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Austrian Finance Minister Interviewed by EIR, Warns against
“Shadow Banking”, but Rejects Glass-Steagall

In a written interview with Executive Intelligence Review, the Finance Minister of Austria, Maria Fekter, said that her government will not promote a separation of banks and Austria will “stick to the universal banking system” which it currently maintains.

The interview with Dr. Fekter was arranged following a presentation she made at a major financial conference in Alpbach, Austria on Aug. 30, 2011, when she responded to a question from an EIR representative, by noting that “Glass Steagall has some good points,” which she then elaborated to the audience.

Since then, the debate over a return to a true Franklin Roosevelt Glass-Steagall banking regulation policy has continued throughout Europe, with parliamentary action in Switzerland – where a Glass Steagall bill was defeated – and discussions are ongoing within governments and parties. The City of London is pushing, through Lord Vickers, a phony proposal, called “ring fencing”. The only other option on the table is to continue the unlimited bailouts, which will lead to a hyperinflationary blowout of the whole system.

The debate has also heated up in Austria, and the Jan. 13 announcement by Standard and Poors that it has downgraded Austria's debt compounds the need to act.

While Mrs. Fekter rejected banking separation in the interview, she did speak out against a major aspect of the present system, which was identified in an official report to the U.S. Congress by the Angelides Commission as “shadow banking,” as a significant factor in the creation and uncontrolled growth of the so-called sub-prime real estate bubble. Echoing the Andelides Commission report, Fekter said that the “origins of the crisis can be traced back to business types which...could also be provided by non-supervised institutions. Therefore,” she added, “it is our strong interest to avoid all types of shadow banking, consequently we support all initiatives in this direction.”

But the only way to deal with “shadow banking,” which is associated primarily with the City of London and its unregulated monetary system, is by implementing Glass Steagall in its full, original form. This would remove the trillions of dollars of worthless obligations currently on the books of the banks, built up by wild speculation and reckless leveraging, through a bankruptcy reorganization, forcing the speculators to eat their own debts, while protecting the legitimate side of the commercial banks, so that new credit could be channeled through the banks for investments in projects in the real, physical economy.

This could not be done in Europe today without a repeal of Maastricht and the other treaties and agreements, which have driven the Eurozone as a whole to the brink of a total crash.

Maria Fekter also opposes Eurobonds in the interview, and she rejects EU bailouts such as the Federal Reserve is doing in the U.S.: “no matter how much money we would put into the system, we would not be able to solve the problems.” But most of the risks would be shifted from the private sector to the public sector and to other countries.

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