imc indymedia

Los Angeles Indymedia : Activist News

white themeblack themered themetheme help
About Us Contact Us Calendar Publish RSS
latest news
best of news




A-Infos Radio

Indymedia On Air

Dope-X-Resistance-LA List


IMC Network:

Original Cities africa: ambazonia canarias estrecho / madiaq kenya nigeria south africa canada: hamilton london, ontario maritimes montreal ontario ottawa quebec thunder bay vancouver victoria windsor winnipeg east asia: burma jakarta japan korea manila qc europe: abruzzo alacant andorra antwerpen armenia athens austria barcelona belarus belgium belgrade bristol brussels bulgaria calabria croatia cyprus emilia-romagna estrecho / madiaq euskal herria galiza germany grenoble hungary ireland istanbul italy la plana liege liguria lille linksunten lombardia london madrid malta marseille nantes napoli netherlands nice northern england norway oost-vlaanderen paris/Île-de-france patras piemonte poland portugal roma romania russia saint-petersburg scotland sverige switzerland thessaloniki torun toscana toulouse ukraine united kingdom valencia latin america: argentina bolivia chiapas chile chile sur cmi brasil colombia ecuador mexico peru puerto rico qollasuyu rosario santiago tijuana uruguay valparaiso venezuela venezuela oceania: adelaide aotearoa brisbane burma darwin jakarta manila melbourne perth qc sydney south asia: india mumbai united states: arizona arkansas asheville atlanta austin baltimore big muddy binghamton boston buffalo charlottesville chicago cleveland colorado columbus dc hawaii houston hudson mohawk kansas city la madison maine miami michigan milwaukee minneapolis/st. paul new hampshire new jersey new mexico new orleans north carolina north texas nyc oklahoma philadelphia pittsburgh portland richmond rochester rogue valley saint louis san diego san francisco san francisco bay area santa barbara santa cruz, ca sarasota seattle tampa bay tennessee urbana-champaign vermont western mass worcester west asia: armenia beirut israel palestine process: fbi/legal updates mailing lists process & imc docs tech volunteer projects: print radio satellite tv video regions: oceania united states topics: biotech

Surviving Cities africa: canada: quebec east asia: japan europe: athens barcelona belgium bristol brussels cyprus germany grenoble ireland istanbul lille linksunten nantes netherlands norway portugal united kingdom latin america: argentina cmi brasil rosario oceania: aotearoa united states: austin big muddy binghamton boston chicago columbus la michigan nyc portland rochester saint louis san diego san francisco bay area santa cruz, ca tennessee urbana-champaign worcester west asia: palestine process: fbi/legal updates process & imc docs projects: radio satellite tv
printable version - js reader version - view hidden posts - tags and related articles

"The Market is not a Safe Bank" by Helmut Schmidt

by Helmut Schmidt Saturday, Oct. 11, 2008 at 9:20 AM

This crisis was avoidable. The fact that American investment banks are not subject to any normal bank supervision is scandalous. Financial transactions must be subject to rules and security standards. The heavier the traffic, the more rules and regulations are needed.


On the world financial crisis. Only international rules can tame the bank managers who are out of control

By Helmut Schmidt

[This article published on: Zeit Online 40/2008 is translated from the German on the World Wide Web,]

No one likes being a messenger of disaster. Nevertheless the financial crisis in the United States is dangerous. It is the most serious bank crash since 1929. While it is a crisis on the financial market, there is a danger of a momentous destruction of the real world economy. A great crisis of trust could occur going far beyond financial management. That cannot be excluded.

Though the situation cannot be compared with the world depression of the 1930s, it is serious enough. It needs a surgical operation and long-term therapy.

The main culprits sit in New York. But these persons are not the ones who suffer the crisis. Many managers with high incomes lose their jobs but go home with their golden parachutes. A lack in long-term perspectives and a moral deficit are manifest on Wall Street.

Politicians follow the Wall Street managers as culprits. The politicians in Washington did not see what was wrong. They did not understand the development. They have a partial re4sponsibility for lack of insight and vigor rather than for a moral deficit.

The arrogance of the government in Washington is crucial. They know everything better. Whether in Iraq, Georgia, the turbulences on the financial market or the hurricane in New Orleans, this government knew everything and did little. It swam along in the profit-soaked euphoria that spread from Wall Street to the North American nation and England and from there over the whole world to the Far East. The president and his cohorts were filled by the ideology that the market accomplishes everything.

