Chapter 1: Monopoly Capitalism in a Nutshell

This piece was written on the eve of the April 2, 2009 G20 meeting in London UK. A day ostensibly intended to put the world financial and economic house in order. But no such thing will happen as the G20 meeting is nothing more than window dressing to make it appear that the global community as a whole has a say in what is going on.

"What do you mean?" a reader might ask. Well before we can answer that we have to tackle a couple of other questions.

Let us start with, How do the mega-financial institutions manage to control the global social economy?

According to a leading contemporary researcher in the field, it is a function of the financial institutions stranglehold on the society:

The growth of financial institutions' holdings of stock during recent decades may be viewed as an aspect of the growing institutionalization of social savings. Financial institutions have become the managers of savings belonging to all income groups. Personal trust funds represent the savings of the upper income group, particularly the economically inactive sections of that group. Investment companies gather in the savings of small investors from the upper-middle income groups. Employee benefit funds mainly represent assets that "belong" to middle and lower income groups. This process of institutionalization of saving has given a great deal of potential power to the leading financial institutions. As the power of financial institutions over nonfinancial corporations based on the capital supplier relationship has declined due to the historical trends discussed above, the process of institutionalization of savings has placed a growing share of the ownership claims over larger corporations under the control of financial institutions, particularly the leading commercial banks. To what extent has this latter trend provided a significant basis for continuing financial control over the large corporations that dominate the American economy?

p. 71 David M. Kotz, Bank Control of Large Corporations in the United States

He elaborates further on the power of the mega banks and how it is used.

The financial control thesis runs counter to this [management] view. According to the financial control thesis, the managerial stratum remains what it was created to be: servants of the capitalists, although well-paid and influential servants. The basis of economic power is not expertise but ownership and control over abstract capital — that is, ultimate power resides with the bankers who are the major stockholders in and creditors of the modern large corporation. It is still a plutocracy.

Who are these bankers? The leading banks seem to be controlled primarily by the descendants of the great capitalists who earlier presided over the creation of the large corporation. For example, David Rockefeller, grandson of John D., stands at the helm of Chase Manhattan Bank. James Stillman Rockefeller, descendant of William Rockefeller and James Stillman, headed First National City Bank in the early 1960s. The Mellon family owned at least 29 percent of the stock of the Mellon National Bank, and R. K. Mellon was its Chairman in the middle 1960s.

It is not surprising that the wealthiest and most powerful capitalist operate through banks. Any particular industrial corporation may decline in the long run, under the impact of changing technologies and new products. A bank, on the other hand, is tied to no particular industry in the long run. The future of banking will become clouded only when that of capitalism itself does. Through a bank, a capitalist can shift his main sphere of investment over time.

A further reason why banks tend to become the centers of control under capitalism is that a capitalist who operates through a bank obtains access to other people's capital. J. P. Morgan rose to a position of power by combining the capital belonging to himself and his partners with that of the richer capitalists of England, who funneled their investments in United States railroads through Morgan's bank. Almost a century later the great commercial banks tap the capital not only of much of the capitalist classes but also a portion of the wealth of independent professionals and the working class, in the form of small checking accounts and pensions funds The Rockefellers and Mellons can thus control corporate empires of far greater worth than their own personal fortunes. Berle and Means were indeed correct when they forecast a growing separation of ownership and control. However, it has taken a form different from what they had expected. The managerial stratum has not expropriated the capitalists. Rather, a few of the capitalists have expropriated much of the remainder of their class and other classes as well.

pp. 148-9 David M. Kotz, Bank Control of Large Corporations in the United States

How did the American financial capitalist get to this lofty point in human society? They have indeed come a long way from the period of transition from mercantile capitalism, which emerged from feudalism and fattened itself on chattel slavery, to industrial capitalism, whose foundations were the power of steam, the innovation of the workshops of early industrial innovators, and the preeminence of wage slavery over chattel slavery.

Indeed, this transition was the real essence of the American Civil War of the mid-19th century, the need to get rid of the dilapidated agricultural market system based on the chattel slavery of Africans with the industrial slavery of wage slaves in factories and all the other arrangements that were prerequisite to the Industrial Revolution.

Thus we see that:

At the close of the Civil War the American economy was one of small, local enterprises. The railroad builders had already adopted the corporate form of organization, which, in a few decades, would facilitate the emergence of giant business enterprises of regional and even national scope. However, in 1865 even most railroads were still local corporations, each owning no more than a few hundred miles of track.

p. 24 David M. Kotz, Bank Control of Large Corporations in the United States

But it did not take long before all this changed. Historically speaking, the transformation came about almost in a twinkling of an eye. Again from Kotz's book:

The decades that followed the Civil War witnessed a rapid extension of the railroad system of the United States. Between 1865 and 1893 total railroad mileage grew more than five-fold, from less than 35,000 miles in the former year to 176,000 in the latter. The rapid increase in rail mileage was accompanied by the consolidation of small, local railroad corporations into great systems, beginning with Cornelius Vanderbilt's expansion of the New York Central Railroad, primarily by mergers, into a line stretching from the Atlantic seaboard to Chicago and west by 1889. During the years 1880 through 1888 nearly two-thirds of the railroad companies in the United States were absorbed by the remaining third.

Both extension and consolidation required financing. To raise the necessary capital the railroad companies made increasing use of the services of investment banks. By the 1880s the leading investment banks came to acquire a position of influence over the railroads, and representation of investment banks on railroad boards of directors became common.

p. 25 David M. Kotz, Bank Control of Large Corporations in the United States

The decades that followed the Civil War witnessed a rapid extension of the railroad system of the United States. Between 1865 and 1893 total railroad mileage grew more than five-fold, from less than 35,000 miles in the former year to 176,000 in the latter. The rapid increase in rail mileage was accompanied by the consolidation of small, local railroad corporations into great systems, beginning with Cornelius Vanderbilt's expansion of the New York Central Railroad, primarily by mergers, into a line stretching from the Atlantic seaboard to Chicago and west by 1889. During the years 1880 through 1888 nearly two-thirds of the railroad companies in the United States were absorbed by the remaining third.

Both extension and consolidation required financing. To raise the necessary capital the railroad companies made increasing use of the services of investment banks. By the 1880s the leading investment banks came to acquire a position of influence over the railroads, and representation of investment banks on railroad boards of directors became common.

p. 25 David M. Kotz, Bank Control of Large Corporations in the United States

And it hasn't stopped yet, despite a long history of absolute disasters and the contemporary dilemma in which it finds itself mired.

The secret to how this came about can be thought of as something similar to a short history of 20th century roots of modern American banks.

The rise of banker control had produced several individuals who were seen at the time as embodying the power of financial institutions…between 1910 and 1929 each of the four either retired or died. The men succeeding them as heads of their respective institutions did not possess the same degree of personal power and prestige...Did their passing undo the regime of banker control they had created, or did the system become institutionalized, losing its need for overwhelmingly powerful individuals to make it work?

To address the question one must look at the forces that affect financial control over the succeeding decades... Between 1915 and 1929 the United States went through a world war, a sharp but brief depression, and then a prolonged period of economic prosperity that culminated in several years of widespread financial speculation. Against this background there were a number of developments that affected the structure of financial control that had been built up in the decades before World War I.

Decline in Importance of Foreign Capital

During World War I, large amounts of foreign held American securities were liquidated. The United States emerged from the war as a long-term net creditor rather than a debtor. The international power of the New York banks was greatly enhanced by the War, with New York emerging as the world's banking center. However, henceforth European capital was a much less important factor in the financing of American business. Since the monopoly over European capital sources held by a few New York banks was one reason for their power, this development tended to reduce the relative power of such banks as Morgan and Company and Kuhn, Loeb and Company. However, Morgan and Company was no longer mainly a contact point between European capital and American railroads, as it had been just after the Civil War. It had long since developed domestic capital sources, and was able to adjust to the gradual decline in the importance of European capital with little relative loss of power. The Stillman-Rockefeller group, whose original source of capital was oil profits rather than European capitalist, may have gained relatively from this transformation.

pp. 41-2 David M. Kotz, Bank Control of Large Corporations in the United States

Thus we have the evolution of the powerful American financial capitalist. And as things stand now — although rather shakily — he who controls the US financial empire controls much of the world. Look at the massive amount of China's money loaned to the US by way of the US Treasury, if you don't believe it.

