Executive Intelligence Review


Denmark Bank Scandals Put Glass-Steagall on the Agenda

COPENHAGEN, Oct. 23, 2018 (EIRNS)—A succession of bank scandals has brought Glass-Steagall bank separation, that would segregate commercial banks from speculative investment banks, onto the agenda in Denmark. The Schiller Institute in Denmark is famous for calling for this measure since the 2011 parliamentary election campaign, when Schiller activists ran as independents with the slogan “Glass-Steagall—or Chaos.”

The first case was the Danish side of the dividend arbitrage/Cum-Ex scandal, when it was discovered a year ago that $1.95 billion (€ 1.7 billion) was looted from the Danish tax office, led by a Sanjay Shah, a British financial swindler based in Dubai. Then, about a month ago, the largest money laundering case in Europe was revealed, involving the Estonian branch of the systemic Danske Bank (Danish Bank). And now, the revelation that some of the biggest banks are involved in massive tax looting in all of Europe.

During a TV debate after the Danske Bank money-laundering case was exposed, a parliament member from the far-left Unity Party called for bank separation, and the vice chairman of the Socialist People’s Party called for the same in her blog. During the Parliament’s open house on Friday, Oct. 13, the Schiller Institute delegation spoke to many political party leaders and other parliamentarians about the need for Glass-Steagall and LaRouche’s Four Laws, as well as the New Silk Road.

But on Saturday, Oct. 20, the need for something like Roosevelt’s Glass-Steagall bank separation was explicitly the main discussion on “Deadline”, the widely watched evening news discussion program on Denmark Radio’s DR2, with the leading bank historian in Denmark, Prof. Per H. Hansen, from Copenhagen Business School, and the editor of the financial newspaper Børsen, Niels Lunde.

After an introduction about how the biggest banks have been involved in the dividend arbitrage scandal, Hansen said that it’s not a matter of one rotten apple, but is systemic. The interviewer said that Hansen had pointed to the takedown of Glass-Steagall as one of the most important events in the financial world, which had allowed these bank crises to occur. Video clips of President Clinton rescinding Glass-Steagall in 1999 were shown, in which he stated that it was no longer appropriate, since the country had ceased being industry-centered, and that now the antiquated national walls had to be torn down which inhibited the modernization of financial services. And later, the interviewer prefaced video clips of the Great Depression in the U.S., describing how Per H. Hansen has researched historical parallels, and what the response was at that time, especially to the 1929 crash. It is something we should think about today, she suggested.

Hansen said Franklin Roosevelt’s response, when he became president in 1933, was Glass-Steagall and other strict regulatory laws in 1933-34. In Denmark, the bank law of 1930 limited how much a depository bank could act as an investment bank, and similar regulations were implemented in the Western world. Rescinding Glass-Steagall was symbolically important because it replaced national regulation with the “free” financial markets as the driver of the economy, while industry was in crisis. It allowed the creation of financial super-markets, whereas before, each of the financial activities was regulated separately—savings and commercial banks, investment banks, mortgage banks, insurance, and pension funds. There was strict national regulation coming out of World War II, with no financial crises, until the 1970s. Then, they became bigger and bigger, and especially the investment banks became more speculative, and the goal became maximizing shareholder value, and nothing else—the heart of the problem. Allowing capital movement, with microsecond algorithm trades, increased the instability.

As to what else should be done, he said fines don’t work, the problem remains and it is systemic, based on deregulation and the Wall Street/City of London investment bank culture. We need something much bigger than minor regulation. Niels Lunde said that, initially, the main role of the banks was to only lend to those they knew, and of whom they could make a proper credit evaluation. Then, the goal of the banks, and the bankers, personally, became to make the most money, including through the creation of financial products they hardly understood, instead of taking responsibility for the financial wellbeing of society. This ethical discussion is being raised only now, 10 years after the 2008 crash, which has allowed these scandals to occur.

The first thing that a Schiller Institute supporter said yesterday, was, “I was thinking about you, when I saw that program. This is what you have been telling me for years, and you were right.”