Defaulting banks - where will it stop?

[Linda Minor]

Thanks for this Linda. Sindona has always intrigued me.

My copy of the Tosches book is now in storage and is not easily available, or I would go get it and copy the relevant section I had in mind. The general thrust was the abuse of the futures and options market and how these are used to invisibly launder vast sums of money via multiple entities domiciled in multiple jurisdictions.

As I recall, it was way beyond the ability of national agencies to police the laundering system and the only chance was the formation of multinational agencies that could legally operate throughout the many jurisdictions - and so far as I know, this has never really happened effectively.

The net result is that deep political forces -- organized crime, big business, politics etc., are able to accrue a stranglehold on the financial markets because of the vast oceans of money they have at their disposal.

If 14 years ago this was estimated by the Belgian police to amount to 50% of the world economy, today it must be incredible.

I did another search on my external hard-drive and turned up an excerpt from research I wrote up in 1997. Unfortunately, the footnote numbers get deleted, but I pasted the footnotes from that section below the text:

What the George Bush chapter depicts is how one branch of the fondi took root in the fertile soil of Texas. There are more chapters to be written. Funds for investment in railroads, lumber companies, oil exploration—all the industries developed in Houston after 1836—came from somewhere other than Texas, which had no means of raising capital at the time. Capital was created by the issuance of bonds, which were sold in other locations—New York, Boston or Europe. But the fondi saw a means of acquiring power quickly by laundering profits earned from trading in slaves, liquor and opium through a new system of investment trusts developed in Philadelphia and continued in Hanover, Morris County, New Jersey—home of the Prudential Company. An examination of the first insurance fund in America, founded even before the 1776 revolution, can be very instructive.

The very first life insurance company in America—the Presbyterian Ministers’ Fund--began about 1761 in Philadelphia. The date roughly corresponds with the date the first life insurance policies were written by the Equitable Assurance Society of London. The American company was a corporation dominated by Presbyterian clergymen to provide protection for their families after their demise. The insurance contracts were reinforced by bonds drawn by Benjamin Chew, Esq., one of the first of the “Philadelphia lawyers.”

After a few decades of not very successful operation, the fund’s management came to include the Bevan family of Quakers who have been trustees in Barclays Bank for centuries. In fact, the American Bevan family began with Matthew L. Bevan, born in Pennsylvania in 1777 to a Quaker family. He became a Presbyterian in 1849, joining a church in Philadelphia pastored by Dr. Jacob Janeway, a Fund board member. Although Bevan was a shipping merchant for the firm of Bevan and Humphreys—largely engaged in cotton handling—his contacts with Barings Bank of Liverpool and with Nicolas Biddle’s son may have helped to get him named as president of the Presbyterian Ministers Fund, carrying with it a directorship on the board of the Insurance Company of North America (ICNA)--1822-41. A subsidiary of this insurance company was North America Land Company, one of the trustees of which was John Barclay, whose family in England were partners with the Bevans.

Another Philadelphia associate was Robert Ralston, shipping merchant in the China trade, director of the ICNA, and a founder and director of the Second Bank of the U.S. and of the Philadelphia Exchange. Ralston was therefore acquainted with fellow church member, Matthew L. Bevan, Presbyterian Corporation president in 1844, who liquidated the assets of the Second Bank of the U.S. It is clear from the author’s tone of writing that he did not care for these 18th century Philadelphians. As he says:

It is to be remembered that Philadelphia was then a city of Democrats. By the term “Democrats” we mean Democrats as opposed to Whigs. They were not exactly Jacksonian Democrats. They were silk-stocking Democrats. The group included such men as A.J. Dallas, John Winthrop Sargeant, and Charles J. Ingersoll. The real Jacksonian Democrats were the folk out on the frontiers—not very elegant gentlemen and ladies in every case, but people who thought for themselves and spoke out about it.

The reader senses the author is implying that around 1820 a group invaded the Presbyterian Corporation for the purpose of looting the fund, and the same people did the same thing to the National Bank, but he is afraid to say so in so many words. But he does furnish a number of clues to connect the managers of this fund to various other life insurance companies. He says there was an “interesting link” with the Equitable Life Assurance Society of New York, in that the Rev. James W. Alexander, a Presbyterian minister insured under the fund, was the father of William C. Alexander, the first president of the Equitable, who was appointed by Henry Baldwin Hyde, the founder of the company, at the time he left Mutual Life of New York. The Equitable’s attorney was another son, James W. Alexander, later president of the company. The author was definitely angry at someone, but he seems not to have known who was at fault. He repeatedly compares the founders of the Fund with their successors. The founders were “Dissenters—Nonconformists…men who insisted on the right of private judgment, the right to think and to do for themselves.” Such men, he says, “may easily sell their birthright for a mess of pottage.” He then warns about the dangers of becoming complacent and regimented, and of allowing men without principles to think for us.

