Swiss Parliament Glass-Steagall Vote Sends The World a Powerful Signal

Swiss Parliament Glass-Steagall Vote Sends –
– The World a Powerful Signal –

by Claudio Celani

Sept. 14–The Swiss National Council (the lower house of
parliament) voted on Sept. 9, with a 3:2 maiority for three
distinct statements calling for a strict, Glass-Steagall type of
banking separation system. Switzerland is a major world financial
center. If the parliament’s will is implemented, the two large
banks UBS and Credit Suisse will be split and trillions of
speculative liabilities will be hung out to dry, representing a
Lehman Brothers effect on steroids for the international
financial system.
And yet, no mention of such an important decision was to be
found in the international media, with the exception of a tiny
article in the German financial daily {Boersenzeitung}. A curtain
of silence has been drawn on a decision of enormous systemic
relevance.
Sure, the Swiss vote is not yet a legislative act. Swiss
banks are not threatened with separation in the short term.
However, the intention was expressed to put an end to the the Too
Big To Fail (TBTF) system, and that intention is enough to shake
the house of cards. That is what the financial oligarchy fears
and that explains the blackout.
Not so in Switzerland. The day after the vote, the debate
exploded in full force, with the bank lobby protesting about the
“unholy alliance” of left- and right-wing parties that made the
vote possible. Indeed, it is a political breakthrough that the
Socialist Party (SP) and the Swiss Popular Party (SVP) joined in
a strategic alliance for banking separation, putting aside all
other issues where they strongly differ. The Green Party also
joined the coalition.
The government (Federal Council), where a
Liberal/Conservative/Christian Democratic coalition has the
majority, opposed the vote and lost. The vote binds the Federal
Council to give a formal answer to the request of whether a
banking separation in Switzerland is possible. Predictably, they
will set up a “commission of experts,” filled with bank
representatives, which will repeat its “no” to the idea, as it
did already in 2010.
SP representative Corrado Pardini announced that his group
is preparing a request for a national referendum to be presented
soon to the federal Chancellor, to check its formal validity. The
referendum is an important institution in the Swiss political
system: Referenda can be held if at least 100,000 citizens
request one, on any issue, and the result has the same validity
as an Act of Parliament. Barely a year passes without a
referendum, often more than one. Recently, for instance, a
referendum established a limit on managers’ incomes.
A referendum would make it possible to bypass the
government’s opposition to Glass-Steagall, as well as problems in
the upper house, the Council of the States (Cantons), where the
SP/SVP/Greens do not have a majority. Pardini is confident that a
referendum will yield 60% “yes” votes for a banking separation
system.
It is not yet known whether the SVP will join the campaign
for the referendum.

– A Recent Shift –
The first attempt at an alliance for a banking separation
reform started in 2009, when industrialist Nicolas Hayek (of the
Swatch Group) brought SVP founder Cristoph Blocher and SP
Secretary General Christian Levrat together to announce an
initiative in a press conference. However, the alliance failed,
and when it came to a vote in 2012, the SVP and SP split.
The attempt was recently resumed by an SP group around
Pardini, in the context of what an insider has described to {EIR}
as a “basilar” (grassroots) sentiment in the Swiss population
to defend national independence against the assault of what they
perceive as “American-dominated” financial globalization.
Certainly, a trigger for the political reaction was the new Swiss
banking regulation introduced at the end of 2012 by the financial
authority Finma, to implement a “bail-in” of large banks at the
expense of bondholders and depositors. The new regulation,
adopting global directives issued by the Financial Stability
Board, has been exposed by {EIR}, Aug. 23, 2013, and circulated
to the Swiss public, generating a wave of indignation. This,
together with pressures on Switzerland to surrender to more
cross-border financial deregulation, the NSA data-collecting
scandal, and the U.S. government’s war policy have led to
resolute opposition in Swiss public opinion.
This produced the first political result when the SP and SVP
joined in a vote June 16 against the so-called “Lex USA,” an
agreement to share data of Swiss banks with U.S. financial
authorities. The next day, Pardini launched his “Bank Security
Initiative” at a public event in Bern, presenting it in the
following way:
“The separation between investment and commercial banks
takes the risk connected with financial trading away from savings
and credit activities, downsizes large banks, and deprives them
of the undesired and anti-market government guarantees. Separated
banks strengthen customer protection and bank efficiency. They
support business with larger availability of credit. This ensures
jobs in industry, trade, and the service sectors.
“The decoupling of government from investment banks
eliminates the danger of ruinous bailouts, because investment
banks can go bankrupt without pulling down tens of thousands of
firms, as it was argued in 2008 in the UBS case. If their
bankruptcy threatens the international financial system, the IMF
should take care.”
Pardini made it clear that he considered all proposals
floated in Europe for a “soft” separation as unworkable, and
made explicit reference to the 1933 Glass-Steagall Act in the
United States as the model.
In the following weeks, behind-closed-doors negotiations
took place between Pardini, who was backed by the SP national
leadership, and SVP strategist Christoph Blocher. Thus, it was
not a surprise for insiders that, as parliament reopened on Sept.
9, the alliance of the two parties, plus the Greens, on this
issue would come out in the open.
The bank lobby deployed its media and political
representatives to attack the proposal, referring to an “unholy
alliance” of the parties and rejecting as scandalous the
proposition that “politicians and officials” would involve
themselves in banking affairs ({Neue Zürcher Zeitung}).
However, reflecting the broad support in the population, the
media was split.

