Author: Alicia

Testimony of Paul Gallagher, Executive Intelligence Review Economics Co-Editor

March 3, 2017

Committee Chair and Delegates,

Thank you very much for holding today’s hearing on the resolution to the U.S. Congress to restore the Glass-Steagall Act separating commercial bank units from all other types of financial institutions, and limiting FDIC insurance to those units.

Glass-Steagall restoration legislation in the U.S. House of Representatives, H.R.790, the Return to Prudent Banking Act of 2017, was introduced Feb. 1 by Republican Walter Jones of North Carolina and Democrats Marcy Kaptur and Tim Ryan of Ohio and Tulsi Gabbard of Hawaii. It has grown to 32 cosponsors, and needs support. Twelve state legislatures are now considering resolutions supporting this legislation.

If Glass-Steagall is not restored now, the next large bank — or non-bank — financial failure will again topple the banking system and trigger both new bailouts and confiscation of bondholders and depositors in the form of bail-in. U.S.-based large bank holding companies have $2 trillion in exposure to European megabanks, which are full of non-performing loans and have not had a single profitable year since the 2008 crash despite hundreds of billions in bailouts and trillions in bond purchases by the European Central Bank.

And if Glass-Steagall separation is not restored now, the largest U.S. bank holding companies — which dominate the banking system to the extent of 60-70% of deposits and assets — will continue to limit lending, in practice, to the large corporate bond issuers and borrowers, shutting out technologically progressive SMEs from credit.

JP MorganChase had $837 billion in loans/leases outstanding at Dec. 31, 2015, just 65.1% of its deposits of $1.279 trillion. Citigroup had $604,991 billion in loans/leases at the same date, just 66.8% of its deposits. But the entire U.S. commercial banking system has loans/leases outstanding equal to 79.2% of deposits according to the Federal Reserve’s flow-of-funds report. Since the six largest banks hold more than half of all deposits, the comparative ratio for the nation’s 6,000 community banks and regionals clearly must be in the range of 90%-plus loans/leases to deposits. The biggest banks’ loan ratios are very low indeed; they both hurt the economy, and demonstrate the great degree to which households and businesses deposits are being used for securities and derivatives speculation.

But since the 2008 crash, the biggest 12 banks have largely absorbed the deposits and assets of some 2,000 small banks which have disappeared — one quarter of all the commercial banks which existed in the United States a decade ago.

The largest bank holding companies changed dramatically from 1995 the point at which Glass-Steagall enforcement had effectively ceased — through the 2007-08 crash. This was studied and effectively described already in a 2011 study by the New York Federal Reserve, entitled “Peeling the Onion: The Structure of Large Bank Holding Companies.” These giants became impossibly complex, morphing from 1-200 subsidiaries typically in 1995 to 3,000 or more units per megabank in 2011. They became giants dominating the assets and deposits of the entire U.S. banking system for the first time in U.S. history. They shifted their huge and growing deposit bases from lending toward supporting securities trading units, derivatives trades, etc. Derivatives markets exploded ten times in size in ten years 1997-2007.

Already in 1998-99 the failure of a single hedge fund called Long Term Capital Management was admitted to have nearly caused a global bank panic, because 55 U.S. and European banks, through leveraged loans, were into LTCM’s immensely risky derivatives trading. By 2008 Lehman Brothers and other investment banks, insurance companies and hedge funds were in the same blowout event condition.

Today, a media report March 2 identified $321 billion in fines which the world’s biggest banks have had to pay since the 2008 crash, for illegal and/or immoral activities which they continue to commit up to the present. The dominant character of these violations of banking law and practice is the use of the very large deposit bases of these banks, to support speculative units, securitization of investments, and derivatives bets. The currently very public Wells Fargo mis-selling scandal is emblematic of this.

If the Glass-Steagall Act is restored by Congress now, financial failures will take down only individual financial institutions, as when important investment banks like Drexel Burnham Lambert and Solomon Brothers failed under Glass-Steagall enforcement without affecting the rest of the banking system. U.S. branches of the biggest European universal banks, which absorbed great volumes of taxpayer bailout loans and recapitalizations, will have to recharter themselves completely independently if they are to operate in the United States at all. But in fact, Glass-Steagall restoration in the United States is likely to be followed more or less immediately in Europe, where many nations have already had Glass-Steagall bank separation legislation introduced.

