City of London-Linked Bankers Move to Perpetrate Another Gigantic Fraud

September 12, 2009 (LPAC)— In keeping with the demands made at the London G-20 Finance Ministers meeting in London by British Prime Minster Gordon Brown and U.S. Treasury Secretary Timothy Geithner, that the G-20 countries continue to employ a stimulus program, i.e., a policy of unlimited bail-out, the American Bankers Association (ABA) sent a letter to Geithner and Federal Reserve Chairman Ben Bernanke demanding that they use the upcoming G-20 meeting in Pittsburgh to curb efforts by the Financial Accounting Standards Board (FASB) to enact changes in present accounting methods used to determine the value of the trillions of dollars of toxic debt on the books of the leading banks and financial institutions. The FASB has called for a return to mark-to-market accounting, by which banks must value assets on their books at present market value, rather than at artificial values determined by the mathematical models.

The FASB has been under pressure from the banks, and has been wavering in its demand for a return to mark-to-market accounting, and has postponed the adoption of new rules until the end of 2010. While this gives the bankrupt financial institutions another year to prop up their dead assets, through demands for trillions more dollars in hyperinflationary government bail-outs, this is not enough for the looters, who demand the right to continue to carry worthless assets on their books, and to buy and sell them with funds provided at taxpayer expense, with no intervention by any regulatory agency.

If the FASB proposal for a return to mark-to-market accounting were applied, trillions of dollars of financial paper currently held by financial institutions would have to be wiped from their books. This is why the ABA insisted that Geithner and Bernanke act on their behalf. The adoption of the FASB proposal, the ABA stated in their letter, would undermine the G-20's efforts to strengthen the financial system.(!) ABA President Edward Yingling went further, arguing that expansion of mark-to-market accounting would reduce lending [which continues to be minimal, at best]. The ABA is arguing that the present model, so-called mark-to-model accounting, should be maintained, as it is essential for the smooth functioning of financial markets. Under this model, assets on the books of banks and financial institutions can be held at the value ascribed to them by the mathematical model which created them. It is these mathematical models which produced the financial bubble in derivative trading that led to the biggest financial crash since the collapse of the Lombard banking system in the 14th century.

The biggest defender of these models has been Alan Greenspan, but the decision, by former Treasury Secretary Hank Paulson, aided by Bernanke and Geithner, in September 2008, to prop up this bubble, at taxpayer's expense — against the advice of Lyndon LaRouche, and against the wishes of the American population — has accelerated the collapse of the physical economy, which is unravelling at an accelerating pace, with unemployment and foreclosures at a record pace, while cities and states are bankrupt, and the U.S. budget deficit is soaring. This crash has exposed the fraudulent nature of these models, and has forced serious economists to take up the call by Lyndon LaRouche for bankruptcy reorganization, and treating the creation of this bubble as a criminal matter, rather than merely a cause for regulation.

Lyndon LaRouche denounced the efforts of the ABA as an attempt to perpetuate a gigantic fraud. Everyone knows these banks are bankrupt. Any effort to protect the worthless debt on their books should be treated as a criminal matter. He added that any effort, by Geithner or Bernanke, to back up this fraud, makes them complicit in these criminal acts.