Larry Summers and the Secret "End-Game" Memo

[seemslikeadream]

Larry Summers and the Secret "End-Game" Memo

Thursday, August 22, 2013

By Greg Palast for Vice Magazine

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn't believe it.

The Memo confirmed every conspiracy freak's fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3% unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears.

The Treasury official playing the bankers' secret End Game was Larry Summers. Today, Summers is Barack Obama's leading choice for Chairman of the US Federal Reserve, the world's central bank. If the confidential memo is authentic, then Summers shouldn't be serving on the Fed, he should be serving hard time in some dungeon reserved for the criminally insane of the finance world.

The memo is authentic.

To get that confirmation, I would have to fly to Geneva and wangle a meeting with the Secretary General of the World Trade Organization, Pascal Lamy. I did. Lamy, the Generalissimo of Globalization, told me,

"The WTO was not created as some dark cabal of multinationals secretly cooking plots against the people…. We don't have cigar-smoking, rich, crazy bankers negotiating."

Then I showed him the memo.

It begins with Summers’ flunky, Timothy Geithner, reminding his boss to call the then most powerful CEOs on the planet and get them to order their lobbyist armies to march:

"As we enter the end-game of the WTO financial services negotiations, I believe it would be a good idea for you to touch base with the CEOs…."

To avoid Summers having to call his office to get the phone numbers (which, under US law, would have to appear on public logs), Geithner listed their private lines. And here they are:

Goldman Sachs: John Corzine (212)902-8281
Merrill Lynch: David Kamanski (212)449-6868
Bank of America, David Coulter (415)622-2255
Citibank: John Reed (212)559-2732
Chase Manhattan: Walter Shipley (212)270-1380

Lamy was right: They don't smoke cigars. Go ahead and dial them. I did, and sure enough, got a cheery personal hello from Reed–cheery until I revealed I wasn't Larry Summers. (Note: The other numbers were swiftly disconnected. And Corzine can't be reached while he faces criminal charges.)

It's not the little cabal of confabs held by Summers and the banksters that's so troubling. The horror is in the purpose of the "end game" itself.

Let me explain:
The year was 1997. US Treasury Secretary Robert Rubin was pushing hard to de-regulate banks. That required, first, repeal of the Glass-Steagall Act to dismantle the barrier between commercial banks and investment banks. It was like replacing bank vaults with roulette wheels.

Second, the banks wanted the right to play a new high-risk game: "derivatives trading." JP Morgan alone would soon carry $88 trillion of these pseudo-securities on its books as "assets."

Deputy Treasury Secretary Summers (soon to replace Rubin as Secretary) body-blocked any attempt to control derivatives.

But what was the use of turning US banks into derivatives casinos if money would flee to nations with safer banking laws?

The answer conceived by the Big Bank Five: eliminate controls on banks in every nation on the planet – in one single move. It was as brilliant as it was insanely dangerous.

How could they pull off this mad caper? The bankers' and Summers' game was to use the Financial Services Agreement, an abstruse and benign addendum to the international trade agreements policed by the World Trade Organization.

Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas. The new rules ginned-up by Summers and the banks would force all nations to accept trade in "bads" – toxic assets like financial derivatives.

Until the bankers' re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives "products."

And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.

The job of turning the FSA into the bankers' battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.

Bankers Go Bananas

Why in the world would any nation agree to let its banking system be boarded and seized by financial pirates like JP Morgan?

The answer, in the case of Ecuador, was bananas. Ecuador was truly a banana republic. The yellow fruit was that nation's life-and-death source of hard currency. If it refused to sign the new FSA, Ecuador could feed its bananas to the monkeys and go back into bankruptcy. Ecuador signed.

And so on–with every single nation bullied into signing.

Every nation but one, I should say. Brazil's new President, Inacio Lula da Silva, refused. In retaliation, Brazil was threatened with a virtual embargo of its products by the European Union's Trade Commissioner, one Peter Mandelson, according to another confidential memo I got my hands on. But Lula's refusenik stance paid off for Brazil which, alone among Western nations, survived and thrived during the 2007-9 bank crisis.

China signed–but got its pound of flesh in return. It opened its banking sector a crack in return for access and control of the US auto parts and other markets. (Swiftly, two million US jobs shifted to China.)

The new FSA pulled the lid off the Pandora's box of worldwide derivatives trade. Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation. Ecuador, its own banking sector de-regulated and demolished, exploded into riots. Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim–and the continent is now being sold off in tiny, cheap pieces to Germany.

Of course, it was not just threats that sold the FSA, but temptation as well. After all, every evil starts with one bite of an apple offered by a snake. The apple: The gleaming piles of lucre hidden in the FSA for local elites. The snake was named Larry.

