There has been a lot of talk in the media recently about the phenomenon of fake news and the popularity of it. A lot of people I see on social media who argue for a certain cause or argue for a particular change in policy or government seem to be woefully misinformed when it comes to the cause they claim to be supporting.
There Is No Direct Line to the CEO’s Office
I was reminded of this during the past week by a friend who is a receptionist at a large international bank that participated in the Dakota Access Pipeline financing. She claimed that somehow the media had gotten ahold of the names of the banks that had financed the pipeline and activists had been calling the listed number and shouting down the receptionists, or using vulgarities to describe their employer and them personally. This type of behavior does not necessarily shock me. There are always fringe elements to society and they feel passionate about their ideas. Once they have a focal point for this rage they expend all their energy on attacking whatever real life manifestation there is of their perceived evil. However, what bothered me a bit was the falsehoods she claims that they were purporting. She told me that callers were claiming that they were shooting children with rubber bullets and tar and feathering 2 year olds.
I find these a little hard to believe, so I did a little research. I did manage to find an account of a teenager who it was claimed was shot point blank in the back by a rubber bullet but I did not find evidence, even on the most slanted websites and blogs of stories of small children being abused there. Why should there be? The area has caught the world media’s attention for the protests; it is well known that clashes between police and protesters have turned violent before, I can’t imagine why someone would bring a small child there, no matter what they believed.
I also did some digging into how the media acquired the names of the banks that were involved in the financing. According to this account activists got in contact with a group called Rainforest Action Network, which has access to a Bloomberg terminal (I find this funny because they have a Bloomberg terminal available for public use at the NY Public Library, you don’t need an inside source to find this info) and they were able to get the names of the banks who participated in the project financing of the pipeline. Once activists had these names, some started to call the reception desks to vent their frustration at the staff.
This is a fruitless effort, the receptionist who makes 30-40 thousand a year has enough to do and doesn’t want to be bothered by your rants about a pipeline no one knew about until social media catapulted it into the public eye. There is no direct line to the CEO’s office.
What This Has to Do With the Basel Ratio
However this speaks to a bigger picture that ties the topic in with my current reading this week. What if I told you there was an organization that was untouchable by any government, paid no taxes and whose members formed some of the most powerful bankers in the world? What if I also told you that every other month these bankers come together to decide the fate of 80% of the world’s GDP in a sealed off ballroom where they wine and dine and decide the fate of literally billions of people? This organization exists in a small town called Basel Switzerland and is the subject of my reading this week.
Tower of Basel: The Shadowy History of the Secret Bank that Runs the World by Adam LeBor a freelance writer whose articles often appear in The Economist, is about the history and the evolution of The Bank of International Settlements (BIS), the mundanely named organization that is at the center of the banking universe. LeBor rightly points out that it is ironic and a testament to the bank’s secrecy and shyness of the press that the conspiracy theorists have not caught on to the power and the international reach of the BIS. Conspiracy theories abound for organizations such as the World Bank, the IMF and families such as the Rothschilds (which I explained originated from anti-Semitic pamphlets in the 19th century here), but the BIS has managed to stay out of the spotlight. This is despite the fact that every banker in the world who is aware of how banks fund themselves has at least heard of the BIS ratio. This ratio is essentially the underpinning to international banking and sets the floor for how much capital is needed based on the riskiness of each banks assets.
Every other month the heads of the most important central banks in the world are flown into Basel to have a closed session discussion of the world economy, where they see things heading and what their policies should be moving forward. It is one of the few places that the men or women (in the case of Janet Yellen) can openly express their views and opinions on the state of the world economy to each other.
In addition the BIS hosts the Secretariat of the Basel Committee on Banking Supervision and with it has played a central role in establishing the Basel Capital Accords, which establish the required capital ratios for banks that operate internationally. This is relevant for all banks as these banks then lend on to smaller local banks all over the world.
As Adam LeBor masterfully points out by diving into the history of the BIS though, banks are and will always be entities that make political decisions. It is fashionable in times of peace like we have now to think that making money is above the day to day political fray. This is often the defense of executives at companies that engage in immoral or questionable areas of business that may harm the long term viability of us all; that they have a duty to their shareholders to make as much money as possible for them in their chosen industry. As we have seen however, with the apparent nomination of Rex Tillerson, the former CEO of Exxon Mobil, to Secretary of State, and his
chumminess with Vladimir Putin, businesses make political decisions all the time, and they are not always in the interest of the greater good.
There are a lot of parallels with the decisions Rex Tillerson made, the banks who financed the Dakota Access Pipeline and the BIS made which ended up being very political indeed. In the case of the BIS, the bank worked through World War II and was essentially acted as a foreign branch of the Reichsbank, the bank of Nazi Germany. To make matters worse, the BIS was headed throughout the war by an American who turned a blind eye to the deposits of stolen gold from the central banks of the countries that Nazi Germany conquered. It is even reported that the gold confiscated from concentration camp victims was melted and sent to the BIS to be deposited in the account of the Reichsbank there.
Has Business Learned From This?
Certainly business has learned something from the horrors of wars past and the role that business can play in lifting up or destroying their respective home countries? Sadly, we still need a hard working and unrestricted international news media to expose companies that are still engaging in questionable behavior to this day.
Banks were supposed to give acknowledgement to the pivotal role they may play in shaping the environment by adhering to something called the Equator Principals. The Equator Principles is a risk management framework, adopted by banks, for determining, assessing and managing environmental and social risk in project finance. As recently this month though, banks were found to be financing companies in Indonesia that were claimed to have engaged in deforestation and illegal burning. This is alarming since the article also claims daily emissions from Indonesia’s forest fires last year at times exceeded emissions produced by all economic activity in the United States.
This is just one example of how business and banks have to be on the lookout for returns to their shareholders but also aware of the social and overt political decisions they are making. In addition we all would do better to keep ourselves informed through reputable news sources and by checking the facts. The whole impetus for the Dakota Pipeline in the first place was to get gas more safely out of the Bakken Shale Formation after the number of train derailments involving gas and large explosions skyrocketed. Protesting the pipeline will not change the fact that the gas is already moving out of the area whether the pipeline gets built or not. Their efforts may be better placed towards encouraging and promoting renewable energy instead of attacking the dirty cheap ways of getting it.