Abolish the Servitude to Interest on Money

“ For the first time in my life, I heard a discussion which dealt with the principles of stock-exchange capital and capital which were used for loan activities. After hearing the first lecture delivered by Feder, the idea immediately came into my head that I had found a way to one of the most essential prerequisites for the founding of a new party.

To my mind, Feder’s merit consisted in the ruthless and the trenchant way in which he described the double character of the capital engaged in stock exchange and loan transactions, laying bare the fact that this capital is ever and always dependent on the payment of interest. In fundamental questions his statements were so full of common sense that those who criticized him did not deny that au fond his ideas were sound, but they doubted whether it be possible to put these ideas into practice. To me, this seemed the strongest point in Feder’s teaching, though others considered it a weak point. (2)

And again,

…I understood immediately that here was a truth of transcendental importance for the future of the German people. The absolute separation of stock-exchange capital from the economic life of the nation would make it possible to oppose the process of internationalization in German business without at the same time attacking capital at such, for to do this would be to jeopardize the foundations of our national independence. I clearly saw what was developing in Germany, and I realized then that the stiffest fight we would have to wage would not be against the enemy nations but against international capital. In Feder’s speech, I found an effective rallying-cry for our coming struggle.”(3)

Further, he wrote,

“The struggle against international finance capital and loan capital has become one of the most important points in the program on which the German nation has based its fight for economic freedom and independence.”(4)

A few weeks later Hitler received an instruction from his superiors to investigate a political association called the Deutsche Arbeiterpartei (German Workers Party). At this meeting held in the Sterneckerbrau Inn in Munich, about 20 to 25 persons were present. The main speaker was Dr. Gottfried Feder.

Shortly thereafter Hitler joined this party and received a provisional certificate of membership numbered seven. His first act on assuming control of the party was to rename it the Nationalsozialistiche Deutsche Arbeiterpartei (National Socialist German Workers Party).

Feder, who was the principal drafter of the party’s 25 points became the architect and theoretician of the program (5) until his unfortunate dismissal as Secretary of State for Economic Affairs in August 1934.

Approximately 40 percent of Feder’s ”The  Program of the NSDAP” is devoted to economic and financial policies. Below are some of the highlights.

Adolf Hitler prints its two main points in leaded type:

“THE COMMON INTEREST BEFORE SELF-THE SPIRIT OF THE PROGRAM  ABOLITION OF THE THRALLDOM OF INTEREST – THE CORE OF NATIONAL SOCIALISM.” “Once these two points are achieved, it means a victory of their approaching universalist ordering of society in the true state over the present-day separation of state, nation and economics under the corrupting influence of the individualist theory of society as now constructed. The sham state of today, oppressing the working classes and protecting the pirated gains of bankers and stock exchange speculators is the area for reckless private enrichment and for the lowest political profiteering; it gives no thought to its people and provides no high moral bond of union. The power of money, most ruthless of all powers, holds absolute control, and exercises corrupting, destroying influence on the state, nation, society, morals, drama, literature, and on all matters of morality, less easy to estimate. (6)

“Break down the thralldom of interest” is our war cry. (7) What do we mean by thralldom of interest? The landowner is under this thralldom, who has to raise loans to finance his farming operations, loans at such high interest as almost to eat up the results of his labor, or who is forced to make debts and to drag the mortgages after him like so much weight of lead.

So is the worker, producing in shops and factories for a pittance, whilst the shareholder draws dividends and bonuses which he has not worked for. So is the earning middle class, whose work goes almost entirely to pay the interest on bank overdrafts. (8)

Thralldom of interest is the real expression for the antagonisms, capital versus labor, blood versus money, creative work versus exploitation. The necessity of breaking this thralldom is of such vast importance for our nation and our race, that on it alone defends our nation’s hope of rising up from its shame and slavery; in fact, the hope of recovering happiness, prosperity, and civilization throughout the world. It is the pivot on which everything turns; it is far more than a mere necessity of financial policy. Whilst its principles and consequences bite deep into political and economic life, it is a leading question for economic study, and thus affects every single individual and demands a decision from each one: Service to the nation or unlimited private enrichment. It means a solution to the Social Question. (9)

Our financial principle: Finance shall exist for the benefit of the state; the financial magnates shall not form a state within the state. Hence our aim to break the thralldom of interest.

Relief of the state, and hence of the nation, from its indebtedness to the great financial houses, which lend on interest.

Nationalization of the Reichsbank and the issuing houses, which lend on interest.

Provision of money for all great public objects (waterpower, railroads, etc), not by means of loans, but by granting non-interest bearing state bonds or without using ready money.

Introduction of a fixed standard of currency on a secured basis.