And if Glass-Steagall is restored by Congress now, even as large holding companies are divesting securities units, their commercial banking units will necessarily be in the business of lending to businesses and households, aside from holdings of Federal and municipal bonds. The common Wall Street argument against Glass-Steagall — that it will reduce bank lending or damage the capital market — is the opposite of the truth. As FDIC vice-chair Thomas Hoenig has frequently argued in recent years, the United States capital markets were the deepest and most reliable in the world in the decades when commercial banking and securities trading were separated and the Federal safety net protected only the former.

If a national bank for great infrastructure projects is established, it will need a system of private commercial banks lending on good terms to its contractors. Glass-Steagall will make lending those banks business again.

Executive Intelligence Review believes that restoring Glass-Steagall is the initiating action of four laws Congress should take. It should lead to a national Hamiltonian credit institutions for trillions in infrastructure investments; to an accelerated return to manned space exploration and to rapid development of fusion power and plasma technologies.

Thank you again for debating this crucial subject.

EIR reported on Feb. 22 that “Real value in China’s economy, and also in its investments in countries along its Belt and Road Initiative, is shifting to infrastructure projects and rising rapidly, as detailed in a report just published by the PricewaterhouseCoopers accounting and audit firm (PwC).”

A closer study of that detailed PwC report reveals its more fundamental point, the “Atlas”-like character of the “win-win” Belt and Road Initiative since 2013, in effectively holding up the world’s economy after the financial crash of the trans-Atlantic banking systems.

 Xinhua had reported Feb. 21, that PwC found that the economic value of announced infrastructure projects in which China is participating, surged by 47% in 2016 in 66 countries and regions that fall under the China-proposed Belt and Road Initiative (BRI). The BRI region had infrastructure projects underway and deals valued at $500 billion in 2016, only one-third of which total was in China.

In fact, that investment had made its biggest surge in 2013-14, rising from just under $300 billion to $400 billion in project investments, and kept rising from there. But with the impact of the 2007-08 crash, economic growth even in the 67 OBOR countries, primarily in Asia, had started falling in 2011 from an average 8% annually across the region, to just 4.5% average growth of the 67 OBOR countries in 2016. [Still much higher, of course, that America’s 1.5% and Europe’s 0.4% stagnation.

Only during 2016 did the economic slide reverse itself, and rise — and this, in China itself as well. In China, the average project size increased by 14% last year. Across the BRI region, the value of invested projects has been growing at a compound annual growth rate of 33% since 2013, PWC reported.

Even as world trade has stagnated in real terms, the great “economic connectivity” projects of OBOR, in utilities, transport, power, telecom, construction, etc., have been the ultimate “countercyclical investments.” They have lifted the whole OBOR region from joining the trans-Atlantic collapse. 

EIR reported on Feb. 22 that “Real value in China’s economy, and also in its investments in countries along its Belt and Road Initiative, is shifting to infrastructure projects and rising rapidly, as detailed in a report just published by the PricewaterhouseCoopers accounting and audit firm (PwC).”

A closer study of that detailed PwC report reveals its more fundamental point, the “Atlas”-like character of the “win-win” Belt and Road Initiative since 2013, in effectively holding up the world’s economy after the financial crash of the trans-Atlantic banking systems.

 Xinhua had reported Feb. 21, that PwC found that the economic value of announced infrastructure projects in which China is participating, surged by 47% in 2016 in 66 countries and regions that fall under the China-proposed Belt and Road Initiative (BRI). The BRI region had infrastructure projects underway and deals valued at $500 billion in 2016, only one-third of which total was in China.

In fact, that investment had made its biggest surge in 2013-14, rising from just under $300 billion to $400 billion in project investments, and kept rising from there. But with the impact of the 2007-08 crash, economic growth even in the 67 OBOR countries, primarily in Asia, had started falling in 2011 from an average 8% annually across the region, to just 4.5% average growth of the 67 OBOR countries in 2016. [Still much higher, of course, that America’s 1.5% and Europe’s 0.4% stagnation.