For in reality, whatever the merit of the opinions of Brazil, South Africa, India, Mexico, Russia and yes, even that of China, they are not likely to be heeded in the high councils of global finance such as the G20 meeting, because such meetings are not really the venues where real decisions will be made. They are public relations stunts, salves thrown to the world worried about the mishandling of our common affairs, in short, nothing more than window dressing to disguise the real decision making process.

It is a process for which the US financial capitalist and their allies are prepared to fight to the death in order to maintain their sole control. They have no intention of sharing decision making power for the global economy. For in the final analysis that is what it means to be the leader of the new world order. A goal that the US has held since the beginning of the 20th century, and in point of fact, something that had even existed in the minds of some even before the launching of the American Revolution, in a slightly less grandiose guise of course.

§ § §

At the heart of the global financial system are the mega banks of the world. What is the history of the mega banks? Where did all of this come from?

Well, it did not start in Europe first, but instead in the grain depositories of the regions of Dynastic Egypt and the Babylonian Temple of Ishtar, which besides serving the function of housing the priestesses of Ishtar and the venue of their rites of sacred "prostitution", generated an enormous amount of money in returns for the holy services provided by the priestesses. So, the Egyptians became a bank by the means of receipts of grain deposits used as money and the Babylonian bank form emerged from the enthusiasm for coitus with the priestesses of Venus.

However, Europe was not far behind, with Delos, Athens, Rome and other centers of early European civilization creating banks of their own.

Eventually grain and other commodities were pushed aside as the money form by gold, although silver continued to enjoy a role as specie for several centuries and in the early United States there was much support for a bimetallic system. However, for the most part gold became king.

This is what the Chicago Board of Trade (CBOT)'s Commodity Trading Manual tells us about the use of gold in relationship to the world's various national money forms.

The gold standard system in its pure form, specified that payments between countries be made in gold, either bullion or species (coins). This system worked until World War I when Britain suspended gold payments. Rising nationalistic interests prior to and during World War I created disruptions in international exchange and ultimately led to practical, if not theoretical, demise of the international gold standard. Financial chaos because of wartime inflation and business depressions continued and climaxed in the Great Depression…

In 1922 the US modified the pure gold standard with the gold exchange standard which allowed a nation to use both gold and US dollars for international settlements. The dollar became a reserve asset along with gold, due to a commitment by the US government to redeem the dollar in gold on demand.

[ Author's Note: In 1931 Britain came off the gold standard, and in 1933 Franklin Roosevelt delinked the dollar from gold and banned gold hoarding and the public export of gold bullion. The official price of gold was changed to $35 per ounce.]

By 1943, the anticipation of the severe economic and financial problems that would follow World War II, including inflation and payment of war reparations by Germany, forced the world's trading nations to the conference table to discuss separate proposals by the US, Great Britain, Canada and France. Compromises between the British and US proposals finally resulted in the Articles of Agreement of the International Monetary Fund (IMF), signed in July 1944 at Bretton Woods, New Hampshire

At the core of the Bretton Woods system was the idea that each member nation's currency would have a par value in relation to the gold content of the US dollar in 1944. The rights of member nations to draw on the IMF funds and the level of the contributions and voting powers would be based on quotas. This idea of fixed parities was central to the new monetary system and an outgrowth of the experiences of 1939 with the dreaded fluctuations of exchange rates. Bretton Woods called for the central banks of the world to keep the exchange rates of their currencies fixed in terms pf the dollar's gold content with variations ranging from plus or minus one percent, in practice, however, the central banks tended to keep even stricter margins of parity ranging from plus or minus ½ to 3.4 percent.

As long as there was confidence that the official rates of exchange would remain stable, all went smoothly. When the confidence declined, major movements of funds occurred in both the spot, or cash, and forward exchange markets. These movements involved heavy selling of weakening currencies in anticipation of a downward change in exchange rate - devaluation - and active buying of stronger currencies in anticipation of upward revaluation. The activity, to a great extent, represented efforts by businessmen to protect themselves against the risk of a decreased value in weakening currencies for payments they expected to receive and the risk of increase liability in strengthening currencies. Heavy speculative activity was also accused of exaggerating the crises.

The devaluation of the British pound sterling late in 1949 was followed immediately by devaluation of more than 20 other currencies. The readjustments achieved only a short-term easing of the problem. Another major crisis developed during 1951 and 1952, which was complicated by the tightness of basic industrial commodities during the Korean War. New pressures on the pound sterling and closely related Commonwealth currencies during 1955 and 1956 were intensified by the Suez Crisis. Tight domestic monetary controls, sales of oil interests in the US and support from IMF funds enabled the British to withstand the pressure on the pound and avert devaluation.

The major focus during the 1950s was on the monetary problems of the British pound; however, the French franc, the German Deutsche mark, and the Canadian dollar were also under pressure much of the time. The chief problem during most of the 1950s seemed to be the dollar shortage as most nations continuously tended to spend more than they earned in trade with North America. The gold and dollar reserves were believed to be in danger of depletion unless plugged by emergency controls in international trade and payments or by long-term loans or grants from the US. The preoccupation with the dollar shortage persisted until the 1960s even after the dollar and gold reserves of many nations began to show sustained growth, and the US dollar began to experience a slight balance-of-payments deficit. (A nation's balance of payments is an account of all payments made to and receipts received from other nations. A deficit balance of payment occurs when payments exceed receipts in value.) "In the 1960s, the lingering misconception of the dollar shortage of other nations was replaced by the reality of dollar glut and US deficits.

US balance-of-payments deficit fed by record US foreign expenditures in nearly every sector from military to tourism, continued to increase through the 1960s. In the spring of 1971 the US announced the imposition of anti-inflationary domestic wage and price controls, a dollar devaluation, and the suspension of the dollars convertibility to gold

During the following weeks, the exchange rates of the German Deutsche mark, the Canadian dollar, and the Japanese yen were allowed to float on international currency markers. After many decades of rigid efforts to restrict exchange rate fluctuations, transitional floating of rates now seemed to have become respectable. Following the devaluation, the major trading nations seemed to believe that it allowed too little room for fluctuations, leading ultimately to the need for abrupt, major realignments in currency values.

Under the Smithsonian Agreement in 1972, exchange rates were allowed to float within a broadened band of plus or minus 2.5 percent. The general principal behind the Smithsonian Agreement was that the broadening of bands would serve to ease temporarily the more deeply rooted problems. The belief gained acceptance that a new international monetary system must allow a flexibility of moderate fluctuations on a continuing basis to avoid periodic major disruptive realignments in exchange rates. In February 1973, with a balance-of-payments deficit approaching a then record $6 billion, the US announced a second devaluation of the dollar after several weeks of pressure on international currency markets. At the time, the value of the dollar was established at 1/42 ounce of gold. These values, however, were applicable only to transactions between central banks. Following the dollar devaluation, several other major currencies were allowed to float.

In 1973, there was intermittent turbulence in international exchange markets. By mid-year, the US dollar had declined between 9 and 18 percent, but later firmed against other major currencies. In December 1973, OPEC, the Organization of Petroleum Exporting Countries, announced a dramatic increase in oil prices. The relative strength of the dollar appeared to reflect the US ability to withstand the inflationary impact of rising oil prices better than some other oil-importing nations.