Does all this evil and pain flow from a single memo? Of course not: the evil was The Game itself, as played by the banker clique. The memo only revealed their game-plan for checkmate.

And the memo reveals a lot about Summers and Obama.

While billions of sorry souls are still hurting from worldwide banker-made disaster, Rubin and Summers didn't do too badly. Rubin's deregulation of banks had permitted the creation of a financial monstrosity called "Citigroup." Within weeks of leaving office, Rubin was named director, then Chairman of Citigroup—which went bankrupt while managing to pay Rubin a total of $126 million.

Then Rubin took on another post: as key campaign benefactor to a young State Senator, Barack Obama. Only days after his election as President, Obama, at Rubin's insistence, gave Summers the odd post of US "Economics Tsar" and made Geithner his Tsarina (that is, Secretary of Treasury). In 2010, Summers gave up his royalist robes to return to "consulting" for Citibank and other creatures of bank deregulation whose payments have raised Summers' net worth by $31 million since the "end-game" memo.

That Obama would, at Robert Rubin's demand, now choose Summers to run the Federal Reserve Board means that, unfortunately, we are far from the end of the game.

[Wombaticus Rex]

Interesting timing, considering Mark Ames wrote about this two weeks ago -- Summers-focused, though, none of the WTO meat.

Still, ain't a damn thing wrong with relaying a signal like this, and it's .... pretty hard to fault Palast for much. I guess the real story is that Palast actually got a copy of this memo.

That Obama would, at Robert Rubin's demand, now choose Summers to run the Federal Reserve Board means that, unfortunately, we are far from the end of the game.

Hoping against hope that it's not such a foregone conclusion...

Edit: PDF link for memo
http://www.gregpalast.com//vulturespicn ... 20Memo.pdf

I would love to see "Tab A: Talking Points for Your Phone Call" get released...

[justdrew]

Larry Summers confirmation is far from a foregone conclusion.

This should be the line they do not cross. There needs to be major organizing to oppose this appointment and not by the republicans. Let obama (note, he's lost his capitalization) know it ain't gonna happen.

http://campaigns.dailykos.com/p/dia/action3/common/public/?action_KEY=502

129,521 total signers

[Nordic]

But but but -- this can't be right. Clinton was president then and Clinton has a big fat D after his name and the D's are the good guys because they're the brand i identify with!

[elfismiles]

Wombat - can you direct me to the Mark Ames bit? Am searching but not finding.

Interesting timing, considering Mark Ames wrote about this two weeks ago -- Summers-focused, though, none of the WTO meat.

[Wombaticus Rex]

Yeah, they're big on paywalls. This is more germane to Summers v. Yellen than WTO v. Earth.

Lo: https://www.nsfwcorp.com/scribble/5658/

I Know What You Did Last, Summers: The Shady Deals That Will Hand Larry The Fed
By Mark Ames

As today’s press conference made clear, President Obama is just about the only person left in this country — or at least the country outside of DC and lower Manhattan — who thinks it’s not completely batshit insane to nominate Larry Summers as the new Fed chief.

I’d been putting off writing about Summers’ impending nomination because I’d assumed it was just some silly rumor floating around. Surely even someone as grotesquely compromised as Obama wouldn’t consider something this stupid. No human being on this planet could possibly be a worse candidate for the job of Federal Reserve chief than Larry Summers — Bernie Madoff would make a better candidate, at least he’s not as slippery as Summers and the damage Madoff caused is a drop in the bucket compared to Summers’ financial holocausts.

The flaw here, I suppose, is in assuming that failure somehow disqualifies you from the gig. In this America, failure on the job is the key to success, and few people understand that like Larry Summers, serial failure, understands.

And so, as Obama made clear, Summers is a front-runner for the Fed chair nomination. Actually that’s an understatement, hopeniks: Larry Summers is THE front-runner. As Ron Suskind put it: “first among equals to replace Bernanke.”

That’s in reference to a deal Larry cut with Obama just before he took office in January 2009 . As crude and cronyist as this may sound — Obama basing his choice for Federal Reserve chief based on a backroom political “deal” he cut years ago — it’s worked for Summers in the past. It’s how he got the job as Treasury Secretary under President Clinton — at least, that’s according to Summers’ mentor and the man he replaced as Treasury Secretary, Robert Rubin.