Only during 2016 did the economic slide reverse itself, and rise — and this, in China itself as well. In China, the average project size increased by 14% last year. Across the BRI region, the value of invested projects has been growing at a compound annual growth rate of 33% since 2013, PWC reported.

Even as world trade has stagnated in real terms, the great “economic connectivity” projects of OBOR, in utilities, transport, power, telecom, construction, etc., have been the ultimate “countercyclical investments.” They have lifted the whole OBOR region from joining the trans-Atlantic collapse. 

Russian Defense Minister Sergei Shoigu delivered a wide ranging address to a meeting of the All-Russian Youth Forum in the Moscow State Institute of International Relations, titled “International military-political and military-economic cooperation: modern tendencies.”

Relations between the states become more and more strained,” Shoigu reported at the outset, according to the transcript posted on the Russian Defense Ministry website. “The attempts of the US-led West to impede the establishment of a new fair world order are leading to growing chaos, anarchy and meet protests in many countries.”

International institutions are unstable and terrorism remains a worldwide threat, Shoigu said. “Under these conditions, it is necessary to unite efforts of public and social institutions to provide protection of national interests and strengthening of defense of this country,” he continued. “Here, the development of the Strategic Nuclear Forces remains the absolute priority. Russian nuclear weapons guarantee deterrence of any aggression from any foreign country.” Modernization of the nuclear forces, therefore, remains a high priority. However, the future role of nuclear weapons in deterring a potential aggressor will decrease. “Primarily, it will be decreased due to development of high-precision weapons,” he said. The impact potential of our high-precision weapons will increase by 4 times to 2021.”

Shoigu went on to describe the accomplishments of the Russian military in Syria, to include the provision of humanitarian aid and the spread of the reconciliation process. He said that, as a result of the Russian Aerospace Forces operations, “Chain of the colored revolutions replicated in the Middle Eastern and African countries has been interrupted.”

Shoigu then hit NATO very hard: “As for relations with NATO, the leadership of the Alliance continues rejecting all forms of practical cooperation with the Russian party,” he said. “Instead of joining efforts to fight the common evil — international terrorism, the NATO claimed Russia to be the main threat and continues building up its military potential near our borders. The NATO has significantly increased the number of military exercises held in Eastern Europe, Baltic Sea and Black Sea. Most of them have anti-Russia character.”

“Intelligence activity of the NATO countries has been intensified along the Russian borders. Within last 10 years, total number of reconnaissance aviation flights near the Russian borders has been increased by almost 3 times, in the south-west of Russia  by 8 times. In comparison, 107 such flights were carried out in the 90s, in the 2000s  298, and in 2016  852 ones,” Shoigu went on. “We have been registering NATO’s ships armed with missiles in the Black Sea more and more frequently. The missile defense system of the United States in Europe has been put on a level of initial operational readiness.” He noted that the combined military budgets of all of the NATO states are in the range of $900 billion, more than ten times Russia’s military spending. Despite all of this, however, “we are ready to establish equitable dialogue with Brussels about all topical issues of global and regional security,” he said.

“Jail Obama and Soros for Treason,” that is what the lead banner will say at the LaRouche PAC Day of Action scheduled for this Thursday, February 23. The nation-wide mobilization will mark the third anniversary of the Soros-Obama backed-Nazi coup in Ukraine, and it will mobilize the population to stop the live operation to launch a similar Nazi “color revolution” against the Trump administration in the U.S. today.

Lyndon LaRouche told associates Tuesday that, in the case of Ukraine, “the Nazis took over, with a Hitler program. We have to say it clearly: they were Nazis, backed by Obama and Soros.” He added that such clarity will be useful to Russian President Vladimir Putin to help him clean up the mess, which he will be happy to do. LaRouche was emphatic that the British are behind the Obama-Soros plans for the United States today; that they must be immediately shut down; and that the LPAC Day of Action is meant to do just that. The leaflet to be used for the day of action can be found here for distribution.

