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Forex Market: Certain Banks Targeted by Regulators), Finance-Banque, 2013 Bankocracy Éric Toussaint Resistance Books IIRE CADTM First English edition published in 2015 by Resistance Books and IIRE www.resistancebooks.org www.iire.org Originally published in French as Bancocratie by Les Editions Aden, 1060 Brussels, Belgium, 2014 Bankocracy is Issue number 58 of the IIRE Notebooks for Study and Research © Co-edition CADTM 2 place de Bronckart 4000 Liège Belgique ISBN 978-0-902869-37-0 Translated, revised and refined by Snake Arbusto, Vicki Briault Manus, Adam Clark-Gimmig, Mike Krolikowski, Charles La Via and Christine Pagnoulle. Edited by Fred Leplat, Susan Pashkoff and Terry Conway. Designed by Pierre Gottiniaux. Printed in the UK by Lightning Source, Milton Keynes, MK11 3LW Bankocracy “What’s breaking into a bank compared with founding a bank?” Berthold Brecht, The Threepenny Opera overnments of the most industrialised countries have dramati- cally increased their public debt to bail out the private banks after Gthe most disastrous economic and financial meltdown in capital- ist history since the 1930s. Paying debts and reducing fiscal deficits have become the perfect pretexts to enforce austerity measures everywhere. The Troika (European Commission, ECB and IMF) and all EU govern- ments have launched an unprecedented attack on the social and econo- mic rights of their peoples. This book will enable the reader to understand how the crisis developed: the consequences of deregulating the banking sys- tem, the logic underpinning private banks’ responses, and the crimes they perpetrate on a daily basis with the collusion of governments and central banks. It argues for socialisation, rather than ‘nationalisation’, of the bank- ing sector so that it becomes a proper public service under citizen control and monitoring. It argues for the cancellation of illegitimate public debt that largely results from bank bail-outs. It uses simple straightforward language to make it possible for anyone to understand the current crisis and see co- herent alternatives to current policies. This book is dedicated to those who wish to better understand our struggle for empowerment, wherever they are; to the refugees who are shamefully denied access to our Western countries; to all those who have lost their jobs or their homes because of the irresponsible behaviour of banks; to those who fight injustice and all forms of oppression. Éric Toussaint Éric Toussaint is a historian and political scientist with a PhD from the universities of Paris VIII and Liège. He is spokesperson for the CADTM (Committee for the Abo- lition of Third World Debt) international network, of which he is one of the found- ing members. He sits on the Scientific Council of ATTAC France. He took part in the process that launched the World Social Forum in 2001 in Porto Alegre (Brazil). For more than twenty years his economic analyses have been widely read in the press and on the Internet. He is the author of numerous books, of which the most recent are: Bankocracy (2015); World Debt Figures 2015 co-authored with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); The Life and Crimes of an Exemplary Man (about Jacques de Groote, former Executive Director of the IMF) (2014). Several of his books have been published in more than a dozen languages and have become ref- erence works on questions of debt and international financial institutions: Debt, the IMF and the World Bank: Sixty Questions, Sixty Answers (2010); The World Bank: A Critical Primer (2008). Toussaint took part in Ecuador’s Debt Audit Commission appointed by the Ecuadorian President Rafael Correa in 2007. In the same year he advised the President of Ecuador and the Minister of Finance on the creation of a ‘Bank of the South’. In April 2015, Éric Toussaint took on the role of Scientific Coordinator of the Truth Committee on the Greek Public Debt set up by Zoe Konstantopoulou, the President of the Hellenic Parlia- ment. Éric is the author of: The Life and Crimes of an Exemplary Man, CADTM, Liège, Belgium, 2014, http://cadtm.org/The-Life-and-Crimes-of-an ; Glance in the Rear View Mirror. Neolib- eral Ideology From its Origins to the Present, Haymarket, Chicago, 2012; Debt, the IMF and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010; The World Bank: A Critical Primer, Pluto, London, 2008; Your Money [or] Your Life – The Tyran- ny of Global Finance, Chicago: Haymarket, 2005. He has co-authored with Damien Millet, The Debt Crisis: from Europe to Where, VAK, Mumbai, 2012, http://cadtm.org/The-Debt-Crisis- From-Europe-to; Who owes Who? 50 Questions about World Debt, London: Zed Books, 2004. See also Éric Toussaint in Capitalism – Crisis and Alternatives, Ed. Fred Leplat and Özlem Onaran, Amsterdam-London: IIRE-Resistance Books, 2011. Contents Foreword and Acknowledgements - p.9 Author’s Preface - p.12 1. 