Eric Boehlert: patching over leaks in the Obama illusion

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Richard Moore

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Apr 9, 2009, 8:38:00 PM4/9/09
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I've run across a few articles by Boehlert, and they fall into an interesting pattern. He keeps on the lookout for legitimate critiques of the Obama regime, critiques that could be threatening to the illusion if they were more widely understood, and then he finds some glib way to dismiss them. He's so consistent in this, that you can almost count his articles as evidence that the opposite is probably true. Says Boehlert:

Media figures have advanced the false claim that in signing the G-20 communiqué establishing a new Financial Stability Board, President Obama ceded U.S. sovereignty to international economic regulators. In fact, the FSB referenced in the communiqué does not have any authority over U.S. policy.

In a very narrow sense, this is a true statement. One might also say that the WTO has no authority over US policy. Maybe not directly, but we can be subject to sanctions if we violate WTO rules. California was forced to abandon some of its environmental protections in that way, for example. The way these global institutions work is that they lay down guidelines, and then the signatory nations are obligated to implement their own legislation in conformance. That's how the EU works. It's not direct, but it's authority nonetheless, whether it be the EU, the WTO, the IMF, or the FSB. And in each of these supra-sovereign institutions, it is unelected financial and corporate elites who set policy, in non-public meetings.

The FSB is one of a pair of initiatives announced at the G20, the other being SDRs -- Special Drawing Rights. The IMF was authorized to issue $250 billion credit out of thin air in the form of these SDRs. We need to keep in mind that these decisions were not made at the G20, by those political personalities we saw on TV, but were finalized at an earlier meeting of the main financial minsters and treasury secretaries. We were told they emerged from that meeting with a consensus, but we were given no details. The political representatives sign off for the cameras, but we're looking at a plan developed by the international bankers, from whom the financial ministers take their instructions.

They've set up the formal institutional arrangements for a global central bank and a global currency, and they've established an historic precedent by having it issue the first round of it's own supra-sovereign credit line. The Financial Times makes this revealing statement: "Unless the creation of SDRs is repeated regularly, or countries create on a large scale assets denominated in SDRs, their role is likely to remain limited." That's one very big unless. Another way to say the same thing is this: By simply making increasing use of SDRs, the world's various financial ministers can turn the SDR into the dominant global currency. No further structural changes are required. The global central bank now exists, and the FSB is the regulatory arm.

Here are two useful articles on this issue:

Andrew G. Marshall: Towards a Global Currency and World Government

SDRs sneaking in as new global currency

And below is Boehlert's skillful exercise in distraction and illusion, making the issue about Obama, rather than about our economic future. Anyone who criticizes the G20 outcomes is irrational and against Obama. If you love Obama, you'll dismiss such critiques. In terms of cult management, this is called content programming.

rkm

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Media figures advance false claim that Obama ceded economic sovereignty at G-20 summit

Eric Boehlert

Summary: Media figures have advanced the false claim that in signing the G-20 communiqué establishing a new Financial Stability Board, President Obama ceded U.S. sovereignty to international economic regulators. In fact, the FSB referenced in the communiqué does not have any authority over U.S. policy.

Since the conclusion of the Group of 20 economic summit in London, media figures including Fox News contributor Dick Morris, CNN correspondent Kitty Pilgrim, and syndicated radio host Monica Crowley have advanced the false claim that in signing the G-20 communiqué establishing a new Financial Stability Board (FSB), President Obama ceded U.S. sovereignty to international economic regulators. For instance, in his April 6 column, Morris claimed, "On April 2, 2009, the work of July 4, 1776 was nullified at the meeting of the G-20 in London" -- an assertion Morris repeated on that night's edition of Fox News'Hannity, when he asserted, "Basically, from an economic standpoint, [Obama's] repealed [the Declaration of Independence]. We no longer have economic sovereignty." In fact, the Financial Stability Board referenced in the G-20 communiqué does not contain cross-border authority and thus does not in any way limit or eliminate U.S. sovereignty. Indeed, an April 3 New York Times article reported, "While the leaders agreed to create a new Financial Stability Board to monitor the financial system for signs of risks, they stopped well short of giving regulators cross-border authority, something France has long advocated."

