Executive Intelligence Review
Subscribe to EIR


'The Other Summit' Raises London Banks' Banner: Default!

Nov. 10, 2014 (EIRNS)—At the APEC Summit the "BRICS dynamic" was on display, featuring new international development banks investing in infrastruture great projects. But the upcoming "G20" meeting, dominated by London and Obama's Washington, is preparing the biggest trans-Atlantic megabanks for a different scenario: default against whole populations.

The G-20 "bank regulators pre-meeting" adopted a new rule that the world's biggest banks should now hold "bail-in bonds," up to 15-20% of their entire asset books, against their own collapse.

Reuters reported that "The Financial Stability Board (FSB), made up of regulators from the Group of 20 economies, said global banks like Goldman Sachs and HSBC should have a buffer of bonds or equity equivalent to 16 to 20% of their risk-weighted assets.... The bonds would be converted to equity to 'bail in' a stricken bank." This means the insolvent bank will default on the bondholders, but give them stock in the bankrupt bank instead. G-20 leaders will vote this rule up later this week in Australia.

Former Bank of England Deputy Governor Paul Tucker presented this bail-in policy of London, Brussels, and the Basel Bank for International Settlements, at a Washington conference last week. Tucker said the too-big-to-fail banks of London and Europe would all start selling "contingent capital bonds," also known as "bail-in bonds," which are made to absorb enormous losses when megabanks become insolvent and default. They will sell them, he said, to pension funds and insurance funds, not to other banks or shadow banks, so as not to spread a wildfire of risk in the financial system. The pensioners and insurance policy holders have to become the indirect owners of the masses of banks' "contingent capital" which they are going to default on in the coming crash.

"Ultimately there are only households," Tucker said at the Nov. 5 conference. "Do you want all the risk to fall back on Wall Street firms?"

There are the new national and international development banks, then, and there are the imploding London and Wall Street megabanks prepared to default, "by rule," against you. Which system will you choose?