In July 1972, the IMF had formed the Committee of Twenty and charged it with developing a plan for major reform of the international monetary system. In successive years, there were meetings held in Washington, Nairobi, Kenya, Rome, and Paris. At a meeting in June 1974, the committee recommended that the Special Drawing Rights (SDR), which had been in use for some time, should become the principle means of international exchange, reducing the role of gold and other currencies. The value of the SDR was determined relative to a "market basket" of 16 currencies at 0.40 SDRs to the US dollar, with the provision that this valuation be reviewed in two years.

During 1975, major currencies continued to float. The primary European trading nations developed a plan, called the European "snake," to allow their currencies to fluctuate against the others within a tolerance of plus or minus 2.25 percent. (…some of the participants withdrew as early as June 1976)

In November 1975, a summit meeting of the Finance ministers of the IMF nations was held in Rambouillet, France. The major purpose was to call on member nations to follow prudent domestic economic policies. The summit advocated that each member nation be given freedom of choice in maintaining the value of its currency. Each nation was given the choice of independently maintaining the value of its own currency or pegging its value to the currency of another nation. Throughout 1975, there continued to be general uncertainty as currencies floated.

In January 1976, the Interim Committee of the IMF met in Jamaica and set plans for sales of gold from IMF reserves in order to reduce the role of gold in international exchange and more strongly establish the role of the SDR. The revenue derived from the IMF gold sales was to be used in part to establish a trust fund to aid less-developed countries in financing imported commodities.

During 1977, most major currencies continued to float fairly independently and there was generally an appreciation of the stronger currencies against the US dollar. Belgium, Luxembourg, Denmark, West Germany, the Netherlands, Norway, and Sweden continued to float their currencies according to the European "snake" plan; the United Kingdom, France, Ireland, and Italy abandoned the snake in mid-1976.

In 1977, the currencies of 44 nations were pegged to the US dollar, those of 14 nations were pegged to the French franc, and those of 9 were pegged to other major currencies. Nine countries pegged their currencies to either a composite market basket of currencies or the SDR.

During 1978, the IMF reiterated the need to reduce the role of gold in international exchange and there were continuous sales of IMF gold stocks. Despite these sales and other by the US Treasury, the free market price of gold continued to rise strongly, nearing $300 an ounce in December 1978. Gold prices continued to rise dramatically during 1979, topping $460 an ounce late in the year. In early 1980, free market gold prices soared, topping $840 an ounce, and then fell back to the $600 per ounce level amidst worldwide political and economic uncertainty. During the first half of 1981 gold prices dropped to the $400 range.

Part of the decline in the value of gold reflects the very high interest rates in the US that discouraged ownership of gold due to the high cost of storage. In addition, these high interest rates in the US, substantially higher than those in other Western nations, strongly encouraged foreign investments in interest bearing instruments denominated in dollars.

Since the end of 1978, the dollar has strengthened greatly against other major world currencies, reflecting, among other factors, the high interest rates in the US. Between the end of 1978 and the end of 1980, the dollar made gains of 22 percent, 19 percent 9 percent and 7 percent, respectively, against the British pound, German Deutsche mark, Dutch guilder, and French franc.

Futures trading in several foreign currencies provides hedging opportunities for multinational firms, banks, and currency dealers, as well as the opportunity for speculative profit. …"

p 286 - 90 Commodity Trading Manual , Chicago Board of Trade

So, we ask how does all this relate to the current global systemic morass, a crises of such proportions that the powers who were the very forces responsible for its existence and thus all the damage attributed to it, are reduced to calling a faux meeting of the G20 magnitude? As with everything, the first answers are found in history. Let us try to put this in general historical terms rather than financial and economic terms exclusively.

World War II and its aftermath marked the final victory of US financial capital over its sometimes allies and full time competitors in western Europe and Japan. It is actually a process that began under Woodrow Wilson. Wilson, who sought to exploit the weakness of Germany, the Austro-Hungarian Empire, Britain, Italy and France because of the enormous carnage and material destruction of the first world war, had what could only be called a grand plan.

Wilson's plan was to redesign the whole global capitalist system and replace the British, which at the time was the central power of the global financial system, with the United States.

To that end the Wilson administration first created a group called The Inquiry and tasked them with determining the parameters of a post-war world, including redesigning the borders of post war Europe and the development of essential points of the peace. These essential points became Wilson's famous Fourteen Points.

The Inquiry was a foundation element in the founding of the now highly influential Council on Foreign Relations.

This is what the CFR has to say about it forerunner beginnings:

IT ALL STARTED as an inquiry, indeed, "The Inquiry." To the select few who knew, this was the name of a working fellowship of distinguished scholars, tasked to brief Woodrow Wilson about options for the postwar world once the kaiser and imperial Germany fell to defeat. Through the winter of 1917-18, this academic band gathered discreetly in a hideaway at 155th Street and Broadway in New York City, to assemble the data they thought necessary to make the world safe for democracy.

Armed with The Inquiry's maps and the Fourteen Points the Wilson administration then launched a global advertising campaign to popularize its call for a Peace Conference. When the German state, faced with deteriorating war situation on all fronts, accepted the Wilson offer, the English and French, despite real misgivings, were obliged to accept the Peace Conference scheme, as the Wilson administration let it be known that the US would make a separate peace with Germany if they did not. Thus, Wilson was able to force the allies to the peace table. This is how a State Department agency describes the whole process:

Wilson's Fourteen Points, 1918

The immediate cause of America's entry into World War I in April 1917 was the German announcement of unrestricted submarine warfare, and the subsequent sinking of ships with Americans on board. But President Wilson's war aims went beyond the defense of U.S. maritime interests. In his War Message to Congress he declared our object "is to vindicate the principles of peace and justice in the life of the world." Wilson used several speeches earlier in the year to sketch out his vision of an end to the war that would bring a "just and secure peace," and not merely "a new balance of power." He then appointed a committee of experts known as The Inquiry to help him refine his ideas for peace. In December 1917 he asked The Inquiry to draw up specific recommendations for a comprehensive peace settlement. Using these recommendations, Wilson presented a program of fourteen points to a joint session of Congress on January 8, 1918. Eight of the fourteen points treated specific territorial issues among the combatant nations. Five of the other six concerned general principles for a peaceful world: open covenants (i.e. treaties or agreements), openly arrived at; freedom of the seas; free trade; reduction of armaments; and adjustment of colonial claims based on the principles of self-determination. The fourteenth point proposed what was to become the League of Nations to guarantee the "political independence and territorial integrity [of] great and small states alike." Wilson's idealism pervades the fourteen points, but he also had more practical objectives in mind: keeping Russia in the war by convincing the Bolsheviks that they would receive a better peace from the Allies; bolstering Allied morale; and undermining German war support. The address was immediately hailed in the United States and Allied nations, and even by Lenin, as a landmark of enlightenment in international relations. Wilson subsequently used the Fourteen Points as the basis for negotiation of the Versailles Treaty that ended the First World War. Although the treaty did not fully realize Wilson's unselfish vision, the Fourteen Points still stand as the most powerful expression of the idealist strain in American diplomacy.

In fact, Wilson was not able to convince the French or the British to accept the meat of his proposal for a new global order, so most of the points were either rejected or severely modified during the negotiation for the peace at Versailles. The proposal for the League of Nation was accepted by the other powers at the conference but because of Wilson's contempt for the power of the Republican-dominated senate, which had the Constitutional responsibility to accept or reject treaties, and who felt that Wilson had slighted them in the development and formulation of the plan for forming the League of Nations, it was rejected. That meant that the country that authored the proposal for the League did not join it.

In the end it proved to be a paper tiger, a sham, anyway, as demonstrated by the League's inaction and the actions of some League members during the attack on Ethiopia by fascist Italy, it is doubtful that it would have done much better even if the US had agreed to become a member, as the US administration in power at the time, Franklin Roosevelt's, did nothing on its own of substance to stop the Italian fascist aggression.

Notwithstanding Wilson's defeat at the Paris Peace Conference, the inevitable demise of Britain as the leading financial center of the world provided all the openings required for the US to assume the mantle itself. As we have already noted, in 1922 the US dollar was the de facto world foreign reserve capital. So, the groundwork done by the Wilson administration had provided the US a very healthy running start.