Creation of a national bank of business development (currency reform) for granting non-interest-bearing loans.

Fundamental remodeling of the system of taxation on social-economic principles. Relief of the consumer from the burden of indirect taxation, and of the producer from crippling taxation (fiscal reform and relief from taxation). (10)

Wanton printing banknotes, without creating new values, means inflation. We all lived through it. But the correct conclusion is that an issue of non-interest bearing bonds by the state cannot produce inflation if new values are at the same time created.

The fact that today great economic enterprises cannot be set on foot without recourse to loans is sheer lunacy. Here is where reasonable use of the state’s right to produce money which might produce most beneficial results.”(11)

Feder was appointed Secretary of State for Economic Affairs when the National Socialists came to power on January 30, 1933, but his efforts to implement official National Socialist economic policy were immediately frustrated by Dr. Hjalmar Schacht, who had been appointed President of the Reichsbank in March 1933. Schacht was an enigmatic character. Although he was born in Tingleff, Schleswig-Holstein in 1877, his family originally came from Hungary. In 1903 at the age of 26, he joined the Dresdner Bank, and in 1908 he became a Freemason.

He was also a student of Hebrew(12) as he deemed that knowledge of this language was necessary if one wished to advance one’s career in banking.

Schacht immediately set out to destroy Feder’s plans, which culminated in the latter’s removal from office in August 1934, after Schacht had been appointed head of the Ministry of Economic Affairs.

This tragic dismissal may be partially attributed to Hitler’s lack of a deep understanding of financial and economic matters. He admitted as much when he first met Feder in 1919,

”Thus the judgment arrived at by Gottfried Feder determined me to make a fundamental study of a question with which I had hitherto not been very familiar.”(13)

A somewhat attenuated version of monetary reform was introduced. In order to finance the state’s work and rearmament programs, two dummy corporations called GesellschaftfuerOffentlicheArbeiten (Offa) and MetallforschungGesellschaft (Mefo) were established. These corporations accepted bills of exchange from suppliers who fulfilled state orders. These bills of exchange were then discounted at the Reichsbank at a rate of 4 percent. They were issued for three months only, which was clearly unsatisfactory in view of the long-term nature of the various projects they were financing. They could, however, be extended at three monthly intervals for up to five years.

In January 1939 matters came to a head when Schacht refused an extension of RM3 billion worth of Offa and Mefo bills, because of fears of “inflation”. On January 7, 1939, he sent Hitler the following memorandum:

“1) The Reich must spend only that amount covered by

2) Full financial control must be returned to the Ministry of Finance. (Then forced to pay for anything the army desired.)

3) Price and wage control must be rendered effective. The existing mismanagement must be eliminated.

4) The use of money and investment markets must be at the sole discretion of the Reichsbank. (This meant a practical elimination of Goering’s Four Year Plan)”(14)

By these means, Schacht intended to collapse the German economy, which during the period 1933-39 had increased its gross national product by 100 percent. From being a ruined and bankrupt nation in January 1933 with over six million unemployed persons, Hitler had transformed Germany into a socialist paradise and the most powerful and prosperous state in the history of Europe. He angrily rejected the recommendations of the Reichsbank, describing them as “mutiny”.(15)

On January 19, 1939, he sacked the impudent lackey of international finance. (16) Without further ado he instructed the Reichsbank to issue all credits requested by the state. A form of Federgeld (Feder money) was now in circulation, although the bills of exchange still attracted nominal interest.

A new Reichsbank law, which was promulgated on June 15, 1939, made the bank “UNCONDITIONALLY SUBORDINATED TO THE SOVEREIGNTY OF THE STATE.”(17) Article 3 of the law decreed that the bank should be “directed and managed according to the instructions and under the supervision of the Fuehrer and Reich Chancellor.”(18) Hitler was now his own banker, but having departed from the fold of international swindlers and usurers, he would, like Napoleon Bonaparte, suffer the same fate: an unnecessary war followed by the ruination of his people and country.

Events quickly unraveled. On March 31, 1939, Poland received a blank check (19) from England, which unilaterally offered to guarantee her sovereignty; not only if Germany invaded Poland, but also if Poland invaded Germany! This merely served to stiffen Polish resistance to Hitler’s genuine desire to achieve a permanent solution of all outstanding issues emanating from the Treaty of Versailles.

During the next five months, the Polish government progressively intensified the oppression, harassment of and attacks on the 1.5 million ethnic Germans living in Poland. These attacks, in which over 58 000 German civilians were killed by Poles in an orgy of savagery, culminated in the Bromberg Massacre on September 3, 1939, in which 5 500 people were murdered. These provocations and atrocities were stoically ignored. (20) Eventually Hitler was forced to employ military intervention in order to protect the Germans in Poland.

