Global Economic News
Iceland's Stand Against Inter-Alpha Group Reverberates
April 12 (EIRNS)Iceland's stand against the bankrupt Inter-Alpha Group banking system is reverberating through Europe, especially Ireland, Portugal, and Greece, among those who want to fight the European Union's economic dictatorship. On April 10, the Icelandic population, for the second time in 14 months, decisively defeated a proposal that the small country pay more than $5 billion to British and Dutch bankers who lost their money in the speculative gambling spree that crashed in October 2008.
A European Parliament faction, the Confederal Group of the European Left-Nordic Green Left, is arranging to send a delegation to Iceland. This faction includes the Irish Sinn Fein, the German Die Linke (Left) party, the Greek Synaspismos party, the Communist Parties from France and various East European countries, and the Danish People's Movement Against the EU.
Britain's Guardian posts a commentary by Aditya Chakrabortty, entitled, "Iceland broke the rules and got away with it," making the point that Iceland's "No" vote is being heard in Ireland and Portugal.
"Reykjavik now serves as a very different kind of parable, of how to minimize the misery of financial collapse by ignoring economic orthodoxy. And in those other broke European economiesfrom Dublin to Athens to Lisbonpoliticians and voters are starting to pay attention. After its three biggest banks85% of the country's financial systemfailed in the same week, Iceland did two remarkable things. First, it let the banks go under: Foreign financiers who had lent to Reykjavik institutions at their own risk didn't get a single krona back. Second, officials imposed capital controls, making it harder for hot-money merchants to pull their cash out of the country.
"These policies were not just controversial; they represented a two-fingered salute to the polite society of academics and policymakers who normally lay down the laws on economic disaster management."
He compares this to Ireland's government guarantee it gave the banks in 2008, which has bankrupted the country.
"A reverse Robin Hoodtaking money from the poor and giving to the rich," is how Anne Sibert, a member of the Central Bank of Iceland's monetary policy committee, described the Irish policy to Chakrabortty.
While things might be difficult in Iceland, he notes, they are not nearly as bad as in Ireland.
Pointing to the fact that the Iceland message is being heard in Ireland, he cites newly elected Dail (Irish parliament) Independent Stephen Donnelly, who said the "Icelandic example is beginning to attract interest in the Dail and in the media.
"An Icelandic politician, Lilja Mósesdóttir, was in Ireland last week and was interviewed by Vincent Browne, the Irish equivalent of Jeremy Paxman" [a TV newsman and interviewer on BBCed.]. Mósesdóttir resigned from the Left-Green Party over the government's paying off the British and Dutch governments and also the government's IMF-dictated policy. Her hard-hitting interview demonstrated how the mass strike in Iceland overthrew the government's policy.
And on Portugal, he cites Lisbon journalist Joana Gorjão Henriques, that newspaper columnists were using Iceland's case as an example that Portugal, Greece, and Ireland should followmake an alliance and say to the EU that they won't pay the debt.
By contrast, the Irish Times in its lead editorial, "Iceland Says No To Payback Vote," writes that Iceland is not a model. While quoting Iceland President Grimsson saying, "The leaders of other states and international institutions will have to respect this expression of national will," and that those pressing for a referendum in Ireland "will gain heart from this result," they also emphatically support simply renegotiating the bailout package "within the EU-IMF framework."
Make Deutsche Bank Pay For Its Frauds?
April 16 (EIRNS)Germany's leading bank, Deutsche Bank, was exposed (along with Goldman Sachs) in U.S. Sen. Carl Levin's (D-Mich.) subcommittee report for recklessly pushing worthless mortgage-backed securities to investors. The U.S. Senate Permanent Subcommittee on Investigations (SPIS) said the bank had wittingly pushed high-risk collateralized debt obligations (CDOs) that would help cause the United States' worst economic collapse since the Great Depression.
"Our investigation found a financial snake pit rife with greed, conflicts of interest and wrongdoing," said Senator Levin while presenting the 639-page report, which documents how the bank assembled a $1.1 billion CDO fund known as Gemstone 7, then filled it with low-quality assets that its top CDO trader cynically referred to as "crap" and "pigs" that needed to be sold "before the market falls off a cliff."
"Deutsche Bank lost $4.5 billion when the mortgage market collapsed, but would have lost even more if it had not cut its losses by selling CDOs like Gemstone," the report said. "Both Goldman Sachs and Deutsche Bank underwrote securities using loans from subprime lenders known for issuing high-risk, poor-quality mortgages, and sold risky securities to investors across the United States and around the world. They also enabled the lenders to acquire new funds to originate still more high-risk, poor-quality loans," the report found.
The fraudulent methods exposed in the Levin Report, are of the same type used by Deutsche Bank in many cases where it sold worthless paper to deluded clients, and this greedy trick was exposed in a landmark ruling by the Supreme Court of Germany on March 22, when the court ruled that the bank had consciously defrauded the Ille Paper Service firm with swap arrangements, and must therefore compensate the firm for its losses. There are 16 more such cases, involving both firms but also several municipalities in Germany, lined up for a ruling at the Supreme Court, plus numerous other cases before lower courts. The Levin Report's targetting of Deutsche Bank has received broad coverage in the German media, and will increase the spirit of firms and municipalities to step up the fight the banksters.