President Franklin Roosevelt, who was a junior member of the Wilson Navy department, faired much better with his plans to supercede Britain as the dominant capitalist power. This was partly because of the incomplete successes of the Wilsonian efforts, but essentially because of the inevitable fall out of the war itself.

The British economy never fully recovered from the First World War. Indeed they were deeply in debt and had to liquidate a great deal of its financial position in America, giving up the bulk of its US security holdings in an effort to finance the war.

Up until the First World War, Britain's pound sterling had been the foreign reserve currency for the global capitalist economy based on the gold standard. But Britain could no longer afford this so they jettisoned the gold for sterling agreement and thereby lost their position as the dominant global currency.

The Britain which Roosevelt faced was not the Britain of the Victorian or Edwardian era, it was the strapped Britain of the post-WWI era, it was a wrecked financial economy.

And Roosevelt, always the consummate wheeler-dealer, devised just the right approach to milk America's WW I ally. His administration proposed the Atlantic Charter as the basis for a possible US-UK alliance against Nazi Germany. The US knew that Britain was on the ropes, France had already been knocked out of the war (in June 1940) except for the Free French, which were basically nothing more than a department of the British armed forces, as they were totally dependent on Britain for everything and Britain herself was still broke and could not afford to pay for the articles, ranging from food to armaments that she needed from the US. The German Luftwaffe were a great menace and would remain so until May of 1941 when the Germans were preparing to attack the Soviet Union (Operation Barbarossa, June 22, 1941). The British sea lanes were under constant attack by U-boats further exacerbating her supply situation, and indeed it is only because of the German leadership's decision to hold back the Wehrmacht at Dunkque, that the British Army had not been destroyed. So, the UK situation was very dark indeed. Is there any wonder that the British Prime Minister, Winston Churchill, was desperate to affect an alliance with the US, even if it meant that it would mean giving up the British exclusive right to trade with British colonies around the world. Which, indeed it did.

On August 12, 1941, Churchill and Roosevelt signed the Atlantic Charter, which was announced to their publics on August 14 after the two leaders had returned from the sea-borne meeting (Roosevelt sailed on the USS Augusta, and Churchill on the HMS Prince of Wales).

Here are the points of the agreement between the two states:

  • no territorial gains sought by the United States or the United Kingdom
  • territorial adjustments must conform to the people involved
  • people have right to choose own government
  • trade barriers lowered
  • there must be disarmament
  • there must be freedom from want and fear
  • there must be freedom of the seas
  • there must be an association of nations

Note in particular the point "trade barriers lowered" which marked the end of British hopes to ever regain its previous position as the dominant capitalist, since that was essentially a function of her exploitation of the colonies, and now she would no longer have that exclusive right. As with the signing of the agreement, the US had forced them to relinquish the exclusive domination of its colonial empire. Thus US capital was free to move in and since it was better armed, better capitalized, had a larger population, and had not suffered the kind of infra-structural damage during the war and so on, there was no way Britain would be able to compete with the American juggernaut. This is the reality of intra-capitalist competition for the re-division of stolen territories and markets.

Also the freedom of the seas had real commercial implications as it meant that, in theory at least, no power could attempt to limit the movement of another or exclude them from international waters. The clause which spoke about choosing one's government, was calculated to encourage anti-colonial agitation which would hurt the British much more than the US, since the US had very few "traditional" colonies, and as we know, the British were heavily dependent on the colonies she held at gunpoint. And the last point calling for an association of nations, led to the United Nation Organization (UNO). The US, of course did not hesitate to join the UNO, as all of the major political leadership readily understood how this would advance the US's plans for global domination and thus the Roosevelt administration had accomplished what Wilson could not do with the League of Nations (even though by the time the UNO actually was inaugurated Roosevelt was dead) and we all know how well the US has used the United Nations in the case of the Congo, in the instance of the creation of Israel, in the war against Democratic Korea and numerous other less than democratic actions.

All and all it was a grand coup de grâce for the American financial empire and the blow that finished the British Empire.

When the US entered the war in December 1941, it was the most powerful capitalist economy in the world. As it not only had avoided the cost of the initial two years of the war, it also made enormous profits supplying the combatants (by the way, some US firms actually produced both lethal and non-lethal products for the Germans…as well as the anti-Nazi alliance). Indeed, it was really the capital generated by the war that began to dampen the harsh effects of the Great Depression, initially by the war profits and then with the entrance of the US into the war, by the "employment" of so many people in the war itself and not just the war industries, and the control that the government took over domestic spending and supply in the name of prosecuting the war. All this meant a command economy with fewer unemployed and greater all around production - plus the markets and resource sources that opened up to the US because of the war.

The Charter made her situation even sweeter as we see here:

The conference took place from August 9-12, 1941, and resulted in the Atlantic Charter, a joint proclamation by the United States and Britain declaring that they were fighting the Axis powers to ensure life, liberty, independence and religious freedom and to preserve the rights of man and justice.

The Atlantic Charter served as a foundation stone for the later establishment of the United Nations, setting forth several principles for the nations of the world, including -- the renunciation of all aggression, right to self-government, access to raw materials, freedom from want and fear, freedom of the seas, and disarmament of aggressor nations.

Note in particle the mention of access to raw materials…what more could a monopoly capital state want, open access to other states' markets and an open invitation to exploit the raw material of the world.

By the time the war ended the US was the undisputed leader of the capitalist world and immediately commenced a new form of war, the cold war, which was used to justify hot conflicts in the world such as in Korea and Vietnam for example. This fight against communism was the major faux rationale for the US wars and interventions throughout the world for the next several decades, until the demise of the USSR. But we are getting ahead of ourselves a bit. We must back up to July 1944, the time of a very important meeting in Bretton Woods, New Hampshire.

Just prior to the end of the Second World War, there was a conference of the allied forces to determine the nature of the global economic and financial system in the post World War II era.

The main forces at this meeting were the US, UK and the USSR. The US was easily able to carry a further weakened Britain along its desired path. Indeed, the British had already signaled their acquiescence by sending Maynard Keynes to the meeting as its main delegate. Keynes had argued that the British and French should accede to the US position at the Versailles Peace Treaty, because he knew that the US was the only capitalist country with the resources needed to rebuild the rest of global capitalism; he also believed that the insistence that Germany pay reparations would lead to another world war, so for him that was another thing the US should pony up for. As the First World War was followed by a second, again involving the Germans, and the US had assumed even greater financial power in the capitalist orbit, Keynes was deemed as the best option to represent the British by the UK's capitalist leadership.

Out of the Bretton Woods conference we got the World Bank and associated elements and the International Monetary Fund. Both these agencies were to play a major part in the new criminal exploitation of the globe on behalf of the US and to a lesser degree its main partners-competitors, Britain, Japan, Germany, and France, in particular. The structures of all the Bretton Woods creations were constructed in such a manner that the US would have de facto control. In effect they were designed to give the US nearly absolute dictatorial power. Although the quota system and other means of administration, directorship and management could theoretically lead to the US being outvoted, everyone knew that this was a highly unlikely, if not a totally implausible circumstance.

When the American economy recovered from the depression under the stimulus of war expenditures in the early 1940s, financial institutions continued to find their service in little demand for financing industry. The reason was that the Federal Government played the major role in financing expanded war production…During the war the Federal Government became the major supplier of capital to private business, directly financing approximately two thirds of the plant expansion related to the war…

Commercial banks, whose assets were at a level in 1939 that barely exceeded the 1929 level, grew rapidly during the war. By 1945 their assets were approximately 2.4 times as great as in 1939. However, their growing assets did not coincide with growing role in financing nonfinancial corporations. Bank loans to business expanded only slightly during the war years, and by 1945, 60 percent of commercial bank assets were in government securities. For all type s of financial institutions, Treasury securities. Accounted for over half of total assets by the end of 1945, compared to only one-fifth in 1939.

