theDrahos

FDIC Vice-Chairman Thomas Hoenig again called for “separating commercial banking, and its inherent safety net, from broker-dealer and proprietary trading activities,” in a speech to the Institute of International Bankers annual conference in Washington March 2. His speech included a warning on the current status of leveraged loans and derivatives in the U.S. banking system, and a plug for the Glass-Steagall Act.

On junk bonds’ cousins, the “leveraged loans,” Hoenig said that the FDIC’s extensive national review of assets of large banks, known as the Shared National Credit Review, showed very large issuance of leveraged loans in 2014: to an $800 billion bubble from just $280 billion one year earlier. Leveraged loans were “highly criticized” in the review: “Examiners noted excessive leverage against gaps in borrower repayment capacity, questionable evaluations”, etc., “weak underwriting and deficiencies in risk management.” He concluded, “This portfolio has systemic implications, whether held in the originating bank or [securitized].”

Derivatives are a still more serious matter. Hoenig said that

“In recent years commercial banking firms in the United States have been allowed to simultaneously own commodities, trade commodities and their derivatives, and own and control transportation and warehousing of these commodities.”

Citing the dangers, he said that

“the United States has insisted historically that banking remain separate from commerce.”

“The precursor to this conflict [of interest],” he noted, “was the repeal of the Glass-Steagall Act in the late 1990s, which permitted commercial banks to significantly expand their presence in trading derivatives and related contracts.”

Citing the notional value of derivatives contracts at the five most-exposed U.S. banking organizations at roughly $300 trillion, Hoenig says that this corresponds to $4 trillion of unstated assets [“value at risk”] on their balance sheets using international accounting rules.

“Also, among these derivatives contracts are more than $25 trillion of notional amounts of uncleared credit default swaps, equity derivatives, and commodity derivatives, which hold the highest risk to these banks. Derivatives activities conducted in the insured bank at lower costs have proven to be quite profitable, which explains why bank managers are so adamant that they stay there” — referring to the strong-arming and bribing of Congress in December.

“Subsidizing such derivative activity with its unbridled leverage should end,” Hoenig concludes.

In a speech in Berlin last night, Gen. Ben Hodges, commander of the U.S. armed forces in Europe, said that Western diplomacy needed a “muscle” to get the right message to Russia:

“If you don’t have something that gives muscle to the diplomacy, to the economic aspect, then it’s not going to be as effective.”

But, while going on to blast and threaten Russia, Hodges also announced, in an exclusive interview with World Bulletin March 3, that the U.S. was putting on hold its training mission to Ukraine—pre-announced to be 600 troops to work with the National Guard—to see if the Minsk accords succeeded.

Hodges said that helping Ukraine with weapons would increase pressure on President Vladimir Putin at home.

“When mothers start seeing sons come home dead, when that price goes up, then that domestic support begins to shrink.”

Hodges did not specify what weapons could be offered, but said that what Ukraine wants “is intelligence, counter-fire capability and something that can stop a Russian tank.” Russia has 12,000 soldiers and heavy weapons in eastern Ukraine, plus another 29,000 in Crimea, and is maintaining another 50,000 close to the border with Ukraine, Hodges asserted.

Senate Republicans are shifting the focus from passing an authorization for the use of force against ISIS, to trying to sabotage a diplomatic agreement with Iran. The New York Times reports:

“With so much attention focused on Iran, it is doubtful that Congress can make much quick progress on the use of force measure, which lawmakers were struggling with even before Iran took center stage.”

Politico also reports that Republicans are planning to fast-track a bill which would allow Congress to approve or reject any agreement that the the P5+1 powers reach with Iran — even at the risk of having Democrats who otherwise support the bill, vote against it. When Senate Majority Leader Mitch McConnell announced on March 3 that he is planning to bring anti-Iran legislation directly to the floor without going through the Senate Foreign Relations Committee first, an “outraged” Robert Menendez (D-N.J.) said he’ll vote against his own bill if he has to. Sen. Tim Kaine (D-Va.) blasted McConnell’s push as “rushed and partisan.” Politico reports that McConnell’s drive to bring the legislation quickly to the Senate floor “has two of the bill’s Democratic sponsors in full rebellion mode, potentially presaging a Democratic filibuster on the floor if the bill doesn’t go through the Senate Foreign Relations Committee first.”

As to Congress’s enthusiasm to follow Netanyahu to war against Iran, Washington Post columnist Dana Milbank noted that:

“It’s a rare thing for Congress to declare war — and rarer still to do it at the request of a foreign leader.”

Another Washington Post columnist, Walter Pincus, who is generally aligned with the military-intelligence establishment, wrote a strong attack yesterday on any Congressional interference with Iran diplomacy, not only taking apart Netanyahu’s arguments, but pointing out that any Iran agreement would be hammered out not just by Obama, but by six great powers—Russia, China, Germany, and France, in addition to the U.S. and Britain—which is something Netanyahu never brings up.

Senate Republicans are shifting the focus from passing an authorization for the use of force against ISIS, to trying to sabotage a diplomatic agreement with Iran. The New York Times reports:

“With so much attention focused on Iran, it is doubtful that Congress can make much quick progress on the use of force measure, which lawmakers were struggling with even before Iran took center stage.”