Barclays’ banking business grew up in the country districts of England, carried on by successful traders who had correspondents in London, choosing to use the descendants of the goldsmith bankers, mainly grouped in Lombard Street and its vicinity. What these associations of traders set up was a clearing house system by which transactions were made possible between the country agents and a London bank without transporting cash. According to a history of Barclays Bank:

English merchants abroad [in British colonies] gradually developed into bankers in much the same fashion; so that a century later, the bill [of lading] on London had become, what it still remains, the most valued form of international currency. Thus first the country bankers, and then the merchant bankers abroad, created the famous bill on London, which by the punctuality of payment of their London agents ultimately obtained world-wide repute.

The book explains British banking history, including the rise of joint-stock banking, limited liability and the great banking amalgamations after 1915, but it indicates that there was a “quite peculiar” manner which amalgamation has taken place in the case of Barclays bank, as follows:

The nucleus of the combination consisted of two great firms united in 1888; Barclay, Bevan, Tritton & Co., and Ransom, Bouverie & Co.; each of them London agents of a number of country banks; and their first amalgamation of 1896, a most natural one, was a union with some twenty of these country banks, in which the Gurneys of Norwich and Backhouse of Darlington figured most actively. From time to time after 1896 there were many similar unions with local banks, especially in districts where the bank was not previously represented. Finally, after 1915, Barclays joined in the general movement for concentration on a far larger scale, and amalgamated with large centralised banch-banks of a different type. In the end it has become the third in size of our Big Five clearing banks, with deposits of over 300 million pounds, and 1838 bank offices.

A review of the Barclays history book found in The Economist in 1927 summarizes as follows:

In the course of the narrative the reader is introduced to a large number of the best known names in English banking: Alexander, Backhouse, Barclay of course, Bevan, Birkbeck, Bolitho, Bosanquet, Bouverie, Buxton, Eaton, Foster, Gosling, Gurneys, Hoare, Leatham, Lucas, Pease, Peckover, Seebohm, Tritton, Tuke, Williams and many others. * * * * It is really astonishing how intimately the English banking families were inter-related. The writer was once shown by an English banker a very elaborate pedigree, some four feet square, on which he made out his descent from Sir John Houblon, the first Governor of the Bank of England. It further appeared from this tangled web of descents and marriages that he was also connected with almost every banking family one had heard of. This intimate and complicated relationship is fully illustrated in the book we are considering. It largely extends our printed record of such connections, and perhaps even more of those religious sympathies on which they were grounded. The Quakers have played a great part in English banking, nowhere more than in the Barclay group; the Huguenots may rank next; but a certain pietistic and mystical form of religious feeling seems to have characterised nearly all the original Barclay bankers.

According to the writers of Dope, Inc., the clearinghouse for the banks involved in the drug trade is the Assicurazioni Generali of Venice, whose major stockholders are the S.G. Warburg merchant bank of London and the Paris Banque de Pris et des Pays-Bas. The Warburg chairman, Lord Eric Roll of Ipsden became chairman of Kissinger Associates in 1984, replacing its founder, Lord Carrington, who had also been a director of Hambro’s Bank, when it financed Michele Sindona’s entry into the United States, as well as a director of Barclays Bank—which is, incidentally, the principal financier for the gold and diamond mining in Africa. As stated in Dope, Inc., these men are
representatives of the ancient fondi who have collaborated for centuries. What is new and ominous is that the men who perform the dirty work of the fondi have moved out of shadows of Caribbean offshore banking and Hong Kong smuggling, and into the board rooms of the most powerful American financial institutions, and close to the councils of the United States government itself.
For a description of how these bankers launder drug money, all we have to do is read the explanation given to Nick Tosches by Michele Sindona:

“Only about 5 percent of all the options traded are executed on behalf of corporations wishing to hedge the currency risks of their international trade. The vast majority of the trading is purely speculative in nature, carried out by banks on behalf of their clients or themselves.

“In the international currency flow of some $60 trillion a year, it is extremely hard to distinguish those transactions carried out simply to realize legal profits from those carried out to launder dirty money.

“So,” he [Michele Sindona] went on, “your dirty money has been deposited in Hong Kong or Singapore in the name of your ghost company. Now you buy, say, a yen option at 240 yen per dollar. This option gives you the right, but it does not obligate you, to buy 24 billion yen for $100 million six months from now. The premium for the option is $1 million.

“If, during those six months, the yen falls to, say, 260 per dollar, you can buy the 24 billion yen in the spot market for $92 million, or you can sell the option contract. In either case, you make a profit of $7 million. That is, $8 milion less the $1 million premium.

“Your counterpart in the deal is officially the bank in Hong Kong or Singapore. But, in reality, that bank is acting only on behalf of the ghost company that deposited the dirty money with them. Your real counterpart is yourself. Therefore, the $7 million profit you earn is not recorded as the bank’s loss, but as the loss of your anonymous bearer-share company.

