Webster G. Tarpley
TARPLEY.net
May 28, 2010

On the most important stop of last week’s desperate mission to make the world safe for derivatives, US Treasury Secretary Geithner has been dealt a decisive rebuff. Geithner’s obvious attempt to sabotage the
recent prohibition enacted by the German government against naked credit
default swaps (among the most toxic of derivatives) was rejected in
Berlin on Thursday by German Finance Minister Wolfgang Schäuble.

At their joint press conference, Geithner and Schäuble could hardly hide the atmosphere of tension and hostility, even though both were determined to mask the clash for domestic political reasons. A Handelsblatt blog pointed to the language
of mutual dislike, and this newspaper headlined that the transatlantic
conflict was escalating. The Washington Post published a photograph on
Friday, May 28, 2010 showing the German minister scowling at the
feckless featherweight Geithner. Geithner assured the journalists that
there was a “broad agreement on regulatory reform,” but in reality there
was no such common ground.

Schäuble has now emerged as the strongman in the German cabinet, due precisely to his willingness to take the point in the fight against derivatives. “Ban Bolsters Schäuble’s Sway,” headlined the Wall Street Journal. German
officials are reported to be increasingly dismissive of the carping
criticism coming from other countries which have failed to act against
the world derivatives plague. The Germans know exactly what they are
doing, Schäuble stressed: “We have done our national homework,” he
added.

It is abundantly clear that Germany is determined to act unilaterally against speculation, especially in the form of derivatives. This means maintaining the current ban on naked credit default swaps, and
supplementing this with a ban on naked short sales of German stocks,
euro-denominated government bonds, and of the euro itself.

Geithner, as always, is operating behind a mask of duplicity. During the press conference, he did not directly address the German ban on naked credit default swaps which has caused such consternation in the
City of London, Wall Street, the US Treasury, and the Federal Reserve,
where derivatives are regarded as sacrosanct. Geithner also failed to
address the question of a Tobin tax or securities sales tax on
speculative financial turnover, which the German government is
attempting to push through the ponderous elephantine Brussels
bureaucracy of the European Union. Geithner also did not talk about the
regulations largely targeting the Anglo-American hedge fund wolfpack
which are also being developed in the Byzantine corridors of the
eurogarchy.

These are matters of extremely serious strategic conflict. As the Washington Post noted on May 28, “… differences have emerged on the host of issues between the United States and Europe… some European officials –
including Schäuble – want to tax all financial transactions for a fund
that might be dedicated to crisis resolution or that might go into each
government’s general account.” Given the increasing pressure on national
budgets, it is of course imperative that the revenue generated by a
Tobin tax be kept in-country to prevent the savage dismantling of the
social safety net which is increasingly demanded by the financiers and
their agents and dupes. Under no circumstances should these funds be
kept in a fund which will inevitably be used for further bailouts of
bankrupt zombie banks. As the Washington Post further
commented: “Europe wants to more strictly clamp down on what it views as
speculation, while … US officials speak more frequently about the risk
of stifling innovation if regulations become too rigid.” Modern
societies need innovation in the area of scientific discoveries that can
lead to new technologies, and do not require any more variations of the
available brands of derivatives cyanide, arsenic, and strychnine. The
world has had enough of toxic derivatives to last us until the end of
the century and beyond.

Geithner’s true intentions can be read from his systematic sabotage and gutting of the financial reform bill recently passed by the U.S. Senate. The most important feature of this bill was the ban on
derivatives speculation by commercial banks proposed by Senator Blanche
Lincoln of Arkansas. This would have partially restored the blanket ban
on most types of derivatives which was in force under the New Deal from
1936 through 1982 thank to the Commodities Exchange Act signed by
President Franklin D. Roosevelt. Geithner has attacked this provision,
and is teaming up with Obama handler Rahm Emanuel to remove it during
the upcoming House-Senate reconciliation process.

Geithner was also an active participant in the efforts to torpedo the McCain-Cantwell amendment, which would have restored the New Deal era Glass-Steagall law, which rigorously prevented commercial banks from
engaging in stock jobbing and related forms of investment banking,
including derivatives.

Geithner has also talked about stress tests for European banks. It should be recalled that the stress tests for US banks carried on last year under Geithner’s supervision were worse than useless, since they
systematically excluded from consideration the main cause for bank
insolvency in the current era – off-balance-sheet toxic derivatives.
This blatant mockery should not be repeated in Europe.

As for the hedge fund hyenas, they are adamant about their intention to bring the crisis currently impacting the southern tier of the euro back home to the United States. In his New York Times article
“Easy Money, Hard Truths,” David Einhorn, a leading hedge fund operator
involved in the infamous February 8, 2010 Manhattan planning session for
the current assault on Europe, is categorical in his forecast that the
European crisis will happen here as well. To spare the American people
endless and useless misery, it is imperative that we mobilize every
legal and regulatory tool in the New Deal armory to put the hedge fund
predators out of business while banning or taxing derivatives. The goal
must be to prevent a needless national bankruptcy of this country and
preserve the present constitutional system of representative government
from the chaos and anarchy the speculators are eager to visit upon us.