This crash was avoidable – if people had done what was vital and had not been half-hearted: introduced tighter controls, issued security and transparency-rules for financing instruments and established a stronger monitoring of financial institutes, banks, funds, financial conduits and the like. The fact that American investment banks are not subject to any normal bank supervision is scandalous. This can only be understood historically. The investment banks were originally stock brokerage firms that dealt with securities and were subject to securities monitoring. In reality, they acted the big shot with the help of credits – like many hedge funds.

Who suffers in this situation now? The first ones to suffer were the employees of these banks who became jobless. Secondly, millions of Americans have suffered grievously for months. They try to sell their houses that are heavily laden with mortgage debts and quickly lose value. Thirdly, consumers suffer because prices soar owing to the enormous money creation by the central banks. To a lesser extent, this will also affect Europeans and even the Chinese. Fourthly, those suffer who will probably become unemployed in the real economy. Fifthly, the taxpayers suffer who at the end will pay the bill for rescuing the banks.

The crisis of trust will expand if the political and economic actors tell citizens of America and Europe that they have things under control. Short-term, medium-term and long-term measures are crucial.

In the short-term, a collapse of the financial system must be prevented. Cooperation between the Federal Reserve Bank in Washington, the European central bank (EZB), the Chinese, Japanese and Russian central banks and the leadership of OPEC is necessary. An immediate summit meeting of the heads of these central banks and the finance ministers in these countries would be helpful, not of the heads of state who hardly understand this.

In the medium-term, one of the most important imperatives is removing the imbalances in the world economies that first made the past system possible and now enlarge the danger of a worldwide economic crisis. The American balance of payments deficit has been high for years because Americans do not save but are accustomed to indebtedness. This is true for individual citizens and for the US state. The basic optimism of American society is behind this. The US balance of payments deficit is between five and six percent of its gross domestic product. Since at least a half decade ago, American society has allowed foreigners, Chinese, Japanese, Europeans and Russians to pay for its investments and its consumption.

On the other side, promissory notes have accumulated in the hands of these foreigners, IOUs of the American state, low-interest government bonds. The Chinese could make policy with these securities by threatening to sell them. They probably won’t do this. They could buy raw materials and are already doing this in Africa and Central Asia. The Chinese could even be the rescuers of American banks by buying up failed investment banks and funds and so supporting the American system. Americans do not want to see this and try to prevent this.

Financial transactions must be subject to rules and security standards. When Charles Lindbergh flew over the Atlantic in 1927, he did not need any traffic regulations. He didn’t need to pass any pilot exam; no authority could take down his aircraft. He was entirely alone. He did not need any alternative rules. No one prescribed his flying altitude.

Nowadays hundreds of airplanes fly over the North Atlantic. Therefore traffic regulations are necessary. There are all kinds of security standards for every airplane, every motor and all electronics. Tests for pilots must be repeated. Obviously there are alternative international rules. The heavier the traffic, the more rules and regulations are needed. This is also true for the many banks, hedge funds and the like traded internationally today. However there are relatively few international regulations for them that are legally enforceable.

The world financial market and the world economy need monitoring rules and security standards valid worldwide. Someone must design a system of financial monitoring for all financial institutes – including funds and private equity companies – and for all financing instruments.

In the past, the classical financing instruments were called shares or loans, mortgages or bank credits. These instruments were managed by financial institutes named Deutsche Bank or Kreisparkasse Pinneberg and were subject to bank supervision. A share had to be approved by the stock exchange board. For that, businesses presented a prospectus and were examined. An auditing firm according to the law scrutinized a stock company. If something misleading was approved, those responsible would be imprisoned. So-called financial derivatives have replaced the old instruments today. In the US, these financial derivatives are not subject to any review. No one goes to jail!

In the long term, all financial institutes and financing instruments must be monitored according to the same principles. No new army of overseers is required. The same international monitoring rules must be followed. This is crucial. Americans cannot fulfill this task alone. Europeans must join in, Chinese, citizens of India, Russians and the governments of Dubai and Riad. Everyone must receive a mandate. The summit conference of finance ministers and central bank chiefs that I stimulated could resolve: the International Monetary Fund (IMF) should make a draft. There is enough independent expertise. The IMF should present the draft in the course of the next two years. The European governments together should press for this.


A regulation should prohibit any credit to an institute that legally settles on an island without a functioning financial supervision and a tax authority. These control-free islands must be dried up. Their air must be taken away! It is no accident that the majority of the 9000 investment funds that exist in the world have their legal home in one of these financial islands. They evade supervision and criminal justice. It is grotesque that respected bankers carry out massive financial transactions on these islands in the Caribbean!