In his memoir, “In An Uncertain World,” Rubin recounted how he cut a secret deal with Summers in the beginning of Clinton’s second term: If Larry agreed to stay on as Treasury undersecretary, then Rubin promised to step down in the middle of Clinton’s second term and hand the top Treasury job to Summers. Rubin writes:

I worked out a rather complicated proposal to make Larry comfortable with staying. I told him that my intention was to remain for two more years. I would try to get the President to agree that if I served two years into the second term, he would then name Larry as my successor—assuming, of course, that the President was still comfortable with Larry. [Ha-ha-ha, good one Bob, convincing display of humility!—M.A.] If I left sooner, there would still be what lawyers call a “rebuttable presumption” in Larry’s favor. If I decided to stay longer, Larry could do as he saw fit....

But we had an agreement in principle. For it to work, though, absolute confidentiality was essential. The only people who knew about this arrangement, as far as I knew, other than the President, Larry, and me, were the Vice President — whose agreement was requisite and readily given — Erskine [Bowles], Sylvia, and Judy. For two and a half years, no hint of this understanding ever leaked — which was remarkable.

If that alone isn’t a case-closed argument in favor of encouraging more government leaks...

So Rubin worked out a deal with Summers and Clinton – that Summers would stay on in return for getting the Treasury Secretary’s job. He stayed on; he got the job; he deregulated the financial industry and destroyed the economy.

But it was the thought that counted: On July 2, 1999, during his Treasury Secretary swearing-in ceremony in the White House Rose Garden, an emotional Summers, “on the verge of tears,” declared,

“I can’t begin to describe how much I have learned from Bob Rubin.”

That was in the 1990s. Nearly a decade later, another Democratic president took power, and that of course meant another sleazy backroom deal promising Larry Summers an even more powerful job if he’d agree to take a lesser job that he pretended not to want. And no, this isn’t Mexico or Russia we’re talking about folks, but we’re getting there.

According to Ron Suskind’s 2011 book “Confidence Men,” Summers had always been angling for the Fed job and, although he assumed Obama would name him Treasury Secretary in 2009 (with Geithner as his Number Two), he saw Treasury as a mere stepping stone to taking over the Fed:

Summers told Obama he would be very interested in the Fed job, a unique and prestigious position on the world stage. Summers had watched his old friend Greenspan turn the chairmanship into a seat of extraordinary, dynastic power. In twenty years on the job, Greenspan could lay claim to having been the most powerful public official of his era. At only fifty-three years old, Summers saw in the Fed post the long final chapter to a storied career. When Summers moved over, Geithner would move up.

Obama came up with what he thought was a better plan: Geithner at Treasury, which would be an easier sell to Congress; and Summers at the president-appointed position as director of the National Economic Council in the White House. Apparently Obama bases his choice on key personnel decisions much the way a country club jock from the Hamptons would:

both longtime tennis players, Summers and Geithner had played together for years, cementing a bond in athletic battle that Obama respected. He became enamored, as he thought about it, of the idea that Summers could spearhead economic debate within the White House while using his deep rapport with Geithner to keep the administration closely coordinated with Treasury’s emergency activities.

When Obama suggested this arrangement, however, Summers demurred. Having once been Treasury secretary, he considered the NEC job a step down. He hinted that he might be less than ideal for the position, pointing out that his strong suit was not in evenhandedly distilling rival ideas into distinct, unbiased choices. This was what the NEC job demanded.

Uh-oh, snag. But Summers, reluctant though he was, came up with a deal, straight out of the Robert Rubin playbook, that might change Larry’s demurring mind:

Then, for good measure, Summers added conditions: he would manage all information regarding economic matters that passed to Obama, and he would be first among equals to replace Bernanke.

Obama accepted his conditions.


Let me repeat that: “Obama accepted his conditions.”

This isn’t exactly the world’s best-kept secret. A longtime colleague and friend of Larry Summers, UC Berkeley’s Brad DeLong, wrote in 2011 that one of the reasons why he didn’t like Suskind’s book was because it didn’t answer why his buddy Larry hadn’t been given Bernanke’s job yet:

I had hoped to learn why Obama chose to renominate Bernanke Federal Reserve Chair over a candidate--Larry Summers--who had reason to think he was the default choice for the job...

Not a secret — but still jarring to re-read it today, given the disaster that awaits all of us just because Obama cut a backroom deal with a Wall Street-backed serial failure, who belongs in a prison, or on St. Helena, or sealed in a space capsule and fired off in the direction of the sun... anywhere but Washington.

[slimmouse]

In his clearly unempathetic approach to what he sanctions, one might surely suggest that Summers is clinically insane?

Do the NSA screen for such mentally disturbed sociopaths telling the rest of our civilisation how its gonna be?

Prolly not, cos if youre working for them, whilst being even half informed. then you must be hafl insane yourself.