May the 6th, 2010

Financial World War is being waged. The contestants of this conflict may be difficult to pick out, since the factions are geographically dispersed, but there are certain dates that stand out. July 16, 2008: the day the Bank of International Settlements' Basel II mark-to-market capital requirements went into effect (as spelled out in Code of Federal Regulations), which is considered to be the "detonator" that exploded on September 15, 2008 with the fall of Lehmen Bros.
( Henry C. K. Lui explains in his Asia Times piece: Monetarism Enters Bankruptcy, Part 3 - Credulity caught in stress test )

May the 6th, 2010 was another day of infamy, on two fronts... Only this time, the volleys were flying not from Basel to Wall St., but from Wall St. to Athens, collaterally hitting Berlin and Brussels in an campaign to destroy the Euro, and simultaneously from Wall St. to Washington D.C., in an effort to maintain its arsenal of financial instruments.

On the Athens front, as the Greek economy crashed and the streets descended into chaos, austerity measures were taken up by Parliament under the leadership of Prime Minister Papandreou, a graduate of the London School of Economics. Just prior to the debacles of early May, Papandreou described his government's situation to the Brookings Institute while on a state visit to Washington in March...

Despite the deep reforms we are making, traders and speculators have forced interest rates on Greek bonds to record highs. Many believe that there have been malicious rumors endlessly repeated and tactically amplified, that have been used to manipulate normal market terms for our bonds. Partly as a result, Greece currently has to borrow at rates almost twice as high as other European Union countries...

And when you have a common currency that is simply not viable. So we will have a very hard time in implementing our reform program if the gains from our austerity measures are simply swallowed up by prohibitive interest rates.

This whole affair has a horrible sense of déjà vu. The same financial institutions that were bailed out with taxpayers’ money are now making a fortune from Greece’s misfortunate while those same taxpayers are paying the price in deep cuts to their salaries and social services. So unprincipled speculators are making billions every day by betting on a Greek default...

Yet, our correct decisions may still be undermined by speculation, and to me this is a challenge to our democratic institutions. An elected government making huge changes with the consent (sic) of its people is being undermined by concentrated powers in an unregulated market, powers which go beyond those of any individual government. (Pgs. 10-11)

Now rest assured, Congress and the Fed are going to do something about this...

NYTimes: In Greece's Crisis, Fed Studies Wall St.'s Activities

Greece’s problems deepened on both sides of the Atlantic as the Federal Reserve disclosed it was investigating Goldman Sachs and other banks that helped the country mask its debts, and investors grew increasingly leery of lending any more money to a nation flirting with default.

Congressional Research Service: Greece's Debt Crisis: Overview, Policy Responses, and Implications

Through the crisis, it has been reported that Greek governments, underwritten by prominent financial institutions including Goldman Sachs, used complex financial instruments to conceal the true level of Greece’s debt. (Pg. 12)

We note that Goldman Sachs is the primary target of these accusations and investigations, so it is of special interest that as Congress was debating the break-up of "too-big-to-fail" financial institutions, Wall St. markets should have entered into something of a precipitous stock-warp in the space of ten minutes, as noted by David DeGraw and Max Keiser in...

AmpedSatus: High Frequency Terrorism: How the Big Banks and Federal Reserve Maintained Their Death Grip Over the United States

In the aftermath of Goldman Sachs’ public flogging before the world in Congress, and while under investigation, on the very day that Congress was voting on the “break up the too big to fail banks” amendment and cutting behind the scenes deals to gut the audit of the Federal Reserve, the stock market had its greatest sudden drop in history, plummeting 700 points in ten minutes...

Tyler Durden makes the case that Goldman Sachs was instrumental to this chaos...

ZeroHedge: Where Was Goldman's Supplementary Liquidity Provider Team Yesterday? A Recap Of Goldman's Program Trading Monopoly

We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.

( What a stock market melt-down sounds like: Panic and Loathing from the S & P 500 Pits )

And so it goes... everyone is pointing fingers at Goldman...

Kathemerini: PM hints at action against U.S. banks

Prime Minister George Papandreou indicated yesterday that Greece might take legal action against certain US banks which, he said, bear “great responsibility” for the debt crisis engulfing his country...

Papandreou also referred to an investigation by Greece’s Parliament into deals struck by Greek authorities in 2000, with help from Goldman Sachs, that allowed them to mask the extent of the country’s debts through the use of complex financial instruments. “We are looking into the past – how things went in the wrong direction and what kind of practices were negative practices”...

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On a somewhat related note, another aspect of the Senate financial reform bill under consideration is the reinstatement of the Glass-Stegall separation of banking from speculative financial institutions. Lyndon LaRouche has been vigorously campaigning for this, and so it was the main topic during his web-cast on May the 8th.

An unnamed questioner brought up a recent conversation had over the subject of Glass-Stegall with an individual from the British Finance Ministry (at an affair at the London School of Economics) who sugested that such a move to reinstate Glass-Stegall by the U.S. would be considered as a "hostile action" by Britain and other European countries...

He went so far as to say, that someone from the British Foreign Office would be contacting their counterpart in the U.S. State Department to make this position clear...

Lo and behold, almost immediately following his swearing in, Foreign Secretary William Hague raced across the pond to meet with his U.S. counterpart, Hillary Clinton...

BBC: Early harmony in US-UK relations

The swearing in of new government ministers at Buckingham Palace early on Thursday evening, and the kissing of hands with the Queen meant Mr Hague needed to fly first to New York, and then catch the train to the nation's capital to see Hillary Clinton on Friday...