The unexpected rejection by the US Congress of the Bush Administration financial rescue plan, TARP on September 29 has opened up the spectre for the first time of a 1931-style domino wave of worldwide bank failures. That is already underway across the US banking spectrum with the failure, nationalization or forced liquidation in the past two weeks of Fannie Mae and Freddie Mac, of the giant Washington Mutual mortgage lender, of the nation’s fourth largest deposit bank, Wachovia. That was on top of a wave of smaller bank failures that began with IndyMac in the spring. For some it is appealing and more simple to grasp the magnitude of these titanic events in the US-centered financial world by assuming it is all part of a pre-planned grand conspiracy by the Money Masters, what in the 1920s in the USA was termed the Money Trust, to control the entire financial world.
As the details of the present crisis reveal, there are huge ideological fault lines making for chaos and a potential meltdown of the Laissez Faire financial system. That present system, which was built on the back of Wall Street financial and banking deregulation since 1987 when Alan Greenspan, a devout follower and close friend of radical individualist Ayn Rand, became Wall Street’s man at the Federal Reserve for almost 19 years, is over now with the failure of the Henry Paulson $700 billion bailout scheme. Governments worldwide now face no alternative but to begin the painful process of putting the financial genie back in the bottle and re-regulating an out-of-control financial system. The failure of the UK Government and the US Government to address that fundamental issue is behind the present crisis of confidence.
A brief look at history
The Great Depression in Germany in 1931 began with a seemingly minor event—the collapse of a bank in Vienna, Creditanstalt, that May. For readers interested in more on the remarkable parallels between that crisis and that of today, I recommend the treatment in my earlier volume, A Century of War: Anglo-American Oil Politics and the New World Order.