Financial emergency pushes Germans to Glass-Steagall; LaRouche says two weeks to act!

As the late June/early July financial blowout predicted by LaRouche started to erupt this week, Germany, the country that suffered the last great hyperinflationary blowout in 1923, took concrete steps towards its own Glass-Steagall reorganisation.

The Angela Merkel-led coalition government in Germany has drafted a bank-restructuring bill premised on the core principle of Franklin Roosevelt’s Glass-Steagall law: that the government has the responsibility to salvage necessary commercial banking functions, but does not accept responsibility for bailing out investment banking and speculation.

On 29^th June, German media reported that the 111-page draft bill would empower the government to intervene as follows: if a bank gets in trouble, whose collapse could set off a chain reaction of bankruptcies throughout the banking system, the government bank rescue fund, SoFFin (Special Fund for Financial Stability), would step in and divide up the bank, separating off the commercial banking part from the rest. The commercial functions would either be sold to a solvent private interest, or, if none were found, would be put under state control and protected. The rest of the rotten parts of the bank could then be shut down through an insolvency procedure. The law is designed, German media report, to prevent the State from having to use taxpayer money in the future to bail out bankrupt banks.

The government wants the measure adopted as law before the summer recess.

Germany’s leading champion of a global return to Glass-Steagall principles in banking, Bürgerrechtsbewegung Solidarität (BüSo) party chairwoman Helga Zepp-LaRouche, characterised the bill as a giant step in the right direction, if the intention is actually implemented. The urgency is obvious, she added. The Spanish bank, BBVA, spent Tuesday selling shares like crazy, because, as of 30^th June, they believe they will be unable to raise a penny. The German government will not bail out the Spanish banking system! French leaders may talk of “living with” inflation, but Germany cannot. The hyperinflation of 1923 is not forgotten.

Just hours before the news of Germany’s move became public, Lyndon LaRouche warned a 29th June election campaign meeting in Massachusetts, “It happens we’ve reached a point, where, if things continue exactly as they are now, you could say that in about two weeks, the whole U.S. system will collapse, and set off a chain-reaction in Europe, as well. We’re faced with the prospect of the worst depression in modern history, right now. It’s not just in the United States: It’s global. China, other parts of Asia, are not in so serious a situation, now. But, once Europe collapses, and the United States, and this includes South America, too, then the whole world will go down in a chain-reaction collapse.

“We still have the opportunity to deal with this problem … So therefore, we have to get up on our high horse, and defy the current President of the United States, who is making a fool of us—by taking the action to restore a Glass-Steagall reform of the U.S. system. If we do that, now, we can save the United States. If we do not do that, and we have about two weeks, as of now—it could change, of course; developments could change that—but as of now, it is safe to estimate that about two weeks brings us toward the limit of a chain-reaction collapse, throughout the United States, one which will also go off in Europe. And then, if Europe and the United States go down, at that point, then Asia will also go down, and other parts of the world.”

Citizens Electoral Council leader Craig Isherwood today greeted the news of Germany’s move to Glass-Steagall, and called for the Gillard government to immediately follow:

“Australia’s banks have no Glass-Steagall restrictions, so all of our deposits are held by the same banks exposed to $14 trillion in dangerous derivatives speculation,” he said.

“The government can’t honour its guarantee on our deposits without bankrupting itself, unless it first forces the deposit banks to separate from the derivatives gamblers.

“PM Gillard lied on 24^th November, 2008 when she said, ‘No-one twelve months ago was talking about a global financial crisis’, because she knew the CEC and LaRouche were talking about nothing but.

“If she doesn’t act to protect Australians with Glass-Steagall measures, she won’t be able to hide behind those kinds of lies when the system blows out,” Mr Isherwood warned.

To find out about the massive fight to introduce Glass-Steagall regulations across the globe, click here.