Examples of media figures advancing the falsehood that the Obama administration ceded U.S. economic sovereignty include the following:

  • During the April 3 edition of Fox News' America's Newsroom, Morris claimed of the FSB, "[I]t effectively ceded massive areas of American sovereignty to Europe and to the global economic mavens." Morris later claimed that "this literally is a massive surrender of sovereignty to an essentially European body."
  • During the April 3 edition of CNN's Lou Dobbs Tonight, Rep. Don Manzullo (R-IL) stated, "Secretary [Timothy] Geithner's proposing, with the help of the administration, a worldwide international control over all financial interests -- in fact, over any corporation, to the extent of even controlling the compensation of the employees. That's not only radical, Kitty, that's frightening." Pilgrim responded, "Yeah, it certainly is."
  • During the April 5 edition of the syndicated program The McLaughlin Group, Crowley claimed the G-20 communiqué is the "the first step to abrogating American sovereignty here, because ... it is going to allow European bureaucrats to step in, not just on the hedge fund regulation and the other explicit things that they agreed to, but buried deep down in this communiqué was the ability for European bureaucrats sitting in Brussels to decide what kind of executive compensation American executives should -- ", at which point Financial Times U.S. managing editor Chrystia Freeland interjected, "No, there was no authority like that there, Monica." Crowley responded, "I read it in the communiqué this morning."

As Freeland noted, the communiqué does not establish authority for the FSB to determine the types of compensation American executives earn and cedes no regulatory authority to any international body. While signatories to the communiqué agreed to "establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF)" and agreed "that the FSB should collaborate with the IMF [International Monetary Fund] to provide early warning of macroeconomic and financial risks and the actions needed to address them," the communiqué explicitly stated that it is the responsibility of member nations' "Finance Ministers to complete the implementation of these decisions." Indeed, while the signatories agreed "to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks" and "to extend regulation and oversight to all systemically important financial institutions, instruments and markets," they did not cede that oversight authority to the FSB.

From the G-20 communiqué:

We each agree to ensure our domestic regulatory systems are strong. But we also agree to establish the much greater consistency and systematic cooperation between countries, and the framework of internationally agreed high standards, that a global financial system requires. Strengthened regulation and supervision must promote propriety, integrity and transparency; guard against risk across the financial system; dampen rather than amplify the financial and economic cycle; reduce reliance on inappropriately risky sources of financing; and discourage excessive risk-taking. Regulators and supervisors must protect consumers and investors, support market discipline, avoid adverse impacts on other countries, reduce the scope for regulatory arbitrage, support competition and dynamism, and keep pace with innovation in the marketplace.

To this end we are implementing the Action Plan agreed at our last meeting, as set out in the attached progress report. We have today also issued a Declaration, Strengthening the Financial System. In particular we agree: to establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF), including all G20 countries, FSF members, Spain, and the European Commission; that the FSB should collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them; to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks; to extend regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds; to endorse and implement the FSF's tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms; to take action, once recovery is assured, to improve the quality, quantity, and international consistency of capital in the banking system. In future, regulation must prevent excessive leverage and require buffers of resources to be built up in good times; to take action against noncooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD [Organisation for Economic Co-operation and Development] has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information; to call on the accounting standard setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards; and to extend regulatory oversight and registration to Credit Rating Agencies to ensure they meet the international code of good practice, particularly to prevent unacceptable conflicts of interest.

We instruct our Finance Ministers to complete the implementation of these decisions in line with the timetable set out in the Action Plan. We have asked the FSB and the IMF to monitor progress, working with the Financial Action Taskforce and other relevant bodies, and to provide a report to the next meeting of our Finance Ministers in Scotland in November.

Further, while signatories to the communiqué agreed to "endorse and implement the FSF's tough new principles on pay and compensation," those principles do not grant international regulators authority to set executive compensation. Indeed, the statement of principles explicitly provides, "They are not intended to prescribe particular designs or levels of individual compensation" [emphasis in original]. The statement of principles also states, "The firm's board of directors should be responsible for the compensation system's design and operation."

From the April 3 New York Times article:

The Group of 20 did agree on new global rules to govern the pay and bonuses of bankers. The leaders also agreed to "name and shame" countries that erected trade barriers, intended to resist growing protectionist sentiment.

But a European push for sweeping global regulation of the financial markets was blunted, to a large degree, by the United States. While the leaders agreed to create a new Financial Stability Board to monitor the financial system for signs of risks, they stopped well short of giving regulators cross-border authority, something France has long advocated.