– The Glass-Steagall `Success Story’ –
Outstanding was the report by Philipp Löpfe in
{Tagesanzeiger} on Sept. 10, under the headline “A Reasonable
Separation.” After stating that banking separation is not “an
exotic idea” and exposing the TBTF blackmail, the article
describes “the success story” of Glass-Steagall, which lasted
60 years. By the time President Clinton abrogated it,
Glass-Steagall had already been considerably “perforated.”
Banking separation would benefit Switzerland, UBS, and
Credit Suisse, Löpfe writes. The former has allegedly downsized
its investment banking, but “not everybody is convinced that UBS
does what it says. The Knight Vinke investors group accuses [UBS
CEO] Ermotti of having simply put the largest part of investment
banking in a Bad Bank, to deceive shareholders.” Knight Vinke is
convinced that UBS should turn into a capital management bank, as
“the most profitable model.” Credit Suisse has reduced the
investment-to-private-banking ratio from 60/40 to 50/50.
“Conclusion: Basically, a banking separation system in
Switzerland is feasible. For UBS, a return to capital management
activity would even be the best business model. The consequences
for employment would be contained, because both big banks manage
their investment banking in London and New York. With the
implementation of a separated banking system they would both be
smaller, but much more Swiss.”

– Assertion of National Independence –
Also author Gian Trepp, who has campaigned for
Glass-Stegall, wrote in his blog that the vote terminated “the
phase of fatalistic acceptance of the status quo in the unsolved
issue of Too Big To Fail. The fact is that UBS and CS destabilize
the Swiss economy. In relation to the real economy, which
produces the largest number of jobs, both large banks are still
so big, that a highly probable insolvency could collapse the
entire economy.”
“There is a basic sentiment in the population,” Trepp told
this author; the parliamentary vote was a reflection of that. It
is certainly a distinct Swiss character of “neutrality,” which
is another word for “independence,” rooted in the
centuries-long history of a {Willen-Nation}–i.e., a nation built
by the will of different peoples coming together. This explains,
he said, how it is possible that ideologically distant political
factions can join forces on an issue that pertains to the
national interest. Switzerland’s historically rooted
“neutrality” reflex has consequences for the “business model”
that the Swiss want to defend.
This feeling of independence (“Yes, we could call it a
Wilhelm Tell reflex, although Wilhelm Tell is a mythological
character”) turns against what in Switzerland is perceived as an
“American” attack on the Swiss financial system, and the fact
that the two big banks, UBS and Credit Suisse, are no longer
Swiss. “The USA has humiliated Switzerland,” he said.
The Swiss vote has sent a powerful political signal. It is
the reaction to a situation that has strategic, economic, and
military effects. The financial assault against Switzerland, the
NSA scandal, and President Obama’s drive for war are seen as one
picture, which makes it urgent for the nation to take steps to
secure its own integrity. This is a message that must be heard
and understood throughout the world.

This entry was posted in Austerity & Bank Bailouts, Economy, Glass Steagall and tagged , , , , , , , , . Bookmark the permalink.

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