Can such a worldwide monitoring of the financial markets really be achieved? The likelihood for that is not very great. Americans and Brits resist this. Maggie Thatcher can rise from the dead and explain to the English people the markets should be left in peace. Therefore I am not very optimistic about the chances in the present crisis. Still the attempt must be made. If nothing happens, the worst banking crisis since 1929 could expand into a world crisis as in the 1930s.

Report this post as:

Local News

Change Links September 2018 posted S02 10:22PM

More Scandals Rock Southern California Nuke Plant San Onofre A30 11:09PM

Site Outage Friday A30 3:49PM

Change Links August 2018 A14 1:56AM

Setback for Developer of SC Farm Land A12 11:09PM

More problems at Shutdown San Onofre Nuke J29 10:40PM

Change Links 2018 July posted J09 8:27PM

More Pix: "Families Belong Together," Pasadena J02 7:16PM

"Families Belong Together" March, Pasadena J02 7:08PM

Short Report on the Families Belong Together Protest in Los Angeles J30 11:26PM

Summer 2018 National Immigrant Solidarity Network News Alert! J11 6:58AM

Watch the Debate: Excluded Candidates for Governor of California M31 5:20AM

Change Links June 2018 posted M28 7:41AM

The Montrose Peace Vigil at 12 Years M22 8:01PM

Unity Archive Project M21 9:42AM

Dianne Feinstein's Promotion of War, Secret Animal Abuse, Military Profiteering, Censorshi M17 10:22PM

CA Senate Bill 1303 would require an independent coroner rather than being part of police M10 9:08PM

Three years after OC snitch scandal, no charges filed against sheriffs deputies M10 8:57PM

California police agencies violate Brown Act (open meetings) M02 8:31PM

Insane Company Wants To Send Nuke Plant Waste To New Mexico A29 11:47PM

Change Links May 2018 A27 8:40AM

Worker-Owned Car Wash on Vermont Closed A27 5:37AM


lausd whistle blower A11 6:58AM

Website Upgrade A10 10:02AM

Help KCET and UCLA identify 60s-70s Chicano images A04 8:02PM

UCLA Luskin: Casting Youth Justice in a Different Light A02 6:58PM

Change Links April 2018 A01 6:27PM

More Local News...

Other/Breaking News

Antrhopocène, le grand effondrement S19 9:53AM

Creative Destruction Hack Diamonds Windows/iOS/Android - Creative Destruction Generator S19 12:51AM

Abolir l'économie S18 11:18AM

The Dictatorship of Corporations S17 5:26PM

18 Lethal Consequences Of Hunting S17 3:13PM

Paraphysique de l'outplacement déontologue S15 6:51AM

Creative Destruction Hack Mod Generator S15 3:49AM

Shopping du bashing S14 8:42AM

After Lehman Brothers, Experts Say Global Financial Crisis Can Happen Again S13 8:28PM

“Animaniacs in Concert!” Starring Voice Legend Rob Paulsen S12 9:30PM

Probabilités de fin d'humanité S12 6:49AM

Florida Area of Migrant Farmworkers Denied Right to Construct Health Clinic near NaplesCIW S11 2:57AM

Propagande de virus, virus de propagande S10 7:34AM

Steer clear of work morality! S09 12:10PM

Sweatshop Lodge Ceremony Continues in US Fed Prisons Led by Inmates S08 6:17PM

Paraphysique de l'origami S08 7:11AM

The Shortwave Report 09/07/18 Listen Globally! S06 11:23PM

August 2018 Honduras Coup update S06 12:28PM

Du réussissement putréfié S06 10:55AM

Brett Kavanaugh Filled The 5th Circuit With Execution Judges S06 6:14AM

Log S06 4:25AM

Augusta Georgia Woman Gets 5 Year Prison Sentence for Writing About Russians Crime Acts S05 8:29AM

Paraphysique de contextualité S05 8:29AM

Crisis Regulation in Global Capitalism S03 3:39PM

Ex-voto de réification S03 10:24AM

Please Oppose Warmonger, Execution and Torture Supporting Bush Operative Brett Kavanaugh A31 10:45PM

Paraphysique d'exploitation occultation A31 10:24PM

Ryan Zinke Is Charging Taxpayers For A Trophy Hunters' Council A31 2:10PM

More Breaking News...
© 2000-2018 Los Angeles Independent Media Center. Unless otherwise stated by the author, all content is free for non-commercial reuse, reprint, and rebroadcast, on the net and elsewhere. Opinions are those of the contributors and are not necessarily endorsed by the Los Angeles Independent Media Center. Running sf-active v0.9.4 Disclaimer | Privacy