Vultures' Picnic, page 37
“Poverty reduction?” Who comes up with these titles? Who do they think is fooled? Well, when your memos are taped to the front of a tank, you can call it just about anything you like.
In 2005, Ecuador blew again when the IMF squeezed harder. While phone land lines were down, I was able to get Ecuador’s incoming President on his cell phone (how is a story too crazy to believe).28 The new President invited me down. (The outgoing President left via helicopter from the balcony of his office.)
In Quito, working my way through chanting women (I liked their style—they wore fedoras), then through rings of armed and nervous military guards, I made it into the Presidential palace for my appointment—but immediately was shooed away.
Apparently, the U.S. Ambassador had seen Palast on President Alfredo Palacio’s calendar and told him to forget it. The President knew that the Ambassador, who held his nation by the currency, had to be obeyed, and sent me off. Then President Palacio told his son, Alfredo Jr., to let me in through a back door into the Ecuadoran Oval Office.
I had those World Bank/IMF agreements that required horrific budget cuts of Ecuador and the sale of state assets. Though his predecessor as President had agreed to the terms, the new President had never seen a copy.
Well, I like to share.
Palacio told me he was sure George Bush, then President, would listen to “reason” and get the World Bank to back off. Palacio reasoned, Bush listened, grinned, then left Palacio and his country to die.
LONDON SCHOOL OF ECONOMICS
Sometimes it’s helpful to have your paranoia justified by an expert.
Joe Stiglitz is an expert, a big-shot economist. He made a big splash by analyzing the First Catechism of Free Market economics: that The Market has “wisdom,” that The Market is always right. That’s why we should be happy to designate The Market as the modern Thug, the Invisible Hand with a big rock to keep us in line with its wisdom. But Stiglitz proved, mathematically, that sometimes The Market can be just crazy, cruel, insane, ignorant, especially when some of the players in the market are keeping secrets.
Now, you and I and Lonigro and most of the planet know that already, but to economists, the discovery that The Market could be wrong was so astonishing that they gave Stiglitz the Nobel Prize.
In 2000, he and I were lecturing at the London School of Economics on the same night, and I figured I’d learn more by listening to him than by listening to myself. So I wrapped up early and went over.
The man is wicked smart, an academic with enough real-world scars to let you know that numbers on the chalkboard can save or destroy nations. Stiglitz agreed to chat with me the next day up at Cambridge, where he was visiting his son. We spoke for what must have been three hours. He stayed cheerful except when I used the words Larry Summers. He’d turn purple and the academic guard would go down. I used Larry Summers a lot.
I came to Stiglitz not just because he was an expert, but because he was an eye-witness to a crime. He had been inside, a member of President Clinton’s cabinet, head of the Council of Economic Advisors from 1995 to 1997. Clinton didn’t take his counsel, but he did let Stiglitz sit in the room with Summers and Rubin while they convinced the good ol’ boy President to decriminalize banking. Stiglitz sat through it somehow, without making gagging sounds or rolling his eyes. He did finally intervene, he told me, when Summers asked Rubin, one too many times, “What will Goldman think of this?”
Apparently, Summers and Rubin never made a major economic policy decision without measuring the implications for Rubin’s former bank. They thought of it as a fine way to test their policies against The Market’s expected reaction. Stiglitz thought it sick, bad governance, and a blatant conflict of interest. He pointed that out and got no more than a look one would give a child that doesn’t understand the ways of the adult world.
In regard to letting banks run wild worldwide, Stiglitz raised some questions and got more tolerant “you’ll see when you grow up” looks.
In 2008, when Barack Obama was elected by a nation in deep economic recession, the President-Elect waited barely a week before picking his economic cabinet: Larry Summers to the new post of Economics Czar and Tim Geithner as Czarina, Secretary of the Treasury.
Stiglitz and others who successfully warned of the fires that would erupt from bank de-control were passed over. Instead of the economic firefighters, Obama chose the arsonists.
Maybe Stiglitz was just sore at Summers over getting fired by the World Bank. Like Summers, Stiglitz had also held the post of World Bank chief economist. He took the job seriously and, word has it, Summers had him taken out.