On August 30, 1939, in an act of great statesmanship, Hitler again offered to the Poles the Marienwerder proposals,(21) namely retention of the existing 1919 borders, the return of Danzig (97% German), the construction of a 60-mile autobahn and rail link connecting West and East Prussia (from Schoenlanke to Marienwerder) and an exchange of German and Polish populations. On the orders of the international bankers, the British Foreign Secretary, Lord Halifax, strongly advised the Poles NOT to negotiate. This is how and why World War II was started. The ensuing forced war resulted in victory for the international financiers and defeat and slavery for all the people of Europe.

Today the banker's reign supreme. The European Union with its commissars in Brussels and its so-called “European” Central Bank headquartered in Frankfurt,(22) increasingly resembles the old Soviet Union. However, with the recent ongoing “sovereign” debt crisis and the collapse of the Euro, the plan for a united Europe anchored in perpetual debt enslavement has received a major setback and has indeed started to disintegrate.

Notwithstanding the inability of Adolf Hitler to permanently liberate Europe, it behooves us to appreciate that what he achieved was not done in vain. It is incumbent on us to learn and understand the fundamentals of usury and to spread that knowledge relentlessly, until our material and spiritual liberties have been restored.

End Notes

 

 

PHILIPPINE FINANCIAL SYSTEM

 

 DESCRIPTION:

Financial System is like the blood and circulatory system.

Institutions that comprise the Phil Financial System / PFS.

·        June 1981 - 2,577 institutions belonged to the PFS

·        1981 – 135 licensed Insurance Companies.

·        2,653 together with CB. The total resources of PFS (excluding CB and Insurance Companies) stood at P258 billion pesos.

·        Of the 2,517 Banking Institutions, 1,034 or 41% are Rural Banks. 33 Commercial Banks. 139 Thrift, Savings, and Private Development Banks.

·        Three specialized got banks (Land Bank, Development Bank with other Financial Institutions made up 48% of the 2,517 institutions of the PFS. Biggest in number – Rural Bank, resources lowest among banking institutions. Assets P156 billion or 60.5% of the PFS assets.

·        Three specialized banks held P8 billion or 31% more than the rural banks

·        30 June 1981- 1,308 Non-Bank Financial Institutions.

·        560 are pawnshops and 361 are financing companies. 78 nonbank thrift institutions. 4 gov't non-banks; GSIS, SSS, Nat'l Investment Development Corp (NIDC), and the Agricultural Credit Administration (ACA).

·        Resources-wise, pawnshops are the smallest – they hold P314 million, 0.6% of the assets held by all non-banks. 0.1% of the total assets of the PFS.

·        13 Investment Houses controlled 17% of the non-bank assets. Non-bank financial institutions hold 20% of the PFS assets.

·        Non-Bank Financial Intermediaries: smaller than banks and have more limited functions.

·        Pawnshops, money brokers, stocks brokers, investment companies, fund managers, venture capital corps.

·        The biggest; investment houses, finance companies, and insurance companies.

                                            

A. Investment Houses - were set up to develop the capital market in our country (the market for long-term funds).

Function – to sell the shares of stock of companies to the buying public. Actively engaged in the short-term money market - conduits for foreign bank lending.

          1.  Unbanking – merges Investment houses and Commercial banks

B. Finance Company - provides loans for the acquisition of house analysts, cars, and household appliances.

C. Venture Capital Corporation – the whose stated purpose is to invest in the equity of small and medium-scale businesses. Operate in partnership with NDC and Human Settlements Development Corporation.

E. CENTRAL BANK (CB).

The government agency that is vested with the authority over the Philippine Financial System / PFS.

Functions:

Banker and Fiscal Agent for the government. Depository of required reserve of commercial banks. Managed the country's international reserves (gold and foreign currency) and external debts. Sole currency issuer (prints and issues Philippine pesos) – as a conduit for facilitating American economic activities in the country.

F. SERVICES OFFERED BY FINANCIAL INSTITUTIONS.

Sending or receiving money from the provinces or abroad. Collecting payments from/for Meralco PLDT, BIR, or insurance companies on their behalf. Disbursing payroll every payday of large companies. Exchanging money/dollars and other foreign currencies for pesos. Administering the wealth of the people. Selling the shares of stocks to other corporations. Buying/selling stocks for clients/buying and selling pesos in the money market.

G. Work Force of the Philippine Financial System / PFS.

·         Of the 46,222 workers employed in a commercial bank in 1981, 37,539 or 81% are rank and file.

·         Bank tellers – handle the window transaction.

·         Clerk-typist – types out a loan, memo,and  bank reports

·         “ Administrative Assistance” a title given to accountants and bookkeepers.