While commercial banks and investment banks declined as financiers of private businesses over the fifteen year period, one type of financial institution greatly increased in importance in this function: life insurance companies… Life insurance companies had become the major providers of long-term debt capital to corporations.

pp. 56-8 David M. Kotz, Bank Control of Large Corporations in the United States

Kotz also says:

A study of "interest groups" in the American economy was undertaken for that year [1939] by the United States National Resources Committee. This study defined eight interest groups, which are groups of nonfinancial corporations and financial institutions that are closely allied. Leading financial institutions were associated with seven of these interest groups: Morgan-First National, Rockefeller, Kuhn Loeb, Mellon, Chicago Cleveland, and Boston. Out of a sample of he 200 largest nonfinancial corporations, ranked by assets, these seven groups were found to include 98 corporations representing 66 percent of the assets of those 200 corporations. The Morgan-First National group alone included 13 industrial, 1 retail trade company, 12 utilizes, and 19 railroads, comprising one-third of the total assets of the sample

…hearings disclosed that investment banking remained highly concentrated. Between January 1934 and June 1939, six New York investment banks managed 57 percent of all registered issues sold by investment bankers, twenty New York investment banks managed 78 percent of such issues during that period... Morgan, Stanley and Company alone managed 23 percent.

p. 59 David M. Kotz, Bank Control of Large Corporations in the United States

Gold and Money

Africa has a huge treasure trove of gold, unfortunately most of it is used for our enemies rather than ourselves...nevertheless, with the right political actions, we will one day reclaim our gold and all our other commodity wealth.

One of the main functions of gold in the world is to act as money. It fulfills this role either directly in the forms of species (coins) or bullion, or as a reserve backing paper money certificates or receipts.

Thus, understanding gold's role is important to our understanding of financial evolution in the world and the economic twists and turns in the world. This is true from both a historical and contemporary point of view.

Understanding the role of gold as the fundamental money form and the rise of modern western financial structures, especially the banks, is critical. This is how the Commodity Trading Manual of the Chicago Board of Trade explains it.

In more simpler economic times, barter — the trading of one kind of goods for another — served as a means of transacting business. The self-sufficiency, isolation, and more cohesive social structures of earlier cultures minimized the need for money. As the social structures developed, particularly with the rise of the nation-state, the need for money as an objective measure of value and medium of exchange quickly served the function of money well due to its scarcity, high value, durability, and its ability to be minted into recognized and accepted coinage.

With the development of the gold coin came the need to provide for its safekeeping. Depositories were developed for the exclusive storage of gold. When an individual deposited his gold he would receive a receipt that he could later present in demand for the gold.

These receipts soon took on the character of money itself since they represented a bearer claim on the underlying gold deposit. For example the holder of a depository receipt for gold might give it to a creditor in payment for goods and services. The creditor could then present it to the depository for payment in gold. The backing or guarantee for these receipts was 100 percent gold.

Experience soon taught depository caretakers that it was unlikely that all depositors would simultaneously present their receipts in demand for gold. Therefore, it was unnecessary for them to keep 100 percent of the gold as backing for the receipts, and they could issue additional receipts or notes in excess of actual gold deposits. Issuance of the additional notes, in fact, represented loans upon which the depositories could earn additional income in the form of interest payments from borrowers to whom the notes were issued. Thus, the notion of interest payments for the use of another's money is nearly as old as money itself.

Gradually, gold depositories took on the characteristics of banks with governments handling the responsibility of minting coins. In 1816, England established the gold sovereign as its primary unit. By the mid-1800s, the banking systems of many nations were based on the gold standard. In 1873 the US Coinage Act placed the US dollar on the gold standard, and from 1879 until 1933, the dollar was defined as being worth 1/29 ounce of gold. Under this system, paper money was backed by gold and depositors could exchange dollar bills for it. The banks would maintain fractional amounts of the total gold deposits on reserve against the contingency of withdrawals and loan out the remainder in currency. This gold would, in turn, be deposited in other banks, and the process would continue so that the total amount of money in circulation soon was larger that the amount of gold in reserve. The banks, acting as a group, were responsible for this expansion of the money supply. The government's role was that of converting dollars to gold.

pp 261-2, Commodity Trading Manual , CBOT

With a financial system, based on gold reserves, and managed by unscrupulous scoundrels, there will always be problems

Nineteenth century US banking methods were confronted with, if not the cause of, periodic financial panics. A panic was sometimes followed by a bank failure, in which the bank refused to pay gold to its depositors, at the time, the US Treasury had some control over the reserve requirements of banks, but its authority was inadequate to prevent frequent panics and bank failures.

p. 262 Commodity Trading Manual , CBOT`

The constant panics and bank failures had a critical role to play in the creation of the Federal Reserve System. When these crises occurred the government had to turn to powerful banking capitalists to bail out the system with an infusion of additional capital. Of these individuals the one who was most influential was J. P. Morgan. For example, in the Panic of 1907 he organized a consortium of bankers to bail out the US banking system. This was not the first time he had "rode" to the rescue. Some government officials quickly recognized that the power this gave Morgan was a danger as it was increasingly obvious that he was more effective in keeping the system going than the government itself. So, the financial magnates and the government agreed to create a semi-government agency, really an agency that only appeared to be governmental, as in point of fact, it was not (and is not to this day) and thus was created — the quasi-government agency called the Federal Reserve System.

The Fed is dominated by the country's major banks, although in addition to representatives of the major banks there are a minority of non-banking corporate leaders involved. However, these representatives are drawn from businesses that are multinational corporations directly allied to the big banks.

So, there is no chance of the US power structure allowing competitors and in some cases, serious, potentially deadly, even, competitors to decide or even formally address the global crisis caused by the US's fiscal, financial and commercial malefeasance. It is a non-starter from the word go.

The crisis at issue is essentially a function of the speed and storage capacity of digitalization. That is, the swindles can be done in temporal and spatial dimensions so great and varied that those who do not have similar capacities and the prerequisite understanding have no chance of coping.

Digitalization has made capitalist swindles a vast hustle way beyond the dreams of the most farsighted capitalist pioneer. This is the reality of the swaps, repackaged and parceled mortgage scams and all the rest that has dominated the world's attention for the past five years or so, and particularly in the last two years.

It is the child of unprincipled, in many cases outright criminal, actions, done at lightning speed (the speed of digitalization) and played out over the whole globe. It is the mother of all scams and hustles.

But this system of speculation, hedging and related actions is not the only little trick up the capitalist sleeve that benefits from digitalization. The old hustle of manipulating bank money reserves is also vastly enhanced by the capability of acting almost at the speed of a click and the ability to traverse vast expanses of the globe.

Combined with monopoly capitals' position of power in the world which allows them to bypass and circumvent any constraints that local market structures may wish to apply, but cannot because of the relative global power equation between the local market and the global monopoly markets, the monopoly capitalist has a free run of the world.

The Bretton Woods conference put the final details in place, and afterward, the world had a new British Empire, that is the US Empire. But just like the British it was not able to hold on to the myth that they could function in a world were others could indeed cash in their dollars for gold, while engaging in the construction and maintenance of a social welfare system and a campaign of numerous wars, such as Vietnam.

By 1971 Nixon had arbitrarily stopped exchanging gold for the dollar and the capitalist world at large no longer had the right to turn in the mass of dollars they held for gold.

With the US's official declaration of the demise of the gold standard, the International Monetary Fund continued the US campaign against gold relative to the role of the dollar. Undoubtedly to facilitate the tantalizing opportunity to manipulate, to employ speculative tactics and otherwise plunder the forex, the foreign exchange market.

However, the post World War II period was not all sunshine and roses for American capital. It experienced several devastating catastrophes such as the Truman price inflation, related to the demand from corporate America that price controls be lifted after the end of World War II. Although not wage controls, one result being the national railroad strike. Truman used the threat to immediately draft all the strikers into the army as a leverage to break the strike.

