From Free Markets to Absolute Power: The Warped Views of “Bank Speak”

The most valuable lesson I learned in grad school a long time ago was about how media filters prevent truth from reaching the mass population regarding a large and varied number of topics.

During research for my Public Policy graduate thesis, I discovered that politicians often granted legislation misleading names or purposefully released misleading sound bites because they realized that in an attention deficit world driven by immediate gratification, headlines and the first three sentences of any leading story could effectively sell deception. I discovered that bills designed to make development of wetlands easier were given names like the Wetlands Conservation bill. I discovered anti-immigration bills that had been sold to the masses with promises to save billions in taxpayer money by denying schooling to immigrant children, when legal precedent had already been set at the highest levels of state court that education could not be denied to any child, legal or illegal. And I discovered that these shenanigans that markedly deviated from reality were not uncommon.

Years after I graduated from grad school, these deceitful practices continued. As an example, consider this story from the Chicago Tribune on August 27, 2003 regarding the Clean Air Act:

“WASHINGTON – The Bush administration Wednesday put into effect a controversial change in Clean Air Act rules that allows electrical power plants, refineries and other industries to replace equipment and increase emissions without installing modern pollution control devices as currently required by law. The new rule softens provisions of 26-year-old “new source review” regulations that require coal-fired power plants and other pollution sources to install up-to-date emission control equipment if they expand or improve their facilities.”

This use of massive deceit by politicians to achieve their goals has neither escaped bankers. I have learned that in “Bank Speak”, just as with “Politician Speak”, “up” means “down” and “down” means “up”. The public makes the following political mistake when trying to translate Bank Speak into truth. If they are Republicans, they look for Republicans to convey the truth. If Democrat, they seek Democrats to hear the truth. Greed, however, has no political affiliations and neither political party can be depended upon to speak the truth. In general, people do not reserve the same levels of skepticism for bankers that they do for their politicians. We have ingested and internalized hundreds of billions of dollars worth of marketing messages about integrity, trust and reliability that bankers have delivered to us over many decades and this is a cataclysmic mistake.

In October 2008, Alan Greenspan, the former Chairman of the US Federal Reserve, told the world that his belief in free markets caused the current economic crisis and that more regulations were needed today to prevent today’s current crisis from every happening again. Yes it is true that Alan Greenspan, as Chairman of the Federal Reserve, was instrumental in destroying many of the regulations that were in place that would have protected the public from the disastrous economic outcome we are experiencing today. What is not remotely true is Greenspan’s claim that he instituted free markets. But instead of investigating the truth, many in the media gladly professed Greenspan’s lie to the world with irresponsible headlines that free market ideology was flawed.

A widely accepted definition of a free market is “Business governed by the laws of supply and demand, not restrained by government interference, regulation or subsidy.” If this is the economic situation that existed in America during Greenspan’s tenure, then I’m responsible for JFK’s assassination. Was business really governed by the laws of supply and demand under his tenure? As Federal Reserve Chairman, Alan Greenspan should have been exceptionally qualified to answer this question. Yet, instead of answering truthfully, Greenspan chose to sell a lie to the public.

As head of a Central Bank that, under his direction, once drastically cut interest rates more than a dozen consecutive times in order to artificially stimulate the US economy, how Alan Greenspan can claim that supply and demand, and not foolish monetary policy, governed market behavior during his tenure, is incomprehensible. For a more detailed explanation of how Central Bank monetary policies, and not free markets, create stock market and real estate market booms and bust cycles, please refer to this article here.

If we need further evidence of a failure of free market conditions under Greenspan’s watch, we need to look no further than Greenspan’s own Congressional testimony. On July 24, 1998, the Senate Finance Committee asked Alan Greenspan to talk about the enormous risk of huge gold derivative positions that had been assumed by the nation’s largest bullion banks. To quell those fears, Greenspan stated, “Central Banks stand ready to lease gold in increasing quantities should the price rise.”

In other words, Alan Greenspan testified, that should supply and demand forces of a free market create higher gold prices, the US Federal Reserve would interfere in the free market to destroy the gold price and they would guarantee enormous profits to the nation’s largest bullion banks. Free markets would have prevented this current global economic crisis from happening, just the opposite of what Greenspan claimed, but this is the reality of Bank Speak. Due to the willingness of the mass media to disseminate Greenspan’s false theories about a free market leading to massive economic meltdowns worldwide, it has led us to this following story just last week:

“PRESIDENT Barack Obama is expected on Wednesday to propose the most sweeping reorganisation of financial market supervision since the 1930s, a revamp that would touch almost every corner of banking from how mortgages are underwritten to the way exotic financial instruments are traded. At the centre of the plan, which administration officials are referring to as a “white paper”, is a move to remake powers of the Federal Reserve to oversee the biggest financial players, give the government the power to unwind and break up systemically important companies — much like the Federal Deposit Insurance Corporation does with failed banks — and create a new regulator for consumer-oriented financial products, according to people involved in the process.”

“The plan stops short of the complete consolidation of power that some lawmakers have advocated. For example, it will allow several agencies to continue supervising banks. It also won’t place specific limits on the size or scope of financial institutions, but it will make it much harder for large companies to be so overleveraged that they threaten the broader economy.”

“After Mr Obama details his proposal, the process will quickly move to Capitol Hill, where Congress would have to pass legislation to enact the changes. Treasury Secretary Timothy Geithner is scheduled to appear before both Senate and House panels on Thursday, where he is likely to face questions and criticisms.”

