The Financial Tsunami, Part IV. by F. William Engdahl

Part IV of F. William Engdahl's "Financial Tsunami" series, The Financial Tsunami Part IV: Asset Securitization-- The Last Tango, which can also be found (abbreviated) on the Global Research site, will be of interest to those following the ongoing decline and fall of the American Empire. The concluding section (non-abbreviated version) follows:

In the 1980’s this author interviewed a senior Wall Street banker, at the time recovering from some kind of burnout, strictly off-the-record. I asked about his bank’s business in Cali, Colombia during the heyday of the Cali cocaine cartel. He related, “Banks would literally kill to get a slice of this business, it’s so lucrative.” It would seem they moved on to sub-prime lending with similar goals in mind, and profits as huge as in money laundering drug gains.

Alan Greenspan, once again, openly backed the extension of bank lending to the poorest ghetto residents. Edward M. Gramlich, a Federal Reserve governor who died in September 2007, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford. When Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan. [16]

Revealing what was most certainly the tip of a very extensive iceberg of fraud, the FBI recently announced it was investigating 14 companies for possible accounting fraud, insider trading or other violations in connection with home loans made to risky borrowers. The FBI announced that the probe involved companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors.

At the same time, authorities in New York and Connecticut were investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities sold to investors. Connecticut Attorney General Richard Blumenthal said he and New York Attorney General Andrew Cuomo were looking whether banks properly disclosed the high risk of default on so-called "exception" loans — considered even riskier than sub-prime loans — when selling those securities to investors. Last November, Cuomo issued subpoenas to government-sponsored mortgage companies, Fannie Mae and Freddie Mac, in his investigation into what he claimed were conflicts of interest in the mortgage industry. He said he wanted to know about billions of dollars of home loans they bought from banks, including the largest US savings and loan, Washington Mutual Inc., and how appraisals were handled.

The FBI said it was looking into the practices of sub-prime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or securitize them and sell them to other investors. Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings that they were cooperating with requests for information from various unspecified, regulatory and government agencies. [17]

By the early weeks of 2008 the stage was set for one of the most gruesome economic contractions in the United States since the Great Depression of the 1930’s. It was caused by the libertine free market excesses of a US financial establishment determined to keep US capital markets as the world’s sole financial superpower. That attempt had backfired colossally and predictably by the early days of 2008. Financial Securitization would be the Last Tango for the United States as the global financial superpower.

The question now was posed what new center or centers of financial power could conceivably replace New York as the global nexus. That we will look at in Part V.

F. William Engdahl is the author of A Century of War: Anglo-American Oil Politics and the New World Order (Pluto Press) and Seeds of Destruction: The Hidden Agenda of Genetic Manipulation, www.globalresearch.ca. The present series is adapted from his new book, now in writing, The Rise and Fall of the American Century: Money and Empire in Our Era. He may be contacted through his website, www.engdahl.oilgeopolitics.net.

We shall eagerly await Part V.