Of course we must not forget the US war against Korea's north and in reality the interest of the whole peninsula (fought under the guise of the UN). This war was started by the US in the hopes of bolstering the US economy from war profits, this is well documented by Albert Norden in his book, Thus Wars Are Made.

There were other important US interventions, notably in Greece and Turkey. Added to these military interventions we must include the Marshall Plan. These kinds of policy actions were at the heart of the US capitalists efforts inside Europe to combat socialism.

Further, the US manipulation of its creation, the United Nations (UNO), to impose the illegal state of Israel on the world.

The zionist criminals in alliance with the British and French, with the behind the scenes guidance of the US, launched a brutal attack on Egypt aimed at nullifying that African state's possession of the Suez Canal.

The alliance of US-Israel-France-UK caused great carnage in that vital part of Africa. In the process they massacred many Egyptian people.

The US was forced to call off their junior partners in this criminal empire, telling the UK, France and Israel that they had to stop their aggression — an aggression that the US knew about all along — when the USSR threatened them with nuclear war if they did not stop.

Likewise the capitalist aggression against the Congo, the murder of Lumumba and untold number of Congolese patriots, the murderous overthrow of the Ghanaian government of Nkrumah by the western capitalist, were signature actions of the monopoly capitalists.

US financial problems accelerate

The general US domestic economic collapse of the sixties plus the failed attempt to use the Vietnam war as a financial tool, a war which sparked revolts in the US itself and inside the units of the US army in Indochina, were two of the most significant consequences of these policies.

The general global turmoil against the US policy in Indochina turned the majority of the people of the world against the predatory war. In the US it led to what Nixon and Kissinger said was the eve of civil war. Related to all this was the infamous enemies list and of course the Watergate crisis. All this was framed within the context of the ongoing struggle of the African and indigenous peoples living in the US. The Black Power and related phenomena are clear historical examples of this, as were the Chicano Moratorium, the Puerto Rican independence movement and the reemergence of American Indian resistance.

The continued global tension caused by the US client state of Israel came to a head again in the 1967 aggression against the Arab people and the extreme conditions resulting from the continued oppression of Africans in the US, the Caribbean and the continent, which resulted in an armed response throughout the African world. The 1973 oil boycott in response to more zionist war making, scandals such as those of the Michael Miliken led to the Drexel Burnham and Lambert junk bonds swindle and the weakness in banks generally.

After the crisis over the war in Indochina, focused primarily on the Vietnamese front, the consequent turmoil all over the world in opposition to the war, including inside the US and amongst US troops in Vietnam and the Watergate fiasco, the Black Power and the American Indian, Chicano, Asian American, Puerto Rican independence and other movements, such as the white left anti-war movement and the related counter culture movement, American society was in shambles. Thus, the powers running the US decided to try a new approach and elected the bible thumping, I don't need a car, I will walk during my inauguration — whose mother celebrated his election by going to a Ku Klux Klan mass rally — ex-Navy nuclear energy engineer and Governor of Georgia as the president, James Carter. Carter's administration saw economic stagflation and recession, a large oil price increase as a result of the US attempts to stifle the Iranian revolution, hoping to prevent it, just as the CIA had overthrown Iran's progressive government in the 50s, which culminated in the Iranians refusing to sell oil to the US and the embarrassing failure of the US military to successfully pull off a would-be rescue of the US hostages held in its embassy as a consequence of the hostile American policies towards the theocratic nationalist state founded by the Khomeini-led revolution.

Carter's — I am a godly populist anti-malaise charade — failed to fool the world, but did succeed in further dismantling the US social welfare system.

As a follow up, the capitalist rulers tried Reagan's Hollywood style imitation of a rejuvenated cold warrior state. This "B-actor" put his administration's version of the fascistic monetary (trickle down) policy in place and steped up military aggression.

It was this administration that really set the ground work for the era of neo-liberal policies, that is Structure Adjustment Policies, SAP, and related actions of the IMF and World Bank, domestic deregulation and the general economic war on the poor, that is, the exploited and oppressed people.

However, the Reagan Hollywood-style approach failed to halt the downward spin of the country. In his administration the US saw a slew of major banking disasters.

After the domestic oil glut, artificially created by the US in response to the Iranian oil embargo, there was a collapse in the Oklahoma banking system which saw the demise of 139 banks including Penn Square, the big enchilada of the affected Oklahoma banks.

Here is the FDIC's description of the Penn Square failure:

The failure of Penn Square Bank, N.A. (Penn Square), Oklahoma City, Oklahoma, still ranks as one of the Federal Deposit Insurance Corporation's (FDIC's) most publicized, most difficult, and most colorful bank resolutions. Penn Square failed July 5, 1982, with $470.4 million in deposits and $516.8 million in assets. By aggressively making large and speculative loans, especially to the oil and gas industries, the bank had grown from $62 million in assets in 1977 to $520 million in assets by mid-1982. Penn Square then sold majority interests in those loans to other banks (in the form of loan participations), but retained the responsibility for servicing the entire loan amount. At its failure, Penn Square was servicing approximately $2 billion in loans.

Of the $470.4 million in deposits, only about $207.5 million were insured. The bulk of uninsured deposits were funds of other banks. After extensive discussions with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Bank (Federal Reserve), the FDIC made the decision to pay off the insured deposits of Penn Square. A payoff was deemed to be necessary to resolve the failing institution at the least cost to the deposit insurance fund. As a result, Penn Square became the largest bank failure in the FDIC's history in which uninsured depositors suffered losses.

Penn Square, formed in 1960, operated as a small, one-office retail bank with a separate drive-up facility in an Oklahoma City shopping mall. In 1975, Bill Jennings, a former president of Penn Square, created a holding company to purchase the bank with $2.5 million borrowed from another Oklahoma City bank and little equity. The following year, Penn Square formed a loan department for oil and gas loans. From the beginning, the bank failed to document loans properly. In addition, it based repayment
on collateral value rather than on the ability of the borrower to repay, and collateral documentation deficiencies were common.

Moreover, although the OCC set lending limits on the amount of credit that could be extended to any one customer, when one of Penn Square's oil and gas customers wanted to borrow more than that limit, Penn Square would make the loan and sell a participation to another bank. In 1978, Penn Square began selling oil and gas participations to Continental Illinois National Bank and Trust Company (Continental), Chicago, Illinois. In 1979, when the Shah of Iran was forced out of his country and fears of oil shortages created panic buying and a surge in oil and gasoline prices, Penn Square began selling participations in oil and gas loans to other large banks in the country, primarily Seattle First National Bank (Seafirst), Seattle, Washington; Northern Trust Company (Northern), Chicago, Illinois; Chase Manhattan Bank (Chase), New York, New York; and Michigan National Bank (Michigan National), Lansing, Michigan. As early as May 1977, the OCC examination of Penn Square noted concentrations of credit to oil and gas companies. Subsequent OCC examinations in April 1980 and March 1981 found low capital, excessive low-quality loans, inadequate liquidity, inexperienced staff, increasing problem loans, and management problems. Penn Square officials signed an OCC agreement in June 1980 pledging improved lending practices and the maintenance of 7.5 percent capital, but no changes in lending practices were noticeable.

Penn Square's external auditors became concerned with the level of loan reserves and gave the bank qualified opinions in December 1977 and March 1981.4,5 In 1981, the Southwest saw a huge increase in commercial loans, particularly in the oil and agricultural industries. In April 1981, oil prices peaked at $36.95 a barrel and then began to fall. Recessions in oil-consuming nations, conservation efforts, and the sale of oil by some Organization of Petroleum Exporting Countries (OPEC) members in excess of their quotas all combined to reduce oil prices in world markets. The demand for oil rigs reached its peak in the Southwest. As oil prices continued to decline during 1982, profits for the oil industry in the Southwest slowed.

The Federal Reserve maintained tight monetary policies, and interest rates remained high; therefore, Penn Square paid higher interest rates on deposits, particularly on large certificates of deposit (CDs).