·         Credit Investigators – supply facts and information about its prospective borrowers.

·         Money Market Trader – they work with people or entities and find persons or companies to borrow the fund.

·         Credit Analysts – undertake studies on the viability of lending money to a prospective borrower.

·         Appraisers – inspecting properties to a mortgage with the bank. Assess the value of the property and determine how much the bank is willing to lend to its client.

H. MARKETING ARM OF BANKS;

·         Branch Managers, Senior Bank officers, and Accountant officers – responsible for finding clients for the banks and generating funds/loans.

·         Rank and File employees, messengers, clerk-typists, money counters, filling clerks, telex operators, data processing coders, clerks in various departments, janitors, and security guards.

·         Bank Officers are – Certified Public Accountants, Accountant Officers, Assistant Managers, Managers, Assistant Vice-Pres, Vice-Pres, Senior Vice-Pres, and President.

I.  DOMINATION OF INTERNATIONAL BANKING INSTITUTIONS

UNBANKING IN THE PHILIPPINES

The gov't, foreign interests, and members of the Filipino Elite (mostly Chinese-Filipino Elite) own the financial institutions operating in the Philippines today.

51.6% of its being owned by gov't related institutions. 1981, 28 "private domestic" commercial banks and unionist banks are owned by Filipino Elite: these are

·         Bank of Philippine Islands – Ayalas

·         City Trust – owners of Philex Corp.

·         Consolidated Bank, Madrigal, Texons

·         Manila Banking – Puyats

·         Phil. Banking Corporation – Laurels

·         Prudential Bank – Santos / Pedrosas

·         Traders Royal Bank – Roberto S, Benedicto

Eight with major government equity. These are

·         Associated Bank – Leonardo Ty

·         Commercial Bank of Manila – Herdis

·         Int'l Corporation Bank – Herdis

·         PCI Bank – Meralco grp / Romualdezes

·         Philippine Veterans Bank – Military

·         Pilipinas Bank (formerly Filman Bank) – Silverio

·         Republic Planters Bank – sugar baron R. Benedicto

·         United Coconut Planters Bank – coconut baron
(J §  Ponce Enrile, E. Cojuangco Jr., C Lobregat)

Thirteen are Chinese-Filipino owned:

·         Allied Bank – Lucio Tan

·         China Banking – Sycips / Dee

·         Equitable Bank – Go, family

·         Family Bank – Andrew Gotianun

·         Far East Bank – Jose B. Fernandez / John Gokongwei / Yulo family

·         Insular Bank of Asia and America – Andrew GotianunAboitiz grp / Kalaw      grp.

·         Metro Bank – George Ty

·         Pacific Bank – Antonio Roxas / Chua Jr.

·         Phil. Bank of Communications – Ralph Nubia

·         Phil Trust – Emilio Yap

·         Producers Bank – Henry Go

·         Rizal Commercial Bank – Yuchengco / Sycip

·         Security Bank and Trust – Ramon Siu / Phil Ang /

§  Willy Go / Roland Gapo


INTERLOCKING DIRECTORATES - Define as the simultaneous holding of position in the Board of DireDirectorsBank B and in Company C.

Ten Banking groups dominate the Philippine Economy.

1.       Rizal Commercial Banking Corp., China Banking grp. Sycip / Yuchengco grp interlocks with 164 companies In 25 industries.

2.       Far East Bank and Trust Co. - Fernandez/Yulo/

3.       Gokongwei grp – interlocks with 112 companies in 37 industries.

4.       Manila Banking Grp - Puyat family interlocks with 84corp in 17 industries.

5.       UCBP Grp – Ponce Enrile/Cojuangco/Lobregat Interlocks with 81 corps in 16 industries.

6.       Bank of the Philippine Islands – Ayala's interlocks with 68 firms in 15 industries

7.       PCI BANK Grp – Romualdez/ Cuenca/ Meralco grp. Interlocks with 63 firms in 15 industries.

8.       Filman Bank – Silverio interlocks with 55 companies in 18 industries (Pilipinas Bank)

9.       Insular Bank of Asia and AmericaGotianun/AboitizKalaw interlocks with 40 companies in 18 industries.

10.    Pacific Planters Bank, Traders Royal Bank – Elizalde/Benedicto interlocks with 38 com. In 20 industries. Phil. Banking Grp – Laurel/Ortigas interlocks with 38 companies in 16 industries.

 

FUNDAMENTAL WEAKNESSES OF THE PFS

Heavy reliance on short-term borrowings or in other words the non-existence of a stable and semi-permanent supply of money.

The emergence of the money market as the system through which money could be made available to businesses.