Although this current legislation to restructure the United States as a Central Bank-run monarchy is now rightly receiving heavy opposition in US Congress, the fact is that the Obama administration is selling this legislation to the world as a solution to the “problem” of free markets that existed under Alan Greenspan’s watch though the market conditions that existed under his watch never remotely resembled free markets. In fact, foreseeing that the US Federal Reserve would use the crisis they created to attempt a further power grab was so transparent, that more than a year ago, on June 14, 2008, I wrote these exact words to my clients:

“Find me one history book in schools today that discusses the primary role of the U.S. Federal Reserve in creating the Great Depression, and I’ll show you a book that is not used in American institutions of public learning (But again, this is a topic for an entirely different day). The only point I want to make here is that by creating a psychology that everything is okay and then having a crisis rear its ugly head seemingly “out of nowhere”, this leaves those in power to implement broad, sweeping changes that will receive limited or no opposition as the cries of “please help us” emanate from every corner of the country. When this crisis starts unfolding in earnest, the international banking cartel will claim from the high heavens, “it is because we do not have enough power that this crisis happened. You must give us more power because if we had more power, we could have prevented this crisis.” Of course, the reality will be that they are the very people that created this crisis but nobody will understand this so more power will be conceded to them. Mark my word. We will soon hear speeches of this nature from those that Alan Greenspan referred to as leaders of the 20th and 21st century. Of this I am certain. This is what happened during the Great Depression, and it will happen again.”

Alan Greenspan in February of 2004, testified that the Federal Reserve, in his words, had “inordinate power” in the affairs of the US economy. So how can granting an institution that has miserably failed to perform its job, that has “inordinate power”, even more power, be of benefit to American citizens? This legislation, if passed not just in its current form, but if passed in any form, will continue to undermine the economic freedoms of every American citizen. Should this legislation pass through US Congress, America will merely complete a transition from a market that had very few free market characteristics under Alan Greenspan to one that has no free market characteristics under Federal Reserve Chairman Ben Bernanke. And if this legislation continues to receive heavy opposition, mark my word, you will see heavy sell offs very soon in US markets that will be manufactured so that US Treasury Secretary Tim Geithner may return to Congress and pose another doomsday scenario to ensure that this legislation passes.

Interestingly enough, if I may reference my graduate school thesis once again, an antidote to the fraud of “Bank Speak” already exists — EDUCATION. When I researched my graduate thesis of media filters, I discovered that most people formulated their opinions about new proposed legislation based upon incomplete and often downright false information. Once they were informed of the truth, their support for various legislative proposals uniformly and dramatically changed. For instance regarding an anti-immigration proposition that surfaced in the state of California during the 1990s, public polls initially demonstrated an 85% support level. However, after a grass roots organization explained to the people what the legislation truly meant, and the same exact people were polled again, support plummeted to less than 20%. The power of education and truth is truly life-altering.

Thus, knowledge regarding the truth is the single most important factor in establishing real solutions to our current global economic crisis. The truth about this current economic crisis has been non-existent in the media because bailout money has kept the truth suppressed. Every single person that has ever gathered intelligence or research of any kind about a specific industry knows that the best source of information is a disgruntled mid-to-upper level executive. Why? People at the very top of the food chain are either inaccessible, or even if accessible, will never reveal the truth. People at the bottom of the food chain don’t know enough to offer any information that can remotely reveal the truth. Thus, a mid-to-upper tier disgruntled employee willing to talk is often by far, the best source of information to learn the truth. But the CEOs and the government officials do not want these employees to talk to the media.

Ironically, it is the public’s money, administered by TARP funds, that has sentenced us to a fate of ignorance and has insured that disgruntled mid-to-upper tier financial executives will not exist. Remember when TARP money was being used to give bonuses left and right to financial executives, such as the $3.6 billion of bonuses paid to Merrill Lynch employees in December 2008? While the media openly criticized the obscene amounts of bonuses paid to the top Merrill executives, the much bigger story percolated underneath the surface. The much bigger story was the hush money, paid in the form of bonuses, that kept the mid-to-upper tier executives from spilling the truth about this crisis to the press.

Remember when Merrill CEO John Thain claimed that the bonuses were necessary to retain talent and when various other financial CEOs refused to disclose the names of the executives and the amounts of the bonuses they were being granted? They refused to disclose this information based upon a claim that the release of this information would give their competitors an unfair advantage. Again, in my opinion, those reasons were a bunch of nonsense. In a New York Times story reported in February 11, 2009, Andrew Cuomo, the New York State Attorney General, stated that only a small portion of Merrill’s 39,000 employees received bonuses. Coumo reported that 700 employees received roughly $700 million; 4 employees received a total of $121 million; 20 employees received more than $8 million; and 53 employees received more than $5 million.

Simple math says the bonus money Coumo referenced only adds up to $834 million paid to 777 employees. If we consider that likely no more than 20% of Merrill’s employees actually know anything worth spouting to the media, then out of the $3.6 billion bonus pot, there was still $2.766 billion left over to pay out to 7,023 employees, a figure that works out to an average of more than $390,000 per employee. That’s a sum that’s probably large enough to keep a lot of people quiet.

It’s nearly a given that a lot of mid-to-upper tier Merrill executives received bonus money, though no one would ever admit that the bonuses were the equivalent of “hush” money. And it’s quite certain that bonus money, and lots of it, were also granted to mid-to-upper tier executives at every other global financial firm as well. But what about the mid-to-upper tier executives at firms like Bear Stearns and Lehman Brothers that lost their jobs? Wouldn’t they be disgruntled? Sure, if they were out of a job. But scan the newswires for the past year, and most of the important players at these firms already have landed new important jobs, probably replete with hefty hiring bonuses.

So how can we, as citizens ever expect to counter the dishonest “Bank Speak” spread by Central Banks and the banking industry in a continuing effort to consolidate their power? We can counter it by spreading the truth. I urge you to please watch the video below, start educating your neighbors and friends, and start spreading the truth.

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