Using panic to centralize power


As I document in my forthcoming book, Power of Money: The Rise and Decline of the American Century, in every major US financial panic since at least the Panic of 1835, the titans of Wall Street?most especially until 1929, the House of JP Morgan?have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power.





Now they must do something similar on a global scale to be able to continue to dominate global finance, the heart of the power of the American Century.


That process of using panics to centralize their private power created an extremely powerful, concentration of financial and economic power in a few private hands, the same hands which created the influential US foreign policy think-tank, the New York Council on Foreign Relations in 1919 to guide the ascent of the American Century, as Time founder Henry Luce called it in a pivotal 1941 essay.


It’s becoming increasingly obvious that people like Henry Paulson, who by the way was one of the most aggressive practitioners of the ABS revolution on Wall Street before becoming Treasury Secretary, are operating on motives beyond their over-proportional sense of greed. Paulson’s own background is interesting in that context. Back in the early 1970’s Paulson started his career working for a rather notorious man named John Erlichman, Nixon’s ruthless adviser who created the Plumbers’ Unit during the Watergate era to silence opponents of the President, and was left by Nixon to ‘twist in the wind’ for it in prison.




Paulson seems to have learned from his White House mentor. As co-chairman of Goldman Sachs according to a New York Times account, in 1998 he forced out his co-chairman, Jon Corzine ‘in what amounted to a coup’ according to the Times.


Paulson, and his friends at Citigroup and JP Morgan Chase, had a strategy it is becoming clear, as did the Godfather of Asset Backed Securitization and deregulated banking, former Fed Chairman Alan Greenspan, as I have detailed in my earlier series here, Financial Tsunami, Parts I-V.


Knowing that at a certain juncture the pyramid of trillions of dollars of dubious sub-prime and other high risk home mortgage-based securities would come falling down, they apparently determined to spread the so-called ‘toxic waste’ ABS securities as globally as possible, in order to seduce the big global banks of the world, most especially of the EU, into their honey trap.


They had help. In recent testimony under oath by Mr Lynn Turner, Chief Accountant of the Securities & Exchange Commission (SEC) testified that the SEC Office of Risk Management which had oversight responsibility for the Credit Default Swap market, an exotic market worth nominally some $62 trillions, was cut in Administration ‘budget cuts’ from a staff of one hundred down to one person. Yes, that was not a typo. That’s one as in ‘Uno.’


リン・ターナー氏による誓いの下の最近の証拠において、Securities & Exchange Commission (証券取引委員会)の会計課長は、クレジットデフォルトスワップ市場(名目上約62兆ドルに値しているエキゾチックな市場)についての監督責任を持っていた危機管理の証券取引委員会オフィスが100人のスタッフからの1人に‘予算の削減’において管理費が切られたと証言しました。



Vermont Democratic Congressman Peter Welsh queried Turner, ‘... was there a systematic depopulating of the regulatory force so that it was impossible actually for regulation to occur if you have one person in that office? ...and then I understand that 146 people were cut from the enforcement division of the SEC, is that what you also testified to?’ Mr. Turner, in Congressional testimony replied, ‘Yes…I think there has been a systematic gutting, or whatever you want to call it, of the agency and it's capability through cutting back of staff.’

バーモントの民主党の下院議員ピーター・ウェールズはターナーに質問し、'…はそこで規制部門の組織的な担当者を激減させることで、あなたがそのオフィスに1人だけならば、規制することが実際不可能でしたか?... それから 私は146人が証券取引委員会の強制部門から減らされたと思います。それはあなたも証言したものですか?』 、ターナー氏は議会の証言の中で答えました ― 『はい…私の考えでは組織的なむさぼり食いがあったと思う、または能力があると叫ぶものは何でも問わずに機関とスタッフの削減である。』

Was that just ideological budget cutting fervor, or was it deliberate? Was former Goldman Sachs man, the man who convinced the President to hire Paulson, Bush’s former Director of the Office of Management and Budget (OMB), Joshua Bolten, now the President’s Chief of Staff, responsible for insuring there was no effective government oversight on the exploding securitization of mortgage assets?


These are perhaps some questions which the good Congressmen in both parties ought to be asking people like Henry Paulson and Josh Bolten, and not such red herring questions as how large Richard Fuld’s bonus pay at Lehman was. Are Mr Bolten’s fingerprints on the corpse here? And why is no one questioning the role of Paulson as CEO of Goldman Sachs, then the most aggressive promoter of exotic and other Asset Backed Securitization products on Wall Street?


Why did Henry Paulson single out one Wall Street firm, a bitter rival of his when he was CEO of Goldman Sachs according to market reports, and let it, as his mentor Erlichman was fond of saying, ‘to twist in the wind.’ It is the Lehman Bros. unwinding and its huge portfolio of Credit Default Swaps which is reportedly leading hedge funds and banks around the globe into panic selloffs.



It now would appear that the Paulson strategy was to use a crisis?a crisis that was pre-programmed and predictable as far back as 2003 when Josh Bolten became head of OMB?when it exploded, to panic the more conservative European Union governments into rushing to the rescue of US toxic waste assets.


Were that to have happened, it would in the process destroy what was left of sound EU banking and financial institutions, bringing the world one step closer to a global money market controlled by Paulson’s cronies?US-style Crony Capitalism. Crony Capitalism is certainly appropriate here. Paulson’s predecessor at both Goldman Sachs and at Treasury, Robert Rubin, liked to accuse the Asian bankers of Thailand, Indonesia and other lands hit with the speculative attacks of US-financed hedge funds in 1997 of ‘crony capitalism,’ leaving the impression the crisis was home grown in Asia and not the result of a deliberate executed attack by US-financed financial institutions to eliminate the Asia Tiger model among other goals, and turn Asia into the funder of US debt.




Interesting to note is that Rubin is now a Director of Citigroup, obviously one of Paulson’s crony bank ‘survivors,’ and the bank which to date has had to write off the largest sum in toxic waste securitized assets.


If the allegation of pre-planned panic, a la the Panic of 1907 is accurate, and it is a big if, then the plan worked…up to a point. That point came over the weekend of October 3, coincidentally the national unification holiday of Germany.