“The deal has turned $7 million in hidden dirty money into a clean profit. You haven’t even really lost the $1 million option premium, because it has been paid to the ghost company that was your counterpart in the deal—that is, to yourself. Your final profit from the transaction is reduced only by the commission you must pay the bank for the fiduciary transaction—here, about $20,000—and by the income tax you must pay to the American government.
“In practice, a man who is expert at this system might buy and sell the same option many times during the six-month period, according to the fluctuations of the market. In this way, he could launder hundreds of millions of dollars in a relatively brief time.

“All right,” he then said. “But what if, during those six months, the yen rises? What if it goes up to 220 per dollar?

“In this case, you allow the option to expire unexercised, and you lose only the cost of the premium, $1 million, and the $20,000 commission to the bank. Bus, again, that $1 million loss is not actually a loss. It is offset by the $1 million in black profits earned by your ghost company as a premium for the option you have granted it. And, as you can deduct the $1 million ‘loss’ from your income, not only do you suffer no real losses, but you also, through this deduction, lower the tax you must pay on the laundered profits from other deals.

“In these days of floating exchange rates, there are often rapid fluctuations within a span of hours. Working prudently, a man who knows what he’s doing can realize enormous profits without risk—profits that are not really profits, but dirty money made clean.

“The same system can be used with commodities. You buy a futures contract valued at $100 million. Once again, the counterpart of the American bank or broker you use will be, upon your request, the bank in Hong Kong or Singapore where your dirty money has been deposited in the name of your bearer-share company. The Far East bank will receive a notice that the contract proposed by the American bank or broker is to be stipulated for the ghost company. The Far East bank takes no risk, and asks only a very slight margin as a formality—perhaps $1 million.

“If the price of the commodity rises 10 percent, you make $10 million in profit. The counterpart company registers a loss in the same amount. Thus you have turned dirty money to clean….

“Whether currency or commodities options are used, the system is invincible. It is”—he looked away, feeling for a phrase—“it is the system at the end of the world.” He smiled wickedly then. “Your government, perhaps, should speak of this to Mr. Colby, the former CIA director, who is now privately employed by the Singapore government.”

Whatever one’s opinion of the honesty or criminality of Sindona, his explanation of how money is laundered makes sense. As a matter of fact, Barclays Bank almost admitted as much in a March 9, 1997 article in the London Sunday Telegraph, which reported as follows:

Every bank has vast derivative liabilities. Barclays, for example, admitted in its results that it had derivatives worth 922 billion pounds at the end of last year, up more than a quarter on 1995.

Barclays and its peers say the risk of these vast positions is nominal because they are all matched and hedged. If the financial markets crash the losses from one set of contracts will be offset by the profits on another.
Barclays Bank is also involved in a consortium with International Trust Corporation (Itco), which was created by Anglo-American Mining—an arm of the Cecil Rhodes trust—a subsidiary of the Oppenheimer mining group, the Royal Bank of Canada and N.M. Rothschilds of London, to create banks, investment companies, tax shelters and trust funds in the Caribbean. The Assicurazioni Generali has taken over control of the Jefferson Insurance company located in Greensboro, N.C., whose chairman, Nathaniel Samuels (formerly of Kuhn Loeb) was a State Department crony of Henry Kissinger. Samuels was also New York chairman of the Banque Louis-Dreyfus Holding Company in the U.S. and a director of Banque Louis-Dreyfus of Paris. It appears that this insurance company may have been instrumental in providing funds for the purchase of the Esperson Building in Houston by George Butler of the Bank of Texas and Post Oak Bank. But their presence in Houston was not new. In another chapter, the history of these connections will be more fully explored.

The question then becomes, if Barclays and similar banks which began as merchant banks, are involved in laundering drug money, who do the drug profits belong to? EIR writers have deduced that the drug trade is being run out of the companies chartered by the colonial governments dating from the time the Venetian bankers took over the British and Dutch oligarchical families.

Notes:
Alexander Mackie, Facile Princeps: The Story of the Beginning of Life Insurance in America (Lancaster, Pa.: Lancaster Press, 1956), p. 1.
Mackie, p. 250.
Mackie, p. 272.
“History of Barclay’s Bank,” a review of a book compiled by P.W. Matthews, Chief Inspector of the Bankers’ Clearing House (1900-1920), edited by Anthony W. Tuke, Local Director of Barclays Bank (Blades, East and Blades, Ltd., 1926)—as reviewed by H.S. Foxwell in The Economic Journal, September 1927, pp. 411-417.
Foxwell at p. 413.
Foxwell at pp. 414-15.
Dope, Inc., p. 108.
Dope, Inc., p. 109.
Nick Tosches, Power on Earth (New York: Arbor House, 1986), pp. 94-96.
Dope, Inc. p. 108.
London Sunday Times Team—Nicholas Fraser, Philip Jacobson, Mark Ottaway and Lewis Chester, Aristotle Onassis (Philadelphia and New York: J.B. Lippincott Co. 1977), p. 40.
Fraser et al, p. 54.
Fraser et al, p. 99.