Stiglitz had seen it all while at the Bank, including despots turning World Bank privatization programs into bribery free-for-alls (“briberization,” Stiglitz called it), cruel demands on nations begging for food (Ethiopia still bothers him), and the Bank’s pathological desire to tear down finance regulations in nations that barely had finances.
But crucial to me was his authentication of the “Poverty Reduction Strategies” and other inside documents from the Bank that had come to our BBC offices. And they needed translating from Bureaucratic Esperanto.
One in particular disturbed me, regarding Ecuador. The World Bank, after ordering the thirty-fold increase in the cost of cooking gas, warned the government to expect “social unrest,” which, the Bank said, should be met with “political resolve.”
What? It seems to me the Bank and its partner, the IMF, were saying in euphemistic fashion that the harsh austerity program would lead to mayhem in the streets and the government should get the police readied for the crackdown. Was this just Palast paranoia?
Stiglitz’s answer nearly knocked me out of my chair.
“We had a name for it: the IMF riot.” It was cold strategy. And you thought banking was dull. Stiglitz said that when the IMF has nations “down and out, it takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up.”
Just as I thought, the riots were in the plan.
And we could see the squeeze, explosion, and crackdown repeated from Greece to Thailand.
I suggested we rename the IMF and World Bank “Riots R Us.”
MANHATTAN, DOWNTOWN
On July 18, 2006, President George Bush gave German Chancellor Angela Merkel a shoulder massage. On May 9, 2010, President Obama twisted her arm off, or, as the White House said in its official statement, the President and Chancellor “discussed the importance of resolute action by Greece and timely support from the IMF and Europe to address Greece’s economic difficulties.”
Germany would have to pony up. Or else. Or else what? Or else this, Angela: In 2008, in a truly strange and wondrous accounting maneuver, the Federal Reserve, for the first time in its history, transferred wads of U.S. currency, totaling half a trillion dollars, to the European Central Bank (and the Central Banks of Switzerland and Japan). Now, Obama signalled the wincing German Chancellor, unless Greece (and Spain) got “resolute” on their citizens—whips, truncheons, and wage cuts—and Germany put money into the pot, the United States would not throw in the additional half trillion the Fed had promised.
Why did our nice President put a half-nelson on the lady Chancellor? Because Barack Obama is not just President of the United States, he was also chief executive of AIG Insurance, which the U.S. Treasury had just bought for $170 billion in bail-out funds.
One single corporation, AIG, not a bank even, was given this $170 billion (six times California’s deficit) because it was the “counter-party” that had sold the world’s banks these crap Credit Default Swaps, thereby promising insurance against the underlying loans going bust.
The U.S. taxpayers had it up to here with bank bail-outs, so slipping the money to AIG was a way for the U.S. Treasury to back-door a hundred billion to The Boys indirectly. Goldman got $12.9 billion via the AIG bail-out fund, but so did the Swiss ($5 billion to UBS); and, Angela, your Deutsche Bank got $11.8 billion, all of it hidden from Americans’ jingoistic eyes. (The German bank immediately ran off with the U.S. Treasury money to Las Vegas and bet it all on a casino, literally. The Germans bought The Cosmopolitan casino-hotel, now bankrupt, and their $4 billion bet with our money is kaput.)
The United States had bailed out Deutsche Bank, and now Obama wanted Merkel’s skin in the game too. To bail out “Greece,” though Greece would get none of it. The German money would go to the speculators, banks holding the credit default bag, including AIG.
And that’s their big joke, isn’t it? That the Greeks don’t get a dime. Germany, France and the European Union gave Greece a €110 billion ($160 billion) bail-out loan in 2010, while investment banks and speculators dumped about €110 billion in Greek debt. In other words, the money went to the bankers, not one Euro to Greece’s Treasury.
But at least AIG would not go down again. And for its CEO, Obama, that was enough.
