When the G20 leaders met in London on April 2, 2009, they agreed to expand the powers of the old Financial Stability Forum (FSF) into this new Financial Stability Board (FSB). The FSF was chaired by the General Manager of the Bank for International Settlements and was set up in 1999 to serve in a merely advisory capacity for the G7 (a group of finance ministers formed from the seven major industrialized nations). The new FSB has been expanded to include all G20 members (19 nations plus the EU) and it has real teeth, imposing "obligations" and "commitments" on its members. What is the FSB's mandate, what are its expanded powers, and who is in charge?

The Shadowy Financial Stability Board

An article in The London Guardian gives these details:

The secretariat is based at the Bank for International Settlements' headquarters in Basel, Switzerland.

To the wary, this is not a comforting sign. The BIS has a dark and controversial history. Prof. Carroll Quigley, Bill Clinton's mentor at Georgetown University, said in Tragedy and Hope that the BIS was created to be the apex of "a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole." The goal was "[control] in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences."

The Financial Stability Forum is chaired by Mario Draghi, governor of the Bank of Italy.

Draghi was director general of the Italian treasury from 1991 to 2001, where he was responsible for widespread privatization (sell-off of government holdings to private investors). From January 2002 to January 2006, he was a partner at Goldman Sachs on Wall Street, another controversial player.

The regulator . . . will cooperate with the IMF, the Washington-based body that monitors countries' financial health, lending funds if needed.

The IMF is an international banking organization that is also controversial. Joseph Stiglitz, former chief economist for the World Bank, charges it with ensnaring Third World countries in a debt trap from which they cannot escape. Debtors unable to pay are bound by "conditionalities" that include a forced sell-off of national assets to private investors in order to service their loans.

What will the regulator oversee? All 'systemically important' financial institutions, instruments and markets.

The term "systemically important" is not defined. Will it include such systemically important institutions as national treasuries, and such systemically important markets as gold, oil and food?

The body will . . . act as a clearing house for information-sharing and contingency planning for the benefit of its members.

In some contexts, information-sharing is called illegal collusion. Would the information-sharing here include such things as secret agreements among central banks to buy or sell particular currencies, with the concomitant power to support or collapse targeted local economies? Consider the short-selling of the Mexican peso by collusive action in 1995, the short-selling of Southeast Asian currencies in 1998, and the collusion among central banks to support the U.S. dollar in July of last year -- good for the dollar and the big players with inside information perhaps, but not so good for the small investors who reasonably bet on "market forces," bought gold or foreign currencies, and lost their shirts.

To prevent another debt bubble, the new body will recommend financial companies maintain provisions against credit losses and may impose constraints on borrowing.

What sort of constraints? The Basel Accords imposed by the BIS have not generally worked out well. The first Basel Accord, issued in 1998, was blamed for inducing a depression in Japan from which that country has yet to recover; and the Second Basel Accord and its associated mark-to-market rule have been blamed for bringing on the current credit crisis, from which the U.S. and the world have yet to recover. These charges have been explored at length elsewhere.

The Amorphous 12 International Standards and Codes

Most troubling, perhaps, is this vague parenthetical reference in a press release issued by the BIS titled "Financial Stability Forum Re-established as the Financial Stability Board":

As obligations of membership, member countries and territories commit to . . . implement international financial standards (including the 12 key International Standards and Codes) . . .

This is not just friendly advice from an advisory board. It is a commitment to comply, so you would expect some detailed discussion concerning what those standards entail. However, a search of the major media reveals virtually nothing. The 12 key International Standards and Codes are left undefined and un-discussed. The FSB website lists them, but it is vague. The Standards and Codes cover broad areas that are apparently subject to modification as the overseeing committees see fit. They include:

Money and financial policy transparency
Fiscal policy transparency
Data dissemination
Insolvency
Corporate governance
Accounting
Auditing
Payment and settlement
Market integrity
Banking supervision
Securities regulation
Insurance supervision

Take "fiscal policy transparency" as an example. The "Code of Good Practices on Fiscal Transparency" was adopted by the IMF Interim Committee in 1998. The "synoptic description" says:

The code contains transparency requirements to provide assurances to the public and to capital markets that a sufficiently complete picture of the structure and finances of government is available so as to allow the soundness of fiscal policy to be reliably assessed.

We learn that members are required to provide a "picture of the structure and finances of government" that is complete enough for an assessment of its "soundness" -- but an assessment by whom, and what if a government fails the test? Is an unelected private committee based in the BIS allowed to evaluate the "structure and function" of particular national governments and, if they are determined to have fiscal policies that are not "sound," to impose "conditionalities" and "austerity measures" of the sort that the IMF is notorious for imposing on Third World countries?

For three centuries, private international banking interests have brought governments in line by blocking them from issuing their own currencies and requiring them to borrow banker-issued "banknotes" instead. "Allow me to issue and control a nation's currency," Mayer Amschel Bauer Rothschild famously said in 1791, "and I care not who makes its laws." The real rebellion of the American colonists in 1776, according to Benjamin Franklin, was against a foreign master who forbade the colonists from issuing their own money and required that taxes be paid in gold. The colonists, not having gold, had to borrow gold-backed banknotes from the British bankers instead. The catch was that the notes were created on the "fractional reserve" system, allowing the bankers to issue up to ten times as many notes as they actually had gold, essentially creating them out of thin air just as the colonists were doing. The result was not only to lock the colonists into debt to foreign bankers but to propel the nation into a crippling depression. The colonists finally rebelled and reverted to issuing their own currency. Funding a revolution against a major world power with money they printed themselves, they succeeded in defeating their oppressors and winning their independence.