Lending by banks and quasi-banks of these short-term funds to businesses on a long-term basis or mismatching of funds of term transformation.

The lack of available supply of even short-term funds (because of IMF and CB restrictions on the growth of money supply and domestic credit) makes the money a highly volatile one. The concentration of lending to a selected group of big business Foreign and gov't corporations.

 

ROLE OF GOVERNMENT IN THE PHILIPPINE FINANCIAL SYSTEM / PFS

To convert its loans to distressed companies into equity. Ex, 1981, P6.58 billion have been an infusion of gov't agencies, DBP, NDC, Land Bank, and SSS. In Feb 1983, P3.9 billion worth of CDCP's loan to gov't financial institutions was set into equity.

To give more loans to distressed companies and/or guarantee loans given to them by private financial institutions. Ex, 16 Feb1981  LOI (letter of intent) 1107. A P5 billion industrial rehabilitation fund scheme was set up.

To set up a credit exchange information bureau. Ex, LOI no 1107 exposure of 20 million pesos and above must be reported monthly, and those above P1 million must be reported quarterly.

To set up holding companies. Ex, DPB and NDC set up subsidiaries to supervise distressed companies in which they have substantial exposure in equity, loans, and guarantees.

 

FINANCIAL REFORMS INITIATED BY THE GOVERNMENT IN 1980

Joint IMF-WB study of the PFS. The establishment of an Offshore Banking System / OBS.

Merging of several Private Commercial Banks together with foreign Banks to satisfy the 1973 mandated requirements by CB-IMF of a higher capital base (P100 million from P20 million).

That the economy was not generating an adequate supply of long-term funds.

 

OBJECT OF THE REFORMS

Greater efficiency through increased competition and economies of scale. Greater availability and use of long-term funds. To encourage these reforms: minimized the difference between banks and quasi and -banks, eliminate all functional distinctions among the types of thrift banks – Private Development Saving Bank.

Increase the power and function of quasi-banks. Remove most ceilings on interest rates on deposits and loans (repeal the anti-usury law)?

Introduced expanded commercial bank unit banking.

Unbanking is no other than the concentration of banking into the hands of a handful of bank oligarchy.

 

UNBANKING

Referred to as expanded commercial banking. It takes the functions of a commercial and an investment bank. Provides a broad range of financial services for its clientele. Unibaking legitimizes the monopoly position of those who control the economy.

Unbanking must have a minimum capital of P500 million and more foreign capital will come in or in the end, merges with other financial institutions.

Unibank owns 30% of the equity of commercial banks or up to 100%. Likewise, they own 100% equity of all non-financial allied undertakings or 35% of the equity of non-allied undertakings.

AllowingUnibanks to invest in allied undertakings in effect gives foreign owners interest in the economy. Unbanking reinforces the union of finance with industry and allows the continued hold of foreign interest over the economy.

 

THE IMF AND WORLD BANK

World Bank was established as a major source of development funds within the capitalist economy. While the Int'l Monetary Fund acts as an int'l monetary system that would support and promote free trade and investment against all barriers and forms of protectionism (capital and financial imperialism).

The IMF had 146 member countries. Voting power is controlled by the US, UK, West Germany, France, and Italy Altogether they hold 40% of all WB votes.  

IMF/WB are related to each other because members of the bank shall be those members of the IMF.

 

INTERNATIONAL FINANCE CORPORATION AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION

The IFC acts as the WB's investment arm for private ventures. While the IDA provides "soft" loans (loans at very low interest) to the least underdeveloped countries.

We received our first loan amounting to $10 million. As of 1981, our outstanding debt to the WB stood at $30 billion.

Most of these loans were “project loans,” such as population planning, roads, and irrigation, education, hydroelectric power, rural electrification, fisheries, and ports. These are all for infrastructure programs.

1.      In  1980 WB introduced, a Structural Adjustment Loan / SAL is a program loan. It focuses on the entire sectors of the economy; Agriculture, Industry, Finance, and Energy.

2.      SAL is usually approved for the Extended Fund Facility or EFF with extensive Bank fund collaboration to achieve leverage over the macro policy of the economy.

 

CONDITIONS ACCOMPANY IMF LOANS

Reduction of domestic demand; comprehensive interest rate reform limiting the growth of money, supply, and domestic credit.

Removal of price control over (domestic) essential goods for domestic consumption. In other words, liberalization.

Increase government revenues and decrease government spending by; raising indirect taxes (specific tax on oil products, cigarettes, alcohol).

Reducing, and eliminating subsidiaries (rice subsidy). Li milting budget deficit to 39% in 1982 to 2.4% in 1983 and for 1984.

Reduction of an overall balance of payment deficit through; the adoption of a floating exchange rate system, devaluation, import and export control (import flow freely into the economy) and, foreign exchange flow freely in and out of the economy.