But not enough for the German banks and Greece’s ruling class, the we-don’t-pay-no-stinkin’-taxes grifters that helped drain Greece’s treasury. In July 2011, the Association of Greek Industries and the German Chancellor demanded that the Greek government sell off €50 billion in state assets, including the water system, to pay the “spread.” (I’d seen this movie before: in 1988, when Argentina, to pay off interest on loans at rates that would reach 101 percent, was ordered to sell off the Buenos Aires water system to Enron. Rates quadrupled, pipes broke, and Enron left the Argentines thirsty and busted.) And Greece’s state bank has to go as well. The EU is not going to let Greece do what Lula’s Brazil did, keep its own bank as a financial life buoy. The arsonists demanded their fire sale. German speculators topped the list of buyers hungry for the nation’s assets. The fabled ports of Piraeus and Thessaloniki were taken, obtaining with just a little financial finagling what Hitler couldn’t obtain with Panzers.
Badpenny could hate in a clean and pure manner: Vultures chewing Zambia, speculators igniting Greece, bankers scamming the Swiss railway retirement fund, which then cut pensions. And when she went after them, it was personal, physical, hormonal. Sometimes she was on it for twenty, thirty hours, non-stop. She was fixated, she was crazed: There must be a connection between Greece, AIG, the bail-outs, and the Goldman currency swap scam. It was dawn in Europe, midnight in America, and I was on the office mattress, safe in dreamland.
Until five A.M.
Suddenly, there was the investigatrix, standing over me, crazy, excited. Badpenny was reading, actually she was shouting, “Hedge-Fonds im Oktober . . .” and then lots and lots of German.
“ARE YOU FUCKING CRAZY? IT’S—WHAT TIME IS IT?—OH MY GOD, IT’S LIKE FIVE A.M.!”
“It’s from the—Are you listening to me?—the Frankfurter Allgemeine. . . .”
I was helpless, on my back, trying to claw my way back to sleep while getting machine-gunned with multi-lingual shrapnel at five fucking A.M.
“LISTEN TO ME LISTEN ‘Die Wette . . .’ ” then some more German. OK, Jesus. What? WHAT?
“I found it! ARE YOU LISTENING TO ME? You wanted me to find it! I found—see, it means—‘. . . the question now is, who sold the credit default swap?’ LOOK AT THIS, I GOT IT, THE CONNECTION BACK TO GOLDMAN!”
The room was hellish hot and she unzipped that little tight jacket she wore on top of the leathers.
“Look! You told me to find it. I’ve got it—you’re not looking! Here Le Figaro picks it up”—she threw off the little top—“La banque”—then lots of blah blah in French words and—“de 300 millions de dollars. That means the bank pocketed $300 million, which matches—I DID ALL THIS FOR YOU AND YOU’RE NOT PAYING ATTENTION”—snap! the black motorcycle pants zipped open—“it matches exactly . . .”
I paid attention.
“. . . exactly the spread . . .”—she pulled away the leather, switching to Italian—“Look. Borsa Plus—migliori tassi sul mercato . . .”
Then next to me, white lace, heartbreakingly girlish, that had hidden under the tough leather.
And I could not speak.
High above the office ceiling, I could hear idiot angels hooting and whistling like cowboys, touching themselves under their robes.
And then they fell silent, as she looked down into my eyes and through them, while their wings beat slowly, rhythmically.
She whispered. “It’s just a technicality by now, isn’t it?”
Those were her last words in English in that warm hour before dawn.
Badpenny’s sleeping breath purred in my ear. But breaking through it, the sound of glass shattering on Second Avenue. Some drunk probably.
Now sleep was impossible. I got up, got dressed, wrote a note, a line from Rilke—Ein jeder Engel ist schrecklich—tore it up and left to go home to the woman I had loved for so long, for the last time.
Every angel is terrifying.
RETURN TO ECUADOR
All my investigations—of global finance, of oil, of the vultures—seem to weave their way through this land at the center of the Earth. Now, I was back in Quito with World Bank memos marked confidential and a lot of questions for a new President, Raphael Correa.
Correa and Ecuador were under attack on three fronts, by the World Bank/IMF combine, by Chevron, Occidental, and the oil industry, and by the finance Vultures.
His predecessor, Palacio, had refused to cut the health budget to pay off the debts of Ecuador’s long-gone scoundrel bankers. The World Bank was not amused. Its President, Paul Wolfowitz, who, in his own mind, had just won the war in Iraq, and was thus filled with the testosterone of self-delusion, dropped the hammer on Ecuador, cutting off the country’s access to the world’s capital markets. It was a banking embargo that could lead to Ecuador’s starvation. The appeal to George Bush failed and that’s when Ecuador was left to die.