Instead, the leaders agreed to more closely coordinate their regulation of "systemically important" financial institutions. They did not, however, agree on a mechanism to resolve cross-border disputes that might arise in the winding down of insolvent banks, an issue that might yet arise if global banks like Citigroup or Royal Bank of Scotland fell deeper in trouble.

"The regulatory part was close to a zero," said Simon Johnson, a professor of economics at the Massachusetts Institute of Technology.

From the April 3 edition of Fox News' America's Newsroom:

ALISYN CAMEROTA (co-host): All right, the G-20 has just ended. President Obama says that he thinks that it went well. You say it was a disaster. How so?

MORRIS: Well, it effectively ceded massive areas of American sovereignty to Europe and to the global economic mavens, but, in fact, they are mainly European.

Let me read you from the communiqué. They set up a new Financial Stability Board, as you mentioned. One of its missions is to endorse and implement new principles -- tough new principles -- on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms. That was A-L-L firms -- all firms.

CAMEROTA: OK, so let me stop you right there, Dick, just for a clarification. So, in other words, an international body will have some say over how much American CEOs make?

MORRIS: You got it. And it's not just some say. They will effectively set international standards that will be applied to the SEC and the Federal Reserve Board and the Commodities Exchange Commission -- each of those agencies -- which will then implement them, so that you're really setting up an international governance over the economy. And not just specifically for certain firms -- for all firms. That was A-L-L.

And another one is to extend regulation and oversight to all systemically important financial institutions, instruments, and markets. By that, they mean the "too big to fail" -- so that while Obama is basically extending national regulation to these bodies, the G-20 is putting a layer of regulation over the national regulation, which basically is European regulation. Europe has wanted to do this for over -- for two decades. They're basically socialists, and they've wanted to control how the United States regulates its industries. But this literally is a massive surrender of sovereignty to an essentially European body.

CAMEROTA: OK, so let's just dig a little bit deeper into that Financial Stability Board -- the FSB, as we're referring to it. You say that they set up something so that all financial institutions that are systemically important -- in other words, those banks, those hedge funds -- that should they fail, they would create --

MORRIS: Or car companies --

CAMEROTA: Oh.

MORRIS: -- or insurance companies --

CAMEROTA: All companies?

MORRIS: -- or God knows what -- public relations firms. I mean, you know, whatever -- "systemically important" is one of those phrases that is about as stable as an accordion.

CAMEROTA: So -- so, but the point is is that if it would be -- it would create a disastrous domino effect, such as AIG, if one of these were to fail. Shouldn't those be better regulated?

MORRIS: Yeah, absolutely -- by the United States government; by people appointed by an elected president and confirmed by an elected United States Senate. Not by a group of central bankers from Europe who outvote the United States 19 to one, who can put whatever standards they want on this thing.

From the April 3 edition of CNN's Lou Dobbs Tonight:

PILGRIM: Yeah, no, I mean, it seems very clear to us that the line -- a certain line was crossed.

You know, last week, you grilled Treasury Secretary Timothy Geithner on his plans to seize businesses that could harm the economy if they failed. You called that absolutely radical.

MANZULLO: Right.

PILGRIM: Tell us a little bit more about -- about why you think we're off the track here in terms of government participation in business.

MANZULLO: Well, he did not draw the distinction between financial companies that received TARP funding and those that don't. He wants to have a one-size-fits-all pattern to control -- for example, executive compensation -- and as what happened with the bill that the House -- passed the House yesterday that would control compensation, down even to the teller.

But what we saw happen just yesterday, in Europe at the G-20, was nothing less than even more radical, because now Secretary Geithner's proposing, with the help of the administration, a worldwide international control over all financial interests -- in fact, over any corporation, to the extent of even controlling the compensation of the employees. That's not only radical, Kitty, that's frightening.

PILGRIM: Yeah, it certainly is.

From the April 5 edition of The McLaughlin Group:

McLAUGHLIN: What do you think, Eleanor -- 20 frightened world leaders there?

ELEANOR CLIFT (Newsweek contributing editor): It was substantive enough, considering you had 20 people around a table. And one of the president's best comments was he said this wasn't FDR and Churchill sitting with, you know, sipping brandy. This is complicated to get that many people to agree. But stylistically it was a wonderful message to the world about the reassertion of America in our standing in the world.