 

POLICIES ADOPTED BY IMF/WB TO THE PHILIPPINES

Opening the economy to the international economy and free trade. Encouraging foreign investment, and promoting exports. Controlling labor and wages (cheap, skilled but docile labor force).

 

IMF/WB CONTROL THE ECONOMY

They control and dictate the thrust of the economic policies and determine which policies are adopted by the gov't.

As part of the economic program submitted to them, the IMF/WB will release the loans after the gov't makes the changes they require. They bring in highly trained technical leadership in the gov't helping them to achieve policy objectives that they endorse.

The borrower may not borrow any more loans from any other institution without prior approval of the WB local conduit. The borrower must admit an executive of the local financial institution into its board of directors.

APEX DEVELOPMENT FINANCE UNIT

Apex loan is a combination of WB and Private Transnational Bank lending to enterprises based in the Philippines. Available only to Export-Oriented and Labor-Intensive Businesses; mining, textile, food production (canning), energy-related industries, and for "new and expanding" projects of these industries. The agency that would review all-out commercial borrowing.

 

GLOBAL BANKING

Transnational Banks – are a special breed of transnational corporations. Their field is international finance – exporting finance capital.

They operate on the wealth and savings of their depositors. They are able to generate and control these funds on a global scale. This gives them tremendous power in deciding which economy and gov't get bailed out. In supporting TNTNCsnd and their activities worldwide, helping third world elites to secure their wealth and power.

·         Sep 1981, $1.423 trillion assets of banks from the industrialized countries.

·         5x bigger than international reserves held by monetary authorities of the industrialized countries.

·         16x bigger than international reserves held by monetary authorities of the Oil Exporting and developing countries.

·         66x bigger than international reserves held by ASEAN monetary authorities.

·         476x bigger than int'l reserves held by Phil monetary authorities in 1980.

 

GLOBAL BANKING was in essence, finance imperialism. This is an extension of colonial imperialism which was brought about by the British colonial empire.

Ex. Chartered Bank of Australia, Bank of India, Hong Kong, and Shanghai Banking Corp., the Anglo-Saxon American Bank, and the British Italian In Corporation.

In 1977, 70% of the 300 largest banks in the world came from the US, Japan, West Germany, Italy, France, TNBs the UK. TNBs of these 6 countries held 75% of the total assets of the top 300 largest banks.

Because TNB operates on a global scale, it is inevitable for banks to follow suit as industry trade and finance cannot exist without each other.

 

CONTRIBUTIONS TO THE EXPANSION OF TRANSNATIONAL BANK

SUPPLY FACTOR – thru-dollar the market for European countries / petro-dollar.

DEMAND FACTOR – this is just simply more borrowing because of the balance of payment / BOP.

TECHNOLOGICAL FACTOR – the computerization of the int'l finance system for efficient int'l cash management service. SWIFT – Society for Worldwide Inter-bank Transfer.

DOMINATION OF BANKING AND FINANCE IN THEIR OWN COUNTRIES

In 1974, in the US 12% of the total 14,500 banks held 22% of domestic assets and 74% of the overseas branch assets.

1976, 3 The largest French Nat'l bank controlled half of the assets of all French banks.

1976, the 2 largest Dutch commercial banks held over 314 of all commercial bank assets in Holland.

TNB must dominate banking in their own countries. TNB is intimately related to industrial TRANSNATIONAL Corporation / TNC.

In Japan, banks and industrial corporations are part of a business structure called the modern ZAIBATSU.

ZAIBATSU – is a “big business group” or Finance-Industrial Combine. Each zaibatsu has a core bank, a core trading firm called SOGO-SHOSHA. Inside Sogo-Shosha is a treasury and finance department that engages in some banking activities of a scale equal to that of the bank.

 

SIX MODERN ZAIBATSU

MITSUBISHI GR P (28 companies) – Bank, Corporation Heavy Industries, Mining and Cement, Chemical, Industries, Petrochemical, Rayon, Metal Estate, and Electric

SUMITOMO GRP (21 companies) – Bank, Metal Industries, Chemical, Corporation, Nippon Electric, Electric Industries, Realty and Development, Coal Mining, and Bakelite.

MITSUI GRP (23 companies) – Bank, Mitsui and Co., Real Estate Development, Mining. Tohatsu Chemical, Toray Industries, Oji Paper, Toyota Motor, Construction, and Toshiba.

