A Shift Towards a Gold Standard”? The FDIC-Fed’s “Proposed Rulemaking” regarding Basel III Capital Requirements

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The power of the Bank for International Settlements (sometimes called the bankers bank) to make or break economies was demonstrated in 1988, when it issued a Basel Accord raising bank capital requirements from 6% to 8%… Japan (was) the world’s largest creditor; but Japan’s banks were less well capitalized than other major international banks. Raising the capital requirement forced them to cut back on lending, creating a recession in Japan like that suffered in the U.S. today. Property prices fell and loans went into default as the security for them shriveled up. A downward spiral followed, ending with the total bankruptcy of the banks. The banks had to be nationalized, although that word was not used in order to avoid criticism.

Among other collateral damage produced by the Basel Accords was a spate of suicides among Indian farmers unable to get loans. The BIS capital adequacy standards required loans to private borrowers to be“risk-weighted,” with the degree of risk determined by private rating agencies; and farmers and small business owners could not afford the agencies’ fees. Banks therefore assigned 100 percent risk to the loans, and then resisted extending credit to these “high-risk” borrowers because more capital was required to cover the loans. When the conscience of the nation was aroused by the Indian suicides, the government … established a policy of ending the “financial exclusion” of the weak; but this step had little real effect on lending practices, due largely to the strictures imposed by the BIS…

Similar complaints have come from Korea. An article in the December 12, 2008 Korea Times titled “BIS Calls Trigger Vicious Cycle”described how Korean entrepreneurs with good collateral cannot get operational loans from Korean banks, at a time when the economic downturn requires increased investment and easier credit…

“Chang Ha-joon, an economics professor at Cambridge University, concurs with the analyst. ‘What banks do for their own interests, or to improve the BIS ratio, is against the interests of the whole society. This is a bad idea,’ Chang said in a recent telephone interview with Korea Times.”

Quote from an April 2009 article by Ellen Brown, The Tower of Basel

1. The Federal Deposit Insurance Corporation, the U.S. government agency that insures bank deposits in the US up to $250,000. http://www.fdic.gov/index.html
2. The Fed; the U.S. organization that Ben Bernankes speaks for which is the parent organization overseeing 12 regional ‘feds’ http://www.federalreserve.gov/otherfrb.htm The Fed is owned by private banks through an elaborate process. http://www.webofdebt.com/articles/time_to_buy_the_fed.php
3. Basel is the town in Switzerland where international meetings have been held on banking since 1970. The Basel Committee meets four times a year. Basel is also the headquarters of the Bank for International Settlements. http://www.bis.org/   Basel III occurred in 2010 and 2011 in response to the financial failures of 2008.

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