Politico also reports that Republicans are planning to fast-track a bill which would allow Congress to approve or reject any agreement that the the P5+1 powers reach with Iran — even at the risk of having Democrats who otherwise support the bill, vote against it. When Senate Majority Leader Mitch McConnell announced on March 3 that he is planning to bring anti-Iran legislation directly to the floor without going through the Senate Foreign Relations Committee first, an “outraged” Robert Menendez (D-N.J.) said he’ll vote against his own bill if he has to. Sen. Tim Kaine (D-Va.) blasted McConnell’s push as “rushed and partisan.” Politico reports that McConnell’s drive to bring the legislation quickly to the Senate floor “has two of the bill’s Democratic sponsors in full rebellion mode, potentially presaging a Democratic filibuster on the floor if the bill doesn’t go through the Senate Foreign Relations Committee first.”

As to Congress’s enthusiasm to follow Netanyahu to war against Iran, Washington Post columnist Dana Milbank noted that:

“It’s a rare thing for Congress to declare war — and rarer still to do it at the request of a foreign leader.”

Another Washington Post columnist, Walter Pincus, who is generally aligned with the military-intelligence establishment, wrote a strong attack yesterday on any Congressional interference with Iran diplomacy, not only taking apart Netanyahu’s arguments, but pointing out that any Iran agreement would be hammered out not just by Obama, but by six great powers—Russia, China, Germany, and France, in addition to the U.S. and Britain—which is something Netanyahu never brings up.

Both the House and the Senate today held hearings yesterday beating the drums of war, setting the stage for nuclear war in the near term. Victoria Nuland herself, the personal controller of the neo-nazis in Ukraine, including Prime Minister “Yats,” was the only witness before the House Foreign Affairs Committee (under Ed Royce and Eliot Engel, who are pushing legislation to arm Ukraine), where she lied wildly about the crisis and threatened Russia with new sanctions. Members of Congress, with few exceptions, ranted for arming Ukraine, moving more troops to the borders of Russia, and preparing our military for full-scale war.

Nuland stuck to the Administration line that it has not yet decided to provide arms to the Ukraine regime.

Mikheil Saakashvili and Garry Kasparov appearing with Damon Wilson, Stephen Blank, and Steven Pifer in front of the Senate Foreign Relations Committee.

Meanwhile, in the Senate Foreign Relations Committee, former Georgian President Mikheil Saakashvili (now advising Ukraine President Poroshenko) and Russia’s wild-eyed opponent of Putin, Garry Kasparov, ranted that talking to Putin was a horrible mistake, that full US military force must be brought to bear immediately in Ukraine, or Europe will fall to Russian aggression and the post-war order be destroyed. The hearing room had huge photographs of Boris Nemtsov, the bridge with his body, MH17 wreckage, and more, lined up all along the front of the hearing room. Joining their war cries were leading Russia-haters from the Atlantic Council (Damon Wilson), the American Foreign Policy Council (Stephen Blank), and former Ambassador to Ukraine Steven Pifer, now at Brookings.

Former President of Georgia, Mikheil Saakashvili, being interviewed outside a hearing of the Senate Foreign Relations Committee.

Nuland and several members of Congress expressed “outrage” at the murder of Boris Nemtsov, only slightly stopping short of blaming Putin directly. Kasparov didn’t stop short, saying that “Putin and his elites believe that after 15 years of power there is nothing they cannot do, no line they cannot cross,” while accusing Putin of using Nazi ideology! He called for color revolution or worse: “Like a cancer, Putin and his elites must be cut out. He must be isolated and removed.”

Nuland praised the Maidan coup, the “peaceful protest by ordinary Ukrainians fed up with the rotten regime.” She insisted that new sanctions are ready to go, if, in Obama’s view, Russia doesn’t hold to Minsk II. Obama has “not decided” on arming Kiev, she said.

Only two Congressmen had the courage to counter her lies. Rep. Greg Meeks said that real leadership would not be US unilateral military action, but working together with others, pointing to European nations opposing the arming of Ukraine.

More powerfully, Rep. Dana Rohrabacher ripped into the whole imperial process, starting with the EU refusing to help Ukraine under Yanukovych, then helping the Maidan revolt which was precipitate by Yanukovych’s decision to postpone the association agreement with Europe.

“Perhaps an electoral process rather than the use of violence and non-democratic means would have been better,” he said, insisting that our goal should be peace in Ukraine, “not to defeat and humiliate Russia, again and again.” If that is the policy, he said, the killing and suffering in Ukraine will go on and on.

When Nuland “took issue” with Rohrabacher, trying to say Yanukovych should have accepted IMF help, Rohrabacher cut her off, saying the ceasefire appeared to be desired by both sides, so “we should not be trying to wreck it.”

Lyndon LaRouche’s March 3 statement denouncing the frame-up of Putin for Nemtsov’s murder was circulated widely at both of these hearings on Capitol Hill today, as EIR and LaRouchePAC representatives attended hearings intended to galvanize the population for war.

At the House Foreign Affairs Committee hearing, a gaggle of media were gathered to interview both the Congressmen and the members of the Ukrainian Congress Committee of America, which were in Washington to lobby for arming Ukraine.

Following the hearing, EIR‘s Stuart Rosenblatt approached Nuland personally, and, in the hearing of many press and others, asked: “Were you behind the assassination of Nemtsov? We know Putin didn’t do it—so was it you?” She responded, “How could you say that?” and was spirited away by staff.