Tuesday, 20 October 2009


By Joan Veon
June 29, 2009

BASEL, SWITZERLAND -The power base of the world has shifted…it is no longer in
London, New York City, Washington D. C., or Tokyo. Neither is it in Beijing or
Moscow. It is Basel, Switzerland. In 1930, the Bank for International
Settlements-BIS was set up as a result of the Young Plan which was named after
the man who presided over the Allied Reparation Committee, Owen D Young.

Basel was chosen as its location because everyone could get on a train from
anywhere in Europe to attend its meetings. When you walk out of the main train
station, the BIS is within easy walking distance of one block. A modern 18
story high building belies the power it extends globally. There is nothing
about the building that calls anyone’s attention to it other than the plaque
near the glass front doors that basically says it is private property. The
world’s power brokers walk to the BIS without fanfare and are set apart from
the citizenry by their business suit and ID pass.

Yet within its walls the world’s monetary system is being designing and
directed by many illuminated and brilliant people from inside and from without,
those who visit regularly from all over the world include: central bank
ministers, treasury secretaries, regulators, insurance supervisors, deposit
insurers and accountants. Truly the BIS is all powerful. Dr. Carroll Quigley in
his book, Tragedy and Hope, wrote that,

The powers of financial capitalism had another far reaching aim, nothing less
than to create a world system of financial control in private hands able to
dominate the political system of each country and the economy of the world as a
whole. This system was to be controlled in a feudalistic fashion by the central
banks of the world acting in concert, by secret agreement, arrived at in
frequent meetings and conferences. The apex was to be the Bank for
International Settlements in Basel, Switzerland (pp. 324-25).

If this power was not evident before, it is in the process of becoming greater
and more immense. While the BIS has always been the focal point of central bank
activity globally, it now is finalizing the structure Dr. Quigley wrote about.
Bi-monthly, the Group of Ten central bankers, along with those from majoring
developing nations come together to discuss global monetary policy, among other
things. Over the years it has expanded to the point that every aspect of
banking, finance, insurance, deposit insurance, and regulation now constitute
its core workings.

In the mid-1990s the word “globalization” came into our vocabularies as we were
faced with naming the process whereby the barriers between the countries of the
world started to fall. Beginning with the establishment of the International
Monetary Fund and World Bank in 1944, the financial barriers between countries
fell; with the establishment of the United Nations in 1945, the political
barriers fell; with the establishment of the World Trade Organization in 1994,
the trade barriers fell; with the establishment of the International Criminal
Court in 1998, the legal barriers fell; and with the September 11, 2001 attack
on the World Trade Center, the military and intelligence barriers fell.

Similarly, during the 1990s, the Bank for International Settlements started to
set up its own level of globalization. In1998, the International Association of
Insurance Supervisors was set up and is comprised of insurance supervisors from
all over the world. In 1999, the Financial Stability Forum was set up which was
comprised of the Group of Seven treasury secretaries, central bankers, and
regulatory agencies. Recently this organization was expanded to include the
Group of Twenty. Then in 2002 the International Association of Deposit Insurers
was set up. This organization is comprised of the “FDICs” of the world. Another
organization which was set up in 1973 and then reconfigured in 1984 is the
International Organization of Security Commissions-IOSCO which is basically a
global “security and exchange” commission which has facilitated a global stock

What the 2008 Credit Crisis has provided is an opportunity to further enhance
and empower these organizations which will and are in the process of
transferring respective responsibilities from the national level to the global
level, thus completing the process of banking, insurance, auditing, accounting,
and regulatory globalization. It should be mentioned that in order for the
United States to play its role in this process, the Obama Administration will
have to set up a single national regulator over our seven different regulators
that currently work independently. This is so important a step that the
Financial Times recently ran an editorial on June 20 that warned America,

The need for thorough regulatory reform is still pressing. One concern stands
out: the risk of the whole financial system breaking down, as it did last
autumn. Those who want to give central banks the power and responsibility to
monitor systemic risks are right. They include the US Treasury, whose proposals
this week seek to turn the Federal Reserve into a systemic super-regulator.
These proposals are contested. They should not be; the alternatives are worse.
Reforms to rein in systemic risk must not now fall prey to politics. They must
be enacted before the memory of last autumn fades.