To that end, Executive Intelligence Review has just announced the release of a dramatic dossier on this subject, with the following press release:

The EIR News Service today pre-released a special report, “Obama and Soros Color Revolutions—Nazis in Ukraine, 2014; USA, 2017?” which will run in its regular weekly edition.

The 17-page pre-release feature is timed with the third anniversary of the Feb. 22, 2014 coup in Ukraine, in order to put forward the truth about the November 2013—February 2014 Maidan process: that it was a pre-planned government overthrow project, which involved Ukrainian neo-Nazis—afterwards installed in the
Kiev government; and it had the active backing of long-standing Anglo-American intelligence circles and the Obama Administration.

This anniversary of the pro-Nazi coup in Ukraine occurs as the very same British Empire-controlled, Soros-funded, and Obama-associated networks target the newly inaugurated Trump Presidency, which like the deposed Ukrainian President Yanukovich, has expressed an intent to have a working relationship with Russia.

The myth of the Maidan as a “people power” uprising, which ousted the government of Ukraine, is just that. In fact, it was color revolution warfare, perpetrated to confront Russia and instigate ongoing destabilization. This was the goal of the London-Wall Street axis behind the Obama-Soros Maidan-support actions, moving to thwart the Eurasian strategic development alliance, which is growing rapidly between Russia, China, India and other nations, now expressed as the “New Silk Road” process. In May, China will host a world summit of nations meeting on this—the Belt and Road Initiative (BRI).

The report will fully document the charges made above, and will be circulated widely across the United States this week in both electronic and print form. There will be public rallies in Boston and New York, as well as other cities on Thursday, February 23rd where the report will be distributed.

The five sections of the new report (plus links to documentation):

1. The strategic situation in Ukraine, from the Maidan neo-Nazi coup through to the collapse of that nation into economic and strategic chaos today.

2. The neo-Nazi provenance of the leading groups and individuals in the 2014 regime-change coup.

3. A chronology of the coup itself, November 2013-February 2014.

4. A profile of the origins and methods of the color revolution.

5. The appeal by Dr. Natalia Vitrenko, presidential candidate for the Progressive Socialist Party of Ukraine, to the EU on Feb. 10, 2017, to stop the repression underway by the Kiev government.

Demonstrating once again that the British are controlling the Obama/Soros color revolution against the US government, the former Financial Times bureau chief in Washington, Edward Luce (who is still in Washington), penned an open call for a violent insurrection against the US government, or, he warned, Trump may bring “the system” down.

“Either the forces that are against the president will bring him down,” Luce writes, “or he will destroy the system. My bet is on the first.”

He notes that Trump has “declared war on the intelligence agencies and the media,” as if this is a horrible thing. “Do not be reassured by Mr Trump’s cabinet. Many of them are experienced individuals,” he admits, while claiming that they will soon be leaving, because they will be “humiliated” by Trump’s leadership.

“I fear it is only a matter of time before this results in violence,” he writes. “It is hard to predict how long it would take to resolve the battle between Mr Trump and the so-called deep state. It is also hard to say how long a Republican Congress could stand the heat…. At some point this will boil down to a choice between Mr Trump and the US constitution.”

People should note the irony of an Oxford-trained British intelligence agent pretending to defend the US Constitution — rich indeed.

Over the past month, legislators led by Rep. Chris Smith (R-NJ), of the House Foreign Affairs Committee, and Senator Mike Lee (R-UT) of the Senate Foreign Affairs Committee, have acted to determine the extent of British agent George Soros’s subversion of the republic of Macedonia, abetted by U.S. Ambassador and Obama appointee Jess Baily.

Both Lee and Smith wrote letters to Baily, demanding he explain the embassy’s role in intervening in Macedonia’s internal party politics, and in “shaping the media environment and civil society … favoring groups of one political persuasion over another,” in the Dec. 11, 2016 elections. Lee’s Jan. 17 letter specifically asked whether “the U.S. Mission to Macedonia selected the Open Society Foundation”—founded by George Soros—”as the major implementer of USAID projects in Macedonia?” The U.S. Agency for International Development (USAID) is part of the State Department.

A Jan. 17 letter by Rep. Smith and several other House Republicans had similar wording. “We need to have a detailed oversight into what the [obama] administration has been doing over the past eight years,” Smith said, “because we have been taking sides politically, and there have been other similar incidents…it is against the law and is unheard of.”

