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LaRouche: Banksters Are Lying; Glass-Steagall Will Solve This
October 9, 2013 • 9:21AM

Economist and political leader Lyndon LaRouche gave a firm answer today to claims from leading Wall Street bankers, and their magazine American Banker, (cf. below) that any U.S. Treasury default later this month will blow out the banks.

"No, it will not blow out," LaRouche said, "for the simple reason that Glass-Steagall will solve this problem. And nothing else will solve it; no other policy can possibly work but restoring Glass-Steagall.

"These bankers have never really earned any money honestly, to be crying about losing it because of the government. We should shut Wall Street down. Ram through the whole Glass-Steagall policy. That, and only that, will solve the problem."

Banksters Who Met with Obama Issue Systemic Blowout Threat

The same Wall Street chieftains who met with President Obama on Oct. 2 to plan the handling of Congress in the U.S. debt crisis, are threatening that any U.S. default later this month, no matter how brief, will blow up the global financial system.

The threat today came through American Banker, the magazine of the American Bankers Association. Rob Nichols, CEO of the Financial Services Forum which organized the Obama-bankster meeting, was quoted, "All of the consequences of an actual default are just severe and unfathomable and unthinkable," because it would "put market collateral at risk, harm overnight lending, and drain key sources of liquidity from the market." Nichols also forecast "a sharp spike in interest rates."

The banksters' biggest threat is actually through the immense global derivatives markets, although the American Banker piece does not say so explicitly, rather talking of "repos". Repurchase agreements, by which derivatives counterparties place collateral which supposedly backs the payment flows they are "swapping", overwhelmingly use short-term Treasury notes and bills, currently some $600 billion worth of liquidity, in the derivatives bubbles, according to a new report by Keefe, Bruyette & Woods to which American Banker refers. A default on any part of any class of Treasury security would "freeze" the use of that class, at least, in "repo" operations, set bank counterparties to demanding additional collateral from each other, and wreak havoc through the derivatives markets in a bigger "Lehman event.".

The yield on one-month Treasuries began surging Oct. 1.

American Banker quotes banking policy analyst Karen Shaw Petrou describing Treasury obligations as the water in the financial system's plumbing. "The very biggest banks fear that a debt ceiling breach breaks the system's pipes" [emphasis added].


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