In early 1982, in response to the decline in oil prices, Penn Square's participant banks began pressing Penn Square to clean up the loan participations. Penn Square had sold loan participations to 53 different participant banks; Continental alone held $1 billion of those participations. Although Chase, Seafirst, and Northern stopped buying participations, Penn Square's new external audit firm presented the bank with a clean audit opinion in March 1982. Interest rates remained high; the Federal Reserve discount rate was 12 percent in January 1982.
I n May 1982, rumors of problems at Penn Square began circulating, which caused a deposit runoff that forced the bank to rely increasingly on brokered funds. Brokered funds at the bank, which in January had been about $20 million, reached $150 million by May 1982.

As a result of its April 1982 examination, the OCC requested Penn Square to raise capital by $7 million. The OCC also demanded that Penn Square charge off $10 million in loans. By June 28, 1982, it was apparent that Penn Square would fail. All that was left to decide was how to handle the failure.

p. 1- 3, "Penn Square Bank, NA", FDIC

(Of course as bad as the Penn Square mess was, it was overshadowed by one of its partners, Continental, as we will touch on briefly a little later. But for our specific purposes here it is sufficient to consider the little excerpt from the official records given above. )

To get an idea of the kinds of money these failures caused the taxpayers, take a look at the data on FDIC payoffs to this twelve bank sample of failures just prior to the Penn State catastrophe:

Name Location Amount of Payoff (in thousands) Date
Village Bank Pueblo West, Colorado 5,059 01/26/79
First National Bank of Carrington Carrington, North Dakota 11,461 02/12/80
The Des Plaines Bank Des Plaines, Illinois 46,269 03/14/81
Carroll County Bank Huntingdon, Tennessee 8,236 04/30/82
Citizens Bank Tillar, Arkansas 6,723 06/23/82
Watkins Banking Company Faunsdale, Alabama 1,660 07/24/78
Bank of Enville Enville, Tennessee 3,468 06/16/79
The Farmers State Bank Protection, Kansas 5,038 09/21/79
Bank of Lake Helen Lake Helen, Florida 4,229 01/11/80
The Citizens State Bank Viola, Kansas 1,872 06/04/80
Southwestern Bank Tucson, Arizona 4,749 09/25/81
The Bank of Woodson Woodson, Texas 3,168 03/01/82

p 4, "Penn Square Bank, NA", FDIC

And yet, there were even bigger losses to follow. The 1984 Continental Illinois National Bank and Trust Company failure was the biggest in history at the time and remained in that position until replaced by the savings and loans institution WaMu (Washington Mutual) in September of 2008. Note:

Washington Mutual is by far the biggest bank failure in history, eclipsing the 1984 failure of Continental Illinois National Bank and Trust in Chicago, an event that presaged the savings and loan crisis. IndyMac, which was seized by regulators in July, was a tenth the size of WaMu.

WaMu is seized in largest bank failure in U.S. history

found on the Star Minneapolis-St. Paul, Minnesota

And here is a good piece of information from US News and World Report web site on IndyMac, which became number 3 right behind Continental and WaMu, number 1. The good folks at US News and World Report also provided us with some useful historical information to boot

The 10 Biggest U.S. Bank Failures
The latest, IndyMac, will move to No. 3 on the list
By Jill Konieczko
Posted July 15, 2008
With an estimated $32 billion in assets, IndyMac Bank of Pasadena, Calif., which federal regulators seized Friday, is poised to become the third-largest bank failure in American history. Here is a list of the top 10 failures, based on total assets, according to Federal Deposit Insurance Corp. data covering 1934 through 2007.

  1. Continental Illinois National Bank and Trust, Chicago (1984)
    Total assets: $40.0 billion
  2. First Republic Bank, Dallas (1988)
    Total assets: $32.5 billion
  3. American S&LA, Stockton, Calif. (1988)
    Total assets: $30.2 billion
  4. Bank of New England, Boston (1991)
    Total assets: $21.7 billion
  5. MCorp, Dallas (1989)
    Total assets: $18.5 billion
  6. Gibraltar Savings, Simi Valley, Calif. (1989)
    Total assets: $15.1 billion
  7. First City Bancorporation, Houston (1988)
    Total assets: $13.0 billion
  8. Homefed Bank, San Diego (1992)
    Total assets: $12.2 billion
  9. Southeast Bank, Miami (1991)
    Total assets: $11.0 billion
  10. Goldome, Buffalo (1991)
    Total assets: $9.9 billion

Source: Federal Deposit Insurance Corp.

Bank Failure Facts

According to the FDIC, from 1934 through 2007, there were only two years with no bank failures, 2005 and 2006.

The year during that period with the most bank failures was 1989, when 534 banks closed their doors.

During the savings-and-loan crisis (1986-95), 2,377 banks failed, representing 67 percent of the 3,559 bank failures from 1934 through May 2008. At the peak of the crisis (1988-1989), 1,004 banks failed, a rate of one failure every 1.38 days.

Bank Failures by Decade

2000-2007: 32
1990-1999: 925
1980-1989: 2,036
1970-1979: 79
1960-1969: 44
1950-1959: 28
1940-1949: 99
1934-1939: 312

Source: FDIC Historical Statistics on Banking, 1934-2008

For more information on Continental's failure go to

For Washington Mutual go to:, for IndyMac go to

Indeed you can find all recorded bank failures at the FDIC site or at least you should be able too.

As you can see from the data provided by US News and World Report, there were a lot of failures in the last twenty years of the 20th century, totaling 2961 in all. This covers a period that includes part of the Carter, all of the Reagan, all of the George H W Bush and most of the Clinton administrations. After tapering off a bit in the beginning of the 21st century, it has returned with a vengeance as contemporary news clearly demonstrates.

The general policy of Reagan was continued by the successor administration of the first Bush, (Infamous for his actions as the CIA lead in the overthrow of Nkrumah, his part in the use of cocaine sales to fund the Contra army fighting the Nicaraguan people and the President who initiated the first war against Iraq. There is wide spread belief that Bush played a part in the Kennedy assassination)

One group of activists in Iceland applied to have him arrested when he visited that states, " for participation in war crimes, crimes against humanity, crimes against the peace, and crimes against internationally protected persons. "

Here is a short statement detailing their charges against Bush the father:

George H.W. Bush is charged of initiating a war of aggression against Panama in 1989, in breach of international law and the UN Charter, constituting a crime against the peace, and of ordering the kidnapping of Panama's President Noriega in violation of the Convention on the Prevention and Punishment of Crimes Against Internationally Protected Persons. George H.W. Bush is furthermore charged for his command responsibility for the multiple war crimes committed by US forces in the Gulf War in 1991, including the policy of deliberately bombing civilian targets and the massacre of soldiers hors combat. His command responsibility for these crimes is equivalent to those of other heads of states who have been charged, indicted and convicted for international crimes, including torture, war crimes, crimes against humanity and genocide. George H.W. Bush is also charged for inducing an uprising of Kurds and Shi'ites in Iraq during the Gulf War and then ordering US forces to withhold aid from those who risked the uprising, thus leaving unarmed uprising masses unprotected against Saddam Hussein's brutal forces. By such policies, he knowingly facilitated the commission of crimes against humanity by Saddam Hussein. He is finally accused for conspiring in imposing deadly economic sanctions against the people of Iraq, with the intent to harm the well-being, health and lives of the Iraqi civilian population, with foreknowledge of the likely consequences and with the subsequent knowledge of the sanctions' devastating consequences. Such conduct is considered to be a crime against humanity under international customary law. About one million persons are believed dead as a result of the economic sanctions, thereof half a million children below five years of age.