FUJI BANK GRP (29 companies) – Bank, Marubeni, Nippon, Kokan, Hitachi Ltd, Nissan Motor, Showa Denko, Kubota, Hodogaya, Chemical, Oki Electric Industry, and Toho Rayon

SANWA BANK GRP (39 companies) – Bank, Teijin, Nissho-Iwai, Kobe Steel, Hitachi, Shipbuilding and Engineering, Ube Industries, Nichimen, Tokuyama Soda, and Unitika.

DAI-CHI KANGYO BANK GRP (45 companies) – Bank, C. Itoh and Co., Furukawa Electric, Fujitsu, Nippon Light Metal, Kawasaki Steel, Kawasaki Heavy Industries, Shiseido, Kanematsu-Gosho, Fukukawa Co., Nissho-Iwai and Kobe Steel.

The US gov't is pushing GATT members to allow foreign banks to operate in the countries on an equal footing as domestic banks. This political move is consistent with recent commercial overtures by the big international US bank which is attempting to create inroads into the domestic market all over the world (May 1982). TNB views third-world countries as a market for transnational bank loans.

TRANSNATIONAL BANK ON THE ISLAND OF LUZVIMINDA (PHIL)

Ten US Banks in the Philippines

1.      CITI BANK

2.      BANK OF AMERICA

3.      CHASE MANHATTAN

4.      MANUFACTURERS HANOVER

5.      JP MORGAN

6.      CONTINENTAL ILLINOIS

7.     CHEMICAL BANK

8.     FIRST NATIONAL BANK OF CHICAGO

9.      SECURITY PACIFIC BANK

10.  BANKERS TRUST

Major borrowers of Transnational Bank

1.       Government
2.       Philippine branches and subsidiaries of TN
 3.       Corporation in the top 1,000

RP's OUTSTANDING BORROWINGS FROM BANK FOR INTERNATIONAL SETTLEMENT STATISTICS

1981, $9.9 billion from private bank int'l banks. According to the institutional investor, the Phil ranks 62 among 105 countries rated by several banks.

 

LIST OF INTERNATIONAL BANKER'S NIGHTMARE

Poland, Mexico, Argentina, East Germany, Brazil, Nigeria, Chile, Zaire, Yugoslavia, Bolivia, Venezuela, Peru, Tanzania, Sudan, Philippines, and Romania...

 

TNB's risk lending to the Philippines for the following reasons

·         The IMF/WB will not let the Philippines default on its loans to transnational banks.

·         The US gov't will not allow Phil to default on its loans to the transnational banks.

American banks through commercial credits and long-term loans add a major and important dimension to our participation in the Phil economy.

TNBs have begun to realize only now that it was a mistake to lend so much to the Phil and other Third World countries.

While it is clear that there is a crisis (in the international financial system) it is less clear whose crisis it really is. When you owe the bank ten thousand dollars and can't pay, you're in trouble. When you owe the bank ten billion dollars and can't pay, the bank is in trouble.

 

GOV'T CORPORATION BORROWS FROM TNB
·         Sep 1982, Nat'l Power Corporation borrowed an estimated $533.2 million
·         Development Bank of the Phil / DBP $220.5 million
·         Phil Nat'l Bank $545 million for a total of $1,298.7 million
·         $50 million from Lloyds Bank London for the Light Railway Transit.
 
OPENING THE DOORS TO TRANSNATIONAL BANKS / TNB
With the declaration of Martial Law in 1972 the doors were wide open to allow and encourage TNBs to penetrate the Phil Financial System.
Following the recommendation of a joint IMF/CB 1971 Bank was required to raise its capital to a minimum of 100 million pesos.
So to comply with this provision some banks had to accept foreign bank capital; others had to accept and merge with foreign bank capital.

Thus facilitating the creation of Financial Oligarchy and Industrial Monopoly Capitalism – reaffirms the concept of Bureaucrat Capitalism.

PHILIPPINE BRANCHES OF TRANSNATIONAL BANK (TNB) 4 BRANCHES

1.      Chartered Bank (1873)

2.      Hong Kong and Shanghai Bank (1875)

3.      Bank of America (1947)

4.      Citibank (1902)       

Assets of the Four Branches

1982, 31 Dec. P26.6 billion of 13% of all 34 commercial banks. Capital accounts as of the same period amounted to P557.4 million.

TNB has a representative office but cannot accept any deposits, nor does it have any dollars to lend. But it can generate business for its head office by identifying prospective borrowers.

 

OFFSHORE BANKING

Offshore banking means doing business with non-residents. Transacting business that is not based in the Philippines. But Philippine-style offshore banking is in fact a mixture of Offshore and Onshore banking.

The gov't envisioned Manila as the Regional Finance Center in Asia. It hoped to compete with the highly sophisticated finance centers of Hong Kong and Singapore.

To realize this plan the gov't provided tax incentives to Offshore Banking Units by paying 5%a taxes on both the Onshore and Offshore earnings. But a 5% income tax on offshore earnings was abolished by PD 1773.

