Reprinted from www.libertylobby.org, home of The SPOTLIGHT archive
Corrupt Banks Identified
By Martin Mann
While the Clinton administration and congressional leaders call for a crackdown on money laundering, there is no agreement as to how to tighten the statutory curbs on outlaw "private banking," thanks to the "boss of bosses" in this vast financial underworld -- Alan Greenspan, chairman of the Federal Reserve Board.
"There is no question that Greenspan is the key figure in the creeping criminalization of our payments system," said Dr. Alan Milinkovich, a former U.S. treasury enforcement official, now a private consultant on Wall Street.
"He has condoned -- on occasion even introduced -- the tainted practices corrupting the financial services industry, from countenancing deceptive accounting standards to churning billions in drug profits through the Federal Reserve system," Milinkovich pointed out.
That system, as SPOTLIGHT readers may already know, is made up of three principal components. At the grass roots, the network of 12 regional Federal Reserve banks, run by private financiers and businessmen, is tasked with serving the banking industry in their territory. Over them sits the Board of Federal Reserve Governors -- seven presidential appointees who deal with policy questions and regulatory oversight. Finally, there is the Federal Open Market Committee (FOMC), a mixed panel made up of the seven governors and five regional Federal Reserve bank presidents. The FOMC meets periodically to debate -- and decide -- what to do about the nation's money supply, interest rates and other macroeconomic issues.
That, at least, is the official version. What Fed Chairman Greenspan and his organization of powerful economic en forcers -- who usurp the authority of high public office while being owned and controlled by private bankers -- do in reality is less well known.
That is because the Fed "enjoys privileges extended to no other agency in Washington," said William Greider, auth or of a major book on the system.*
The Fed operates in airtight secrecy without congressional supervision or public accountability. "No other agency of government, not even the Central Intel ligence Agency, enjoys such privacy," Greider marveled.
The usage of this prominent author, a former Washington Post correspondent, is revealing. Even Greider, a perceptive critic of the system, tends to talk on occasion as if the Fed were one of the "other agencies" of government.
But the Fed is not a government agency. It is a singularly privileged and secretive coordinating center of the private financial services business.
Greider notes that the Fed likes to depict the economic subculture of banks and allied institutions Greenspan dominates as a well-ordered, open environment.
That is not the case, Greider said. The financial system is not as neatly laid out "as an accountant's static balance sheet ... it works like a fantastically complicated labyrinth of pipes and storage tanks and boilers, with pressure valves and plumbing and auxiliary pumps, all elaborately interconnected."
Inside this serpentine system flows the financial wealth of the nation, "back and forth, through many channels and tanks, always seeking higher returns," that is, fatter profits, Greider concluded.
The fattest profits of the financial services business are to be found in money-laundering, a recent congressional probe discovered to its surprise.
The Senate Permanent Subcommittee on Investigations headed by Sen. Susan Collins (R-Maine) began hearings on the dirty-money deals in No vember 1999. But the probe was called off after two days when senators were shocked to hear testimony implicating Wall Street banks in a huge cash-wash that routinely converted trillions of tainted dollars. (See The SPOTLIGHT's front-page report on Dec. 6, 1999, for more details.)
The hearing started as an investigation of just how Citibank, the giant Wall Street money-center, came to launder more than $100 million in drug payoffs for the family of former Mexican Presi dent Carlos Salinas.
But the testimony of banking executives revealed more than the lawmakers had reckoned with. The largest U.S.-based banks, led by Chase Manhattan, the Rockefeller dynasty's financial flagship, routinely laundered tens of billions of dollars into deeply disguised false-front accounts around the world without questioning their origin.
Their explanation was that this was not "money laundering." It was "private banking."
Cash-washing on such a huge scale was inevitably done through the Federal Reserve system, the congressional investigation discovered. When Citibank took in millions of dirty drug dollars from the Salinas clan, it booked the loot -- falsely -- as clean deposits and sent them on to the Federal Reserve Bank in Atlanta to be added to its reserves.
When, perhaps a week later, it required fresh currency, Citibank simply drew on its surplus Fed reserve account. After deducting its lucrative "fees" and "royalties," Citibank transferred the narcotics nest egg of the Mexican ex-president's family to false-front Swiss ac counts, where they were eventually discovered by authorities only by accident.
However, the Salinas account, totaling a little more than $100 million, was "one of the smallest our private banking unit handled," a Citibank executive testified. It was merely an insignificant drop in the tide of tainted billions laundered by Wall Street banks through the Fed system. Frightened by the enormity of the abuses they had uncovered, they terminated the hearing -- just when it got interesting
Now, in a new attempt to discourage massive money-laundering -- or, at least, to make a credible pretense of doing so -- the Clinton administration is urging Congress to impose tighter controls on the financial markets.
The bill proposed by Treasury Secre tary Lawrence Summers would designate locations known to be heavily involved in masked money-management as "High Intensity Money Laundering and Related Financial Crime Areas," or HIFCAs.
Once a HIFCA hotspot is identified in the U.S., it will become the target of a stepped-up interagency drive to investigate and prosecute anyone found dealing in dirty cash.
But according to a list compiled last month by the General Accounting Office (GAO) the watchdog arm of Congress, when it comes to dealing in dirty money, the worst offenders are Israel, Russia, Ukraine and Mexico.
When the Mexican payments system collapsed in 1994, Greenspan rushed some $30 billion from the Fed's own closely held slush fund to save Mexico's banks from going belly up.
A year and a half after this bold bailout -- which Greenspan launched over the objections of Congress and behind its back -- the three largest Mexican money-center banks the Fed had rescued were indicted in the U.S. on drug-money laundering charges.
In less dramatic circumstances, Green span has intervened at least three times in the early 1990s to help stabilize Israel's currency and payments system with emergency loans.
The International Monetary Fund (IMF), under fire for incautiously having lent Russia and Ukraine billions which were promptly stolen and laundered offshore, is complaining more and more loudly that these dubious disbursements were made only "under heavy pressure from the American Treasury and Federal Reserve," as former IMF Managing Director Michel Camdessus put it recently.