LaRouchePac

Aug. 26 (EIRNS)-Lyndon LaRouche today issued an emergency call for the
immediate instituting of Glass-Steagall full bank separation worldwide, starting
in the United States.

"As of now," he said, "Wall Street is plummeting to a general breakdown
crisis. It is already underway and it is unstoppable. Wall Street is hopelessly
bankrupt. We must, therefore, mobilize in anticipation to force the United States
Federal Government to stop the financial crash from bringing down the real
economy and the nation with it."

LaRouche spelled out, "We must preemptively close down Wall Street and
force the issue back to the Presidential system. That means immediately
reconvening the U.S. Congress to act on legislation already presented in both the
House and the Senate to reinstate the FDR Glass-Steagall bank separation,
precisely as President Franklin Delano Roosevelt did it in 1933.

"We have reached the point where the United States can no longer survive if
we continue to tolerate the existence of Wall Street. We must end the Wall Street
control over the U.S. economy.

"This requires a mobilization as was carried out by FDR, to defend the U.S.
economy by ending the tyranny of Wall Street.

"Furthermore, this is a global crisis and the Glass-Steagall solution must be
adopted internationally. This means global bankruptcy reorganization and the
establishment of a credit system to revive capital intensive real production."

LaRouche concluded: "I am taking this opportunity to sound the alarm and
to call on others to join me in forcing the only viable action available to the
American people, and to people worldwide: Shut down Wall Street and reinstate
Glass-Steagall. We can sustain the U.S. economy while Wall Street is put
through an immediate, orderly bankruptcy proceeding. We can launch a global
recovery, but only under the condition that Wall Street and the other bankrupt
centers of financial speculation are shut down for good."

Executive Intelligence Review PRESS RELEASE

Glass-Steagall Would Have Prevented the 2008 Crash

by Paul Gallagher, Economics Editor, EIR

Aug. 25, 2015 (EIRNS)-The following oped was written August 24, as part of the ongoing debate on reinstating Glass-Steagall. Bills to do that (S. 1709 and HR 381) are now before both Houses of Congress.

Former President Clinton merely repeated the excuse of his former Treasury Secretary Robert Rubin, who tells all who ask about Glass-Steagall, "It wasn't being enforced; repeal made no difference." In truth, it made all the difference in generating the 2007-08 bank panic. Progressive elimination of Glass-Steagall over 1994-99 had dramatic effects on U.S. banking. The failure merely of a large hedge fund-Long-Term Capital Management-nearly broke the banking system in 1999 because 55 banks had poured leveraged loans into it-action not permitted to them under Glass-Steagall. The largest banks became impossibly complex, going from typically 1-300 subsidiaries to typically 2,500-4,000 subsidiaries, buying and creating what were overwhelmingly securities and broker-dealer vehicles. The derivatives markets exploded geometrically with the flow from depository giants, from about $70 trillion notional value in 1997 to $700 trillion in 2007 according to the Bank for International Settlements.

The largest banks became entirely interconnected with one another, particularly through their mutual derivatives exposures-thus a Lehman could not fail without bringing down all the others. Their leverage ratios were allowed to rise from typically 16:1 to 30-35:1. Loans/leases assets fell to about half of total assets, while the banks became rapidly larger.

After being saved with bailouts which at one point reached $14 trillion according to former FDIC chair Sheila Bair, the largest banks' lending fell; the whole banking system's loan/deposit ratio fell to a historically low 70%.

FDIC vice-chairman Thomas Hoenig described the current situation in a May 6 speech at the Boston Economics Club: "The largest banking firms also have tended to increase their complexity. They have used the safety net subsidy to support their expansion across the globe. They have further combined commercial, investment banking, and broker-dealer activities. There have been no fundamental changes in the wholesale funding markets, in the reliance on bank-like money market funds, or in the use of repos, which all are major sources of volatility in times of financial stress. They remain excessively leveraged with ratios, on average, of nearly 22 to 1. The remainder of the industry averages below 12 to 1. The average notional value of derivatives for the three largest U.S. banking firms at year-end 2013 exceeded $60 trillion."

The condition of the largest banks in London and the European Union is much worse. The trans-Atlantic banking system is headed for a general crash, unless we restore Glass-Steagall principles of regulation.

Markets Manifest the Systemic Breakdown Collapse

Aug. 24 (EIRNS)-On " 'Black Monday': Hundreds of Billions Wiped Off World
Stock Markets in Worst Plunge Since 2008," headlined the London Telegraph.
Asian stock markets fell by 6-8%; Europe's by 4-6%; the Wall Street exchanges
by just under 4%, or almost 600 points; Mideast markets plunged even more steeply;
Brazil's Bovespa exchange lost 6%.

The commodity collapse accelerated. West Texas crude oil is below $39/barrel.
Bloomberg's Commodity Price Index of 22 commodities is falling at 2-3%/week,
according to Bloomberg News Aug. 24, and is now at 1998 crisis levels. That index
has dropped by 51% since the end of 2013 as economic growth disappeared in trans-
Atlantic, then in Russia and Brazil; but the drop is clearly accelerating this Summer.
It was the trigger in Spring-Summer 2008 for the bank blowout of the Autumn.
One of the largest categories of corporate debt has gone "underwater" in the
crash. The larger U.S. corporations have borrowed $1 trillion/year since 2013,
overwhelmingly (90-95%) for the purpose of buying their own stocks, or other
companies' stocks in takeovers. The markets' plunge has now pushed that several
trillion in corporate debt into hundreds of billions in unrealized losses, which will
expand further.

Credit default spreads for major banks widened in an accelerating way,
indicating "counterparty risk"-their assets are bad. The high-yield bond spread (the
difference between corporate/muni bonds and junk bonds, mainly in energy)
zoomed up through 5%.

Wall Street banks were plunging faster than the market. On Aug. 20-21
combined, Citigroup shares lost 6.06%; JPMorgan Chase 6.01%; BoA 7.95%.
World trade shipping rates are in collapse, having fallen 60% in three weeks and
27% in the last week alone, to $467/TEU on the Shanghai Containerized Shipping
Index. About $800-1,000/TEU is a profitable level.

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LaRouchePac