CROWLEY: I thought it was largely symbolic, but the one point of substance that I took issue with was at the end, when they issued this communiqué, they agreed -- and President Obama signed on to this -- to the creation of something called a Financial Stability Board, which I view as the first step to abrogating American sovereignty here, because --

McLAUGHLIN: What did they -- how did they --

CROWLEY: -- because it is going to allow European bureaucrats to step in, not just on the hedge fund regulation and the other explicit things that they agreed to, but buried deep down in this communiqué was the ability for European bureaucrats sitting in Brussels to decide what kind of executive compensation American executives should --

[crosstalk]

FREELAND: No, there was no authority --

McLAUGHLIN: No.

FREELAND: -- like that there, Monica. Had -- had there --

CROWLEY: Yes. No, I read it in the communiqué this morning.

FREELAND: No. So did I --

CROWLEY: Yes.

FREELAND: -- and there was no such authority. Had there actually been such authority, the Europeans would be cheering, and the hedge fund guys would be beating down the doors of the White House right now.

From the April 6 edition of Fox News' Hannity:

MORRIS: This is a president who basically thinks like a European -- in his economic program, in his view of the -- of abhorring nationalism, abhorring American exceptionalism -- and he certainly gave evidence of that. But what is driving me crazy about this trip, Sean, is -- when I was on your show one week ago today, we talked a lot about what I was afraid he would do at the G-20 summit. And he not only did everything I was afraid of, he made it even worse than that. He literally -- the way I put it, Sean, is during this trip, the Declaration of Independence was repealed; that essentially the United States gave up its economic sovereignty to the G-20.

HANNITY: So basically, our Declaration, our founding document, you know, with the idea that we're endowed by our creator and America has paid the price for that liberty and freedom around the world -- you're saying he has basically pushed that -- that aside?

MORRIS: Basically, from an economic standpoint, he's repealed it. We no longer have economic sovereignty. What he did was that this group called the Financial Stability Forum -- it was a quasi-academic group that would come up with ideas. It was based on the central banks of all the European countries, plus a few others. Well, they've taken this central -- this Financial Stability Forum and created the Financial Stability Board.

And the board is charged with making recommendations for uniform high standards to be implemented by the regulators of each of the G-20 countries. And it says what they're supposed to do. They're supposed to have regulation and oversight to all systemically --

HANNITY: Sure.

MORRIS: -- important financial institutions, instruments, and markets -- and hedge funds; and implement tough new principles on pay and compensation; and to support sustainable compensation schemes and corporate social responsibility --

HANNITY: Sure.

MORRIS: -- for all firms.

So this, essentially, is a vehicle for the Europeans, the Financial Stability Board, to regulate all major companies in the United States, acting through the SEC and the Federal Reserve. And because Obama didn't kick up a fuss and has agreed to the concept of consensus regulations -- that then are imposed as mandatory by the U.S. regulatory agencies -- he essentially is saying that the compensation for chief executive officers of major American companies is going to be determined --

HANNITY: Let me --

MORRIS: -- by the European central bankers, with a little bit of input from the United States.

HANNITY: Yeah, when you --

MORRIS: This is an unbelievable surrender of sovereignty.

From Morris' April 6 column:

On April 2, 2009, the work of July 4, 1776 was nullified at the meeting of the G-20 in London. The joint communiqué essentially announces a global economic union with uniform regulations and bylaws for all nations, including the United States. Henceforth, our SEC, Commodities Trading Commission, Federal Reserve Board and other regulators will have to march to the beat of drums pounded by the Financial Stability Board (FSB), a body of central bankers from each of the G-20 states and the European Union.

The mandate conferred on the FSB is remarkable for its scope and open-endedness. It is to set a "framework of internationally agreed high standards that a global financial system requires." These standards are to include the extension of "regulation and oversight to all systemically important financial institutions, instruments, and markets ... [including] systemically important hedge funds."

Note the key word: "all." If the FSB, in its international wisdom, considers an institution or company "systemically important", it may regulate and over see it. This provision extends and internationalizes the proposals of the Obama Administration to regulate all firms, in whatever sector of the economy that it deems to be "too big to fail."

The FSB is also charged with "implementing ... tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms."

That means that the FSB will regulate how much executives are to be paid and will enforce its idea of corporate social responsibility at "all firms."

— J.H.

Posted to the web on Tuesday, April 07, 2009 at 08:03 PM ET

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