the
Greek case
by SCH
If we take a
look at the Greek legislation, we can understand why the country is
totally controlled by big private banks. According to the legislation
concerning operating rules of the Primary
Dealers selected in order
to provide specialised services in the government securities
market
, one can read that:
From article
1, paragraph1: as Primary Dealers are appointed institutions
authorised as credit institutions or investment firms in a country
which is a member of the European Union or authorised as such in
another jurisdiction by a regulatory authority which, in the opinion
of the Minister of Finance and the Governor of the Bank of Greece
(hereinafter “the Competent Authorities”), imposes an adequate
supervisory/investor protection regime. Primary Dealers are
selected in order to provide specialised services in the government
securities market, i.e., to participate in the syndications and
auctions of Greek government securities in the primary market as well
as to trade such securities in the Electronic Secondary Securities
Market (hereinafter “HDAT”) at prices that they are obliged to
announce.
From article
4, paragraphs Da and Db: Primary Dealers are required to facilitate a
broad distribution of Greek government securities domestically as
well as internationally and provide the Ministry of Finance, the
Public Debt Management Agency (PDMA) and the Bank of Greece with
advice, information on and assessment of market conditions, and other
information pertaining to their status as Primary Dealers.
From article
5, paragraphs 1d, 1e, 1f, 1g: Primary Dealers enjoy privileged
access to information pertaining to the borrowing needs of the
Hellenic Republic and issuance planning, new financial
instruments and relating operating rules, securities in circulation,
volume and turn-over as well as auction results. Exclusive access
to short-term securities lending mechanisms that may be created in
order to facilitate hedging (short selling). Privileged access
to syndication pursuant to Article 13. Privileged access to
liabilities management. The Public Debt Management Agency (PDMA)
shall take into account the credit rating of the counterparty with
which it shall perform such transactions.
From article
9: The Committee responsible for Primary Dealers’ Supervision and
Control
is set up by a joint decision of the Competent Authorities
and consists of 10 members representing the following institutions:
two representatives of the Bank of Greece, three representatives of
the Ministry of Finance, one of which from the Public Debt Management
Agency (PDMA), three representatives of the Primary Dealers, one
representative of the Dealers, one representative of the Hellenic
Banks Association. The Committee is presided over by one of the
two representatives of the Bank of Greece and decides with a majority
of at least seven of its members.
According to
the Greek PDMA website, the primary dealers are currently the
following 22 banks: Alpha Bank, Banca IMI Spa, Barclays Bank plc, BNP
Paribas, Citigroup, Credit Suisse, Deutsche Bank, Emporiki Bank, EFG
Eurobank, Goldman Sachs, HSBC, ING Bank, JP Morgan, Merill Lynch,
Morgan Stanley, National Bank of Greece, Nomura, Piraeus Bank, RBS,
Societe Generale, UBS, Unicredit.
Despite the
swap scandal of "fixing" the Greek deficit by Goldman
Sachs, for which the Greek government paid the bank at least 300
million euros, (http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=all&_r=0), Goldman Sachs is included in the Primary Dealers list,
in order to continue providing "valuable services - advice"
to the Greek government. Another two banks, Merrill Lynch and
Citigroup, are included in the Primary Dealers list, despite that
according to the US Financial Crisis Inquiry Commission (FCIC)
report, together with Goldman Sachs, are those responsible for the
"creation" of 30% of the destructive financial "tools"
known as CDOs during 2004-2007, which contributed significantly to
the creation of the housing bubble in US. Two more banks which had
significant presence in CDOs that time are Deutsche Bank and UBS,
which also continue to be two of the twenty two Primary Dealers.
Another bank
based in Greece, Piraeus Bank, is also included to the Primary
Dealers list. It is worth to remember the scandal of "selling"
the healthy part of public bank Agrotiki to Piraeus Bank in July
2012. The governor of the Bank of Greece, George Provopoulos, had
stated that it was a necessary action because the European Central
Bank was about to cut the necessary amount of 6,3 billion euros and
Agrotiki would have closed, so, many people would have lost their
jobs. However, according to the bill concerning this "selling",
the difference between assets and liabilities of Agrotiki Bank, was
nearly 6,67 billion euros and should be covered exclusively by the
Greek Financial Stability Fund, ie the Greek taxpayers! Which means
that the "selling" was targeting only to assist a private
bank (Piraeus) to eliminate a competitor (public bank Agrotiki), and
secure its position in the "Too Big to Fail" category.
Those banks
are permanently included in the Primary Dealers list and according to
a "riddled" legislation, they have the right to participate
in all liquidity processes by the Greek Public in money markets, to
supervise and control these processes, as well as enjoying special
privileges.
It is
characteristic that the committee, which is responsible to control
and supervise primary dealers, consists of 10 members, 5 of them
represent private banks interests, according to the article 9.
However, knowing that the Bank of Greece is, in high percentage, a
private institution, then private interests dominate in the
committee with a fraction of 7/10, just as much as they need to
decide in favor of banking cartels.
Also, since
no one knows who are the basic stockholders of the Bank of Greece, it
would be no surprise if the basic stockholders are the same private
banks which participate in committee which supervise the primary
dealers.
The Greek
case shows that the supposed free market is just an illusion,
especially in the banking industry. The biggest private banks created
a complex financial environment with complex financial destructive
"tools" which governments are unable to manage. Governments
are forced to turn to the same banks for "advising services"
while they are flooded with former bank executives placed in key
positions. This explains why the biggest private banks receive
bailout packages of billions at the expense of taxpayers, loading
governments with more debt.
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