On Feb. 3, the Heritage Foundation news agency, the Daily Signal reported that Congressmen are considering holding hearings and Representative Smith has launched an investigation into Soros’s Macedonian operation. Anti-Soros organizers inside Macedonia, report that since 2012, USAID has been allocating most of its assistance to the Open Society Institute as well as to non-governmental organizations controlled by Soros. Conservative Macedonian political commentator Cvetin Chilimanov told the Daily Signal that Baily was actively seeking to form a “red-green” coalition between the former communist Social Democratic Union (SDSM) and two ethnic Albanian parties, to replace the VMRO-DPMNE coalition which won the Dec. 11 elections.

Chilimanov is a co-founder of the “Stop Operation Soros” citizens’ group. According to the Asian Tribune Sunday, Senator Lee’s staff met recently with Macedonian lawmakers, who handed them a white paper produced by the group which charges that USAID has been financing hard-left causes in the country, including violent riots in the streets which target the President, police and government institutions. To date, Ambassador Baily hasn’t responded to the Senate or House letters, but in response to Representative Smith’s inquiries, acting State Department spokesman Mark Toner stated in late January, that as a friend of Macedonia, “the U.S. urges all parties to respect the rule of law, democratic processes and international commitments. We want to see a strong Macedonia, on its way to becoming a member of the Euro-Atlantic family.”

Targeting Feb. 28 when President Donald Trump first speaks to Congress, LaRouche PAC and Democratic activists have collected nearly 4,000 signatures calling on the President to propose re-enacting Glass-Steagall — petitions Glass-Steagall sponsors in Congress hope to present to the President by that date. Some 1,500 of the “Trump” petitions from Ohio alone have been conveyed to sponsor Marcy Kaptur (D-OH). Glass-Steagall legislation, the “Return To Prudent Banking Act,” was introduced in the House of Representatives Feb. 1 and now has 32 sponsors there.

In the same mobilization, LaRouche PAC activists and EIR representatives have gotten the legislatures of 11 states in just over one month to file resolutions calling on Congress for Glass-Steagall and/or for the “American Recovery Program.” The latter starts with Glass-Steagall and consists of actions based on Lyndon LaRouche’s “Four Laws To Save the Nation.” In four of those states — Minnesota, Illinois, Washington and Delaware — these resolutions have moved in both houses of the legislature.

These actions are concentrated in the industrial or “Rust Belt” states of the Midwest and South, and resolutions by legislators in more states are anticipated soon.

After more than two years of many discussions of, and meetings on the “American Recovery Program” or “LaRouche’s Four Laws” with state officials, a new optimism about economic change, following the extraordinary Presidential election, is one factor in these rapid actions. Alabama State Rep. Thomas Jackson, for example, advanced such a resolution without obtaining any cosponsors in 2016, but has nine cosponsors this year.

But the full involvement of LaRouchePAC activists and petitioners has also played an important role in states like Illinois, Ohio and Iowa. In Kansas the Cattlemen’s Association posted phone numbers of the entire legislature and Congressional delegation, along with an article on the “Four Laws” by LaRouche PAC’s Bob Baker. A few of the legislators themselves have become “activists” in the cause.

Though no resolutions have been voted through state bodies yet, most of the legislatures involved will remain in session for some time after the President’s speech to Congress. This gives the opportunity for more activists to get involved petitioning and recruiting more sponsors in their state legislatures.

During this Congressional recess of Feb. 18-26, many Members will hold large and highly controversial town hall meetings. LaRouche PAC activists in the New York Metropolitan Area plan to be at six of the town halls. In their first intervention Feb. 18, they “were swarmed by people to sign the petition.” With 53 signers from roughly 300 attending, they distributed 200 copies of their Hamiltonian weekly, and were interviewed by NPR and Telemundo, a U.S. Spanish-language TV network. Activist Marta Gallegos told Telemundo, “It’s very important to support the President” this way.

Rep. Adriano Espaillat (D), holding the town hall, was given a packet of literature and said, “Glass-Steagall, yes, we need that.”