 

FUNCTIONS OF OFFSHORE BANKING UNITS

Accepting deposits and lending them (dollars and other foreign currencies).

OBUs are not to lend in pesos. But they do so through an arrangement with the Central Bank and with the h Foreign Currency Deposits Unit / FCDU of local banks.

PD 1035 allows FCDU to exchange dollars for pesos with the Central Bank and lend the pesos (swap loan). So FCDU can lend pesos through swap loans of FCDU.

 

INCOME OF OFFSHORE BANKING UNIT /OBU

1.      Offshore and Onshore.

           ·   BIR regulation No. 14-77 (9 Nov. 1977) included as offshore income all fees,        commissions, and other non-interest charges on loans of OBUs to residents.

·    Actually onshore income is being disguised as offshore income. By doing this OBU obtain an additional tax bonus. It has become a common practice among OBUs to pass on the onshore taxes to their clients.

·     In effect, OBU does not pay any taxes at all as their clients shoulder little taxes they are required to pay.

2.      Offshore income makes up 70% of all loans, although offshore loans are only 23% of total OBU loans (1981).

·         1981, $3.4 billion loans of OBUs to RP-based borrowers.

·   $4.4 billion as of the end of 1981. 25% of loans to the Foreign Currency Deposits Unit are onshore loans.

·      78.5% of Offshore Banking Unit, onshore loans exposure to RP-based borrowers.

·   It offers foreign banks for lending onshore, thus they penetrate domestic markets for loans.

3.      The OBU need not comply with the requirement to deposit $ 1 million in the Central Bank.

 

OBU's bid for Domestic Banking Function

2.     Strengthening of foreign control over the Philippine Financial System and the Economy.

3.      Possible bankruptcy of local financial institutions.

4.      Retrenchment and lay-off of bank employees due to bankruptcy.

 

UPDATES INFORMATION: PHIL FINANCIAL SYSTEM

·         Expanded Commercial Bank (EKB)

·         Bank of the Philippine Islands

·         Phil. Commercial Int'l Bank, PCIB

·        Rizal Commercial Banking Corporation

·        Far East Bank and Trust Company

·         Solidbank Corporation

·         Philippine National Bank

·         Allied Banking Corporation

·         Land Bank of the Phil.

·         Metropolitan Bank and Trust Co.

·         United Coconut Planters Bank

·         China Banking Corporation

·         Citi trust  Equitable

·         Banking Corporation

·         Prudential Bank

In authorizing banks to perform EKB functions, the CB looks into their competence, experience, and adequacy of facilities as reflected in the following factors;

·        liquidity, solvency, and profitability

·         Past performance of management in the operations of the bank.

·         General compliance with banking laws, CB rules, and instructions of the Monetary Board.

·         Managerial reorganization or potential capacity to provide international banking expertise.

·         Adequate staffing, equipment, and other facilities to meet its expanded functions including international correspondent bank relationships.

·         Unbanking requires a minimum capital of at least P 1.5 billion. Jan-July 1992, P4.233 billion. July 1993, 4.967 billion total assets of KB's.

 

Research finished: 1993 (Phil. Social Science Center)

 

UPDATES ON TRADE AND INVESTMENT 2005

·         99.2 billion Total US spending on information technologies by businesses in the Asia-Pacific region and in Japan in 2005

·         7% average growth of Philippine small businesses in 2005.

·         3.6 million. A number of people employed by small businesses in the Phil.

·         3.4 million. A number of people are employed by Philippine medium-sized businesses.

·         1.02 million. The number of small businesses in the Phil.

·         80,780 the number of medium-sized businesses in the Philippines.390 million. Total dollar revenues by Philippine small businesses.

·         124 million. Total US dollar revenues by Phil medium-sized businesses.

·         518 billion. The total amount of business loans needed by 64 thousand of SMEs to keep their business moving. According to Japan Int'l. Cooperation Agency.

·         13% average expected growth for Philippine small businesses for 2006.

·         7.9 billion. Total loans to SMEs by gov't financial institutions in the first quarter of 2006.

·         25% of the number of Philippine small businesses that own computers.

·         85% of the repayment rate of SME loans to Planters bank, helps debunk the myth that small enterprises are high-risk creditors.

·         4,953.75% actual export versus the target of region 8 (eastern Visayans)

·         30 million. Number of SMEs in the Asia-Pacific Region

·         Pyramid of small businesses; 0.1% 45,000 firm's large businesses employed 1000+ workers, 0.7% 525,000 firm's medium-businesses employed 100-999 workers, 99.2% 73.4 million firms small businesses employed 1-99 workers.