Political colonialism is now a thing of the past, but under the new FSB guidelines, nations can still be held in feudalistic subservience to foreign masters. Consider this scenario: Like in the American colonies, the new FSB rules precipitate a global depression the likes of which have never before been seen. XYZ country wakes up to the fact that all of this is unnecessary -- that it could be creating its own money, freeing itself from the debt trap, rather than borrowing from bankers who create money on computer screens and charge interest for the privilege of borrowing it. But this realization comes too late. The FSB has ruled that for a government to issue money is an impermissible "merging of the public and private sectors" and an "unsound banking practice" forbidden under the "12 Key International Standards and Codes." XYZ is forced into line. National sovereignty has been abdicated to a private committee, with no say by the voters.

A Bloodless Coup?

Suspicious observers might say that this is how you pull off a private global dictatorship: (1) create a global crisis; (2) appoint an "advisory body" to retain and maintain "stability"; and then (3) "formalize" the advisory body as global regulator. By the time the people wake up to what has happened, it's too late. Marilyn Barnewall, who was dubbed by Forbes Magazine the "dean of American private banking," wrote in an April 2009 article titled "What Happened to American Sovereignty at G-20?":

It seems the world's bankers have executed a bloodless coup and now represent all of the people in the world. . . . President Obama agreed at the G20 meeting in London to create an international board with authority to intervene in U.S. corporations by dictating executive compensation and approving or disapproving business management decisions. Under the new Financial Stability Board, the United States has only one vote. In other words, the group will be largely controlled by European central bankers. My guess is, they will represent themselves, not you and not me and certainly not America.

Adoption of the FSB was never voted on by the public, either individually or through their legislators. The G20 Summit has been called "a New Bretton Woods," referring to agreements entered into in 1944 establishing new rules for international trade. But Bretton Woods was put in place by Congressional Executive Agreement, requiring a majority vote of the legislature; and it more properly should have been done by treaty, requiring a two-thirds vote of the Senate, since it was an international agreement binding on the nation. The same should be mandated before imposing the will of the BIS-based Financial Stability Board on the U.S., its banks and its businesses.

Even with a two-thirds Senate vote, before Congress gives its approval it should draft legislation ensuring that the checks and balances imposed by our Constitution are built into the agreement. The legislatures of the member nations could be required to elect a representative body to provide oversight and take corrective measures as needed, with that body's representatives answerable to their national electorates. If we are to avoid abdicating our national sovereignty to a private foreign banking elite, we need to insist on compliance with the constitutional and legal mandates on which our country was founded.

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her earlier books focused on the pharmaceutical cartel that gets its power from “the money trust.” Her eleven books include Forbidden Medicine, Nature’s Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are www.webofdebt.com and www.ellenbrown.com.

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The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It was established after the 2009 G-20 London summit in April 2009 as a successor to the Financial Stability Forum. The Board includes all G-20 major economies, FSF members, and the European Commission. It is based in Basel, Switzerland.^[1]

Background

The Financial Stability Board emerged from the Financial Stability Forum (FSF), a group of finance ministries, central bankers, and international financial bodies. The FSF was founded in 1999 to promote international financial stability, after discussions among Finance Ministers and Central Bank Governors of the G7 countries, and a study which they commissioned.^[2] The FSF facilitated discussion and co-operation on supervision and surveillance of financial institutions, transactions and events. FSF was managed by a small secretariat housed at the Bank for International Settlements in Basel, Switzerland.^[3] The FSF membership included about a dozen nations who participate through their central banks, financial ministries and departments, and securities regulators, including: the United States, Japan, Germany, the United Kingdom, France, Italy, Canada, Australia, the Netherlands and several other industrialized economies as well as several international economic organizations.^[4] At the G20 summit on November 15, 2008 it was agreed that the membership of the FSF will be expanded to include emerging economies, such as China. The 2009 G-20 London summit decided to establish a successor to the FSF, the Financial Stability Board. The FSB includes members of the G20 who were not members of FSF.^[5]

The Financial Stability Forum met in Rome on 28–29 March 2008 in connection with the Bank for International Settlements. Members discussed current challenges in financial markets, and various policy options to address them from this point forward.^[6] At this meeting, the FSF discussed a report to be delivered to G7 Finance Ministers and Central Bank Governors in April 2008. The report identifies key weaknesses underlying current financial turmoil, and recommends actions to improve market and institutional resilience. The FSF discussed work underway at the International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) with regard to sovereign wealth funds (SWFs). The IMF is working closely with SWFs to identify a set of voluntary best practice guidelines, and is focusing on the governance, institutional arrangements and transparency of SWFs.^[6] On April 12, 2008 the FSF delivered a report to the G7 Finance Ministers which details out its recommendations for enhancing the resilience of the financial markets and financial institutions. These are in five areas:

• Strengthened prudential oversight of capital, liquidity and risk management
• Enhancing transparency and valuation
• Changes in the role and uses of credit ratings
• Strengthening the authorities' responsiveness to risks
• Robust arrangements for dealing with stress in the financial system [1]

Overview

The FSB represents the G-20 leaders' first major international institutional innovation. Secretary of the US Treasury Tim Geithner has described it as "in effect, a fourth pillar" of the architecture of global economic governance. The FSB has been assigned a number of important tasks, working alongside the IMF, World Bank, and WTO. Chairman of the board is the Canadian Mark Carney, Governor of the Bank of Canada.^[7]

Member Organizations

• Bank for International Settlements
• European Central Bank
• European Commission
• International Monetary Fund
• Organisation for Economic Co-operation and Development
• The World Bank