2007-2008 – the explosion of private debt - p.16 2. The impact of banking deregulation - p.29 3. Thirty years of financial deregulation - p.38 4. Banking methods at the root of the crisis - p.55 5. The quest for maximum Return on Equity - p.65 6. Banks expand their assets - p.69 7. The banking collapse of 2008 - p.75 8. Permission to reduce equity/asset ratios - p.81 9. Basel II: neoliberal euphoria and maximum permissiveness - p.89 10. Banking regulations: truth and lies - p.98 11. The nature of the major European banks - p.109 12. The art of deception - p.117 13. High leverage is maintained - p.121 14. Structured products – time-bombs ticking - p.123 15. New crises ahead - p.129 16. Sovereign debt is not to blame - p.133 17. Speculation on raw materials and food - p.137 18. Currency speculation and exchange-rate manipulation - p.148 19. Giants with feet of clay - p.152 20. The ‘Too Big to Jail’ doctrine - p.157 21. Abusive foreclosures in the United States - p.162 22. HSBC’s drug money scandal - p.164 23. Tampering with interest-rates - p.174 24. Tax evasion and fraud by UBS - p.178 25. Impunity - p.183 26. Governments’ and central banks’ collusion - p.185 27. The Fed bails out Wall Street - p.193 28. The ECB since 2010 - p.197 29. The European Central Bank’s priorities - p.203 30. Policies that fail - p.210 31. The German model - p.215 32. Capital’s global offensive against Labour - p.223 33. Discord between IMF and EU? - p.230 34. The central banks’ dilemma - p.234 35. Banks from Karl Marx’s day to the present - p.242 36. Alternatives - p.249 37. Postscript - p.275 Acronyms - p.280 Glossary - p.282 Bibliography - p.297 References - p.303 Books by Éric Toussaint - p.306 About the CADTM, Resistance Books and the IIRE - p.309 Foreword and Acknowledgements This book is intended to help those who do not belong to the inner circles of banking or political institutions to understand what is going on in the world of private banking, central banks and the European Commission, i.e. the places where crucial decisions are made that impact on the living conditions of the vast majority of the world population. Chapters 1 to 3 trace the development of the capitalist system, and of the banking sector at its heart, since the 1970s-1980s. How the banking system in the US and Europe has evolved over the past twenty years to cause the 2008 meltdown is analysed in Chapters 4 to 7. The cynicism behind banking regulation is described in Chapters 8 to 10. Chapters 11 to 16 examine the state of banking in 2011-2014, while the manipulations and crimes that banks resort to are described in Chapters 17 to 25. The impact of governments, central banks and the IMF on the class struggle are studied in Chapters 26 to 34. Chapter 35 covers the development of banking over the past two centuries; and to conclude, Chapter 36 outlines a consistent set of alternatives and proposals. I have tried to provide keys to understanding the various decisions that were made at top level. I also wanted to show that there are alternatives that are within reach if we act together. Social and political democracy has to be fought for on a daily basis. Collective action is a vital instru- ment of self-empowerment. Writing this book took almost two years. I read thousands of doc- uments on the world of finance to achieve an in-depth understanding of how it works. Readers will understand that the very situation I attempt to describe here is changing from day to day. It is far more difficult to analyse an on-going process than to explain past events. The book was written in several countries (Greece, France, India, Ecuador, Brazil, Haiti, Tuni- sia, Morocco, Belgium, Spain, Portugal…) while I took part in the CADTM’s many activities. It could not have been completed without the invaluable help and support of many people, whose contribution I wish to acknowledge. For eight months, Patrick Saurin kindly read one chapter after another and commented on the banking world, which he knows from the inside. I wish to thank him heartily. My thanks also go to François Chesnais, Aline Fares, Jean-Marie Harribey, Michel Husson and Antonio Sana- bria, who read parts of the book and gave advice. Pauline Imbach and Damien Millet provided precious help during the difficult early stages. Daniel Munevar, Claude Quémar, Virginie de Romanet, Antonio Sanabria, Nacho Álvarez, Daniel Albaracin, Jean-Denis Gauthier, Stéphanie Jacquemont and François Sana were unstinting with their time when I needed help with re- search. The CADTM team devoted two whole days of workshop to the finished manuscript in February-March 2014.
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