Let us examine what the first paragraph of the Bank for International
Settlements 79th Annual Report stated with regard to the credit crisis:

How could this happen? No one thought that the financial system could
collapse. Sufficient safeguards were in place. There was a safety net: central
banks that would lend when needed, deposit insurance and investor protections
that freed individuals from worrying about the security of their wealth,
regulators and supervisors to watch over individual institutions and keep
managers and owners from taking on too much risk. Since August 2007, the
financial system has experienced a sequence of critical failures.

While it provides their assessment of what went wrong, the report summarizes
the problem and the solution this way:

In summary, financial regulators, fiscal authorities, and central bankers
face enormous risks. Building a perfect, fail-safe financial system—one capable
of maintaining its normal state of operations in the event of a failure—is
impossible. Standing in the way are both innovation and the limits of human
understanding, especially regarding the complexity of the decentralized
financial world. We have no choice but to take up the challenge of first
repairing and then reforming the international financial system.

Their recommendations include the BIS standard-setting committees (the Basel
Committee on Banking Supervision, the Central Bank Governance Forum, the
Committee on Payment and Settlement Systems, and the Markets Committee) and the
Financial Stability Board. For our purposes we will discuss the newly
centralized power of the Financial Stability Board.

First it should be noted that with this kind of total economic and monetary
failure, the entire system should be scrapped and perhaps we should go back to
being individual nation-states, but you see for their purposes, they are
expanding and empowering another level of control which will move the assets of
the entire world into their domain. No physical war, no guns, no
bullets—electronic financial warfare.

The Financial Stability Board was originally the Financial Stability Forum-FSF.
When it was set up in 1999, I interviewed its Secretary-General, Svein Andresen
who told me that there was no guarantee that it would be able to protect the
global system from problems. However, it was believed that if you brought the
central bank ministers together with the treasury secretaries and the
regulatory agencies from the Group of Seven countries that it would provide a
framework to protect the global financial system. Obviously they failed in
their mission. The alternative instead of liquidating the FSF was to expand and
empower it. When I asked FSB Chairman Mario Draghi about the role and input of
the international bankers like Sir Evelyn de Rothschild, he replied,

We are in contact with various --say bankers association, market
association—banks, hedge funds, securities fora and lots of other bodies. We
look at what they do and then we make up our own mind. So it is an interesting
context but in the end, ours is a forum where you have the regulators—banking
regulators, market regulators, financial ministries and international
organization and institutions and standard setters. So it is our own mind in
the end which we look at.

It is important to note that the internationalization or globalization of the
financial system is here. It constitutes tearing down the final barrier between
the countries of the world. It has been almost fully operational for at least
10 years. At this point in the game, the integration between a handful of
international organizations is apparent.

The need to coordinate international accounting through the International
Accounting Standards Board with the American counterpart, Financial Accounting
Standards Board- FASB with the FSB and G20 is already happening. IOSCO is
working with the BIS Joint Forum and FSB. In order to develop high quality
international standards for auditing, assurance, ethics and education for
professional accountants, the Monitoring Group was set up and a Charter was put
in place in 2008 by Memorandum of Understanding. Those participating include:
IOSCO, the Basel Committee of Banking Supervision, the European Commission, the
International Association of Insurance Supervisors, the World Bank, the
Financial Stability Board and the International Forum of Independent Audit

There are so many working groups which now comprise a new level of regulatory
oversight operating internationally that it is almost impossible to go back to
the power of the individual nation-state. The number and the oversight of these
groups will make your head spin. Can we go back? Any country who would dare say
no would be completely destroyed—ask the 5 Asian countries that chose to say no
to the WTO Financial Services Agreement in the mid-1990s. It is now the
Financial Stability Board which is now empowered with becoming the “United
Nations of Financial and Regulatory Control” over countries.

© 2009 Joan Veon - All Rights Reserved

Joan Veon is a businesswoman and international reporter, who has covered over
100 Global meetings around the world since 1994. Please visit her website:
www.womensgroup.org. To get a copy of her WTO report, send $10.00 to The
Women's International Media Group, Inc. P. O. Box 77, Middletown, MD 21769. For
an information packet, please call 301-371-0541

E-Mail: t7w...@aol.com

Website: www.womensgroup.org

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