Ecuador didn’t die.
Palacio despaired, but his Finance Minister, Rafael Correa, on his own, secretly went to the President of Venezuela, Hugo Chavez, and got loan guarantees and other help from Chavez worth up to a quarter billion dollars.
Correa saved his nation—and was fired. Palacio really had no choice: ministers can’t run off on their own ponies cutting deals, even life-saving deals.
In Ecuador’s December 2006 election, the IMF and international banks were counting on the owner of the biggest banana plantation in this banana republic to be returned to the presidency. But Correa, which means “The Belt” in Spanish, whipped him. The country’s credit rating, in bad shape, fell apart. Correa grinned.
Ecuador’s agreement to pay off the losses of banks run by straight-out crooks had been coerced out of Palacio’s and Correa’s psychotic predecessors. (There are more psycho presidents in history than I can count, from Iran to the USA. But Ecuador’s Abdala Bucaram, removed in 1997, had an official medical diagnosis.)
Correa’s presidential campaign anthem was Twisted Sister’s “We’re Not Gonna Take It.” Sure. I’d heard that before, from his predecessors. Once in office, once under the World Bank gun, they changed their tune.
Correa didn’t. He told me, “We are not going to pay bonds with the hunger of our people.” Food first, interest payments later, vulture payments never. Big talk. I’d just met with his compadre, Hugo Chavez, Venezuela’s President who could back up big talk with big oil reserves. But tiny Ecuador?
And there was more heat on Correa. George Bush demanded that Ecuador maintain a U.S. military base on its coast. Correa told Bush, forget it—unless Bush allowed Ecuador to put a military base in Miami.
Clearly, Correa was asking for it. Indeed, he once asked for it, literally, when some angry cops mobbed him. He ripped open his shirt and told them, “Dispara a mí!!”—Shoot me!
I showed the President agreements made by an Ecuador finance minister with the World Bank in 2005. The March 10 meeting minutes I had in my hand were marked for OFFICIAL USE ONLY. The President was official enough for me, if not for the World Bank.
He was disgusted, but not surprised, that the World Bank required Ecuador to sell off the nation’s oil fields. It read,“. . . Despite political opposition the government was moving ahead with an ambitious package of structural reform, including an opening to private partnership in the oil sector. . . .”
Opening to private—as in, sell us your oil reserves. Partnership—like with Chevron.
Correa had been a Finance Minister, but he’d never been shown these documents. He asked me if he could make a copy. Since they were, presumably, stolen from his office, I didn’t see how I could object.
While he’d never been shown the deals, the attacks on him from banks and diplomats let him know he’d certainly violated terms secretly made before his time.
As to the required sell-offs of the oil fields and privatization of power companies, Correa told me, simply, “Ecuador is no longer for sale.” Good luck with that.
Much of the power of the WTO, IMF, and World Bank is not just in their brute ability to choke off a nation’s money supply, but the gallons of greasy highfalutin techno-economic-theoretical jive that covers up their cold threats. But they were trying to blow their complex economics smoke in the face of Professor Dr. Correa, European-trained economist, fluent in five languages. Until he was tapped for the Finance post by Palacio, Dr. Correa taught economics at the University of Illinois, where his doctorate and publications included “Destabilizing Speculation in the Exchange Market: The Ecuadorian Case,” “The Washington Consensus in Latin America: A Quantitative Evaluation,” and so on. In other words, he had Larry Summers’s number. When the World Bank spoke in macroeconomic bullshit, Correa knew exactly what they really meant.
Correa knows that Ecuador’s only hope, other than begging, is to take back control of its own oil. Ecuador was once a member of OPEC. Correa rejoined it.
He had already taken the first difficult step of taking back the public’s oil, while Palacio’s Finance Minister. The two of them threw Occidental Petroleum out on its ass for not living up to its contracts. Occidental was shocked. Oxy must have confused Ecuador with Azerbaijan and thought it could treat contract terms like baby-bottom wipes.