It was after Bush's first term that the capitalist rulers imposed the Clinton administration on the world. It effectively destroyed what was left of the insufficient social safety, especially those elements added during the Johnson administration as a trick to defuse the African and general internal revolts hammering America in the midst of their war of aggression against the people of Vietnam and Indochina generally; and continued the Bush military aggression against Iraq, bombing it daily and imposing a genocidal embargo against that country. It was this administration that engaged in war to dismember and destroy sovereign Yugoslavia and was directly implicated in the Rwanda Burundi mass killings and the mysterious deaths of the Abiolas. In fact many people belief that the Nigerian presidential hopeful Chief M.K.O. Abiola was poisoned by the Clinton official Susan Rice, who is now in the UN representing the Obama regime, when she accompanied Under Secretary of State Thomas Pickering, and US Ambassador William Twadell on an official visit while Abiola was still in prison.

Besides the continued prosecution of the war and war-like foreign and domestic policies of the first Bush presidency, the Clinton administration's negative achievements also included the continuation of the so-called welfare reform legislation. It was during this administration's shift that the Gramm-Leach-Bliley Financial Services Modernization Act, was enacted. As you know many people believe this legislation was responsible for driving the last nail into the coffin of the global financial and economic system by essentially gutting the Glass Seagal Act. And one has to say that those who believe such have good reason to do so, notwithstanding the fact that even with the protection of the Glass Seagal Act, the financial mobsters of world capitalism were running wild and create havoc and destruction across the face of the globe. However, with the provisions of the Gramm, Leach and Bliley bill the general socio-economic destruction of the globe's peoples, went from mach 2 speed to mach 20 speed.

Clinton's administration did not use the power of the bully pulpit to block the Gramm, Leach and Bliley bill, nor did it make any effort to educate the people about the deadly consequences of the legislation. Perhaps it is because Clinton did not really oppose it.

George H. W. Bush's son George W followed Clinton as the titular head of the subsequent US administration. We all know what energy George W put into his efforts to prove his parent's well-known preference for his brother, Jeb Bush, as their choice for the successor emperor in the Bush line, was in error. He was determined to show them that he could "lynch and burn", rape and maraud with the best of them. Indeed, George W., if anything, took the warmongering of his father to even higher heights of insanity, if that is possible, at least the Bush the First reign listened to their servant Powell's advice that they should not try to invade and occupy Baghdad in course of the first US attack against the Baath party state of Iraq

Not only was/is George B. a cruel, sadistic, cowardly socio-path posturing as a sort of 21st century Teddy Roosevelt or James Polk in foreign policy, his domestic policy was equally as fascist. Taking his guidance and lead from the Cheneys, and PNAC kooks of the world, he managed to concoct a legacy of two major wars, neither of which were necessary policy decisions, as Iraq was completely innocent of possession of WMD, nor did it have any links with Al Queda. The attack on Afghanistan had nothing to do with the mysterious destruction of 9-11-2001, but had everything to do with the desire of the lead energy companies wanting to control that critical geopolitical area, which is why the Bush 2 administration made no effort to follow the international law.

The statutes of international law gives every state the support of the international legal system in the bringing to justice those who perpetrate terrorist attacks and/or in air piracy. Thus, when the majority of states and political forces of the world sent messages of support to the US government after the 9-11 incidents, including the Palestinian Authority, Cuba, the American Indian Movement, the US not only would have the legal backing of its nominal allies in the west and elsewhere, but even many of those political forces that are generally aligned against US policies. This made it very simple to organize a global police action to apprehend and bring to justice the real perpetrators of the crimes of September 11th, by means of police personnel using paramilitary force if need be. But, the Bush 2 reign rejected this out of hand, undoubtedly because they were not really interested in apprehending the true culprits (which is understandable since there is ample evidence that the hand of the zionists and powerful elements in the US itself that was behind the incidents nor do they appear to be all that concerned with combating the darling of both the Carter and Reagan-Bush power cliques, Bin Laden). By all indications there were only interested in using it as a pretext for their long advocated wars in South West Asia and the Arab regions (what is called colloquially the Mid-East).

It was this administration that presided over the coup against Aristede's government and the people of Haiti. As if all that wasn't enough harm to civilization, they presided over the Katrina crimes, which some Pan-Africanist activists called a cyber lynching, which continues to this very day. Katrina and other actions of the Bush 2 circle were great gifts to the extreme white racist right in the world and was openly celebrated by the indiscriminate murders of Africans in that area, without even one of the perpetrators ever facing even the semblance of a trial.

And as icing on this devil's cake, courtesy of the more erratic wing of the monopoly capitalists, they managed to accelerate the degradation of the environment and the decay of the global financial, commercial, fiscal and economic system, with the active or impassive assistance of the other part of the capitalist party in America, the Democrats.

In short, Bush the Second's reign was nothing other than a complete disaster replete with barbaric wars, unmitigated acts of racism, ecological destruction and general global systemic collapse.

Now the capitalist have given us Obama, who to the disappointment of many who hoped he would mark a change, is gleefully continuing the same policies, with different accessories and nuances of the Reagan-Bush-Clinton-Bush tradition. The Obama dictatorship has assimilated the foreign, financial and general socio-economic policies of the predecessor administrations to the letter. Now we see why Obama was so effusive in his glowing praise for Reagan. And does all this not explain what is happening at the moment?

Certainly it does, as this is precisely what is happening to the world today with large banks and other financial service entities running all the key sectors of modern society, including the national and derivative governments, in the lead capitalist country, the US, and her allies/competitors; and also, through the devices of neo-liberal globalism (more accurately known as neo-colonialism) dominating and outright running much of the rest of the world. This is done by the power of their national institutions, such as their military sectors, and through their control of multilateral organizations such as the World Bank, WTO, IMF, the Bank for International Settlements, the United Nations Organization and so forth.

It will be a daunting, but doable, task for the world to extricate itself from the clutches of the neo-colonialist system. Although the neo-colonialist look invincible, in reality they are not. The weak point of their system is that it is totally dependent on our lack of resistance. As soon as we get properly educated and organized, properly equipped, mobilized and deployed, the glory days of monopoly financial capital and the individual financial kingpins of western society will find themselves up against the forces of their own national populations, as they will no longer have the booty stolen from Africa, Asia, Latin America, and the parts of Europe that are neo-colonized, to bribe them with. Then those who created the living hell that the capitalist financial system, and particularly that part which is directly identified as citizens of the US, have created for most of the people of the earth will have to justify themselves before these same people they have victimized so cruelly.

The mega-rich mobsters will have to answer for their blood stained life of private jets, mega mansions, ultra haute couture, tropical island resorts, gold plated life-style before the courts of the people, not the rubber stamp courts they have created, sanctioned and own lock, stock and barrel. Then the world will see honest justice, handed out by earnest servants of the majority of the world's peoples in an authentically democratic system. Any punishment the culprits will receive for their actions would be the consequence of the world and history they have so gleefully made for themselves. Perhaps that will give some of them solace when they do come face to face with the angry majority of society and are indicted by the stench of their actions and condemned the evidence of history. Sooner or later this class will have to come to terms with the consequences of what they have done. I would advise them to make it sooner rather than later, it will strengthen the impact of their pleas for understanding and leniency in any future judicial processes.

The "Hand Writing" is indeed on the wall. No one knows when or how the bough of monopoly capitalism will break and the disgusting modern day offspring of feudalism, slavery and mercantile colonialism will fall. But they will and then everybody will know that the emperor is indeed naked and that monopoly capitalism has been traveling down the "road to hell." as the Czech Prime Minister, Mirek Topolanek was quoted in reference to Obama's plan to end the global crisis. " Obama heads into G-20 talks, NATO challenges", Bridget Johnson g-20-talks-nato-challenges-2009-03-31.html

As Osagyefo Kwame Nkrumah shows us, this reckoning could be evolutionary, which would require eons upon eons, or it can be revolutionary. That is it can be a function of our self-education, self-mobilization and self-organization as discrete but tightly united cultures within the context of the common human culture, coming together in the interest of the survival and prosperity of each continental/national group and of humanity generally.


Pan-African Perspective is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to


© 1997 - 2017 Pan-African Perspective. All rights reserved.