmi.html
[2]  http://www.globalresearch.ca/index.php?context=va&aid=9995
[3]  http://www.ft.com/cms/s/0/51aacef6-84e4-11dd-b148-0000779fd18c.html
[4]  http://online.wsj.com/article/SB122178234612954617.html?mod=googlenews_wsj
[5]  http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act