Treasure Islands - Nicholas Shaxson [87]
Walter Wriston, the chief executive of Citibank from 1967 to 1984, described the thinking of many of the parties involved as private offshore banking emerged as a global force. Sitting before a picture of himself with President Marcos and his wife, Imelda (the picture, he said, “caused so much uncontrollable laughter among my colleagues that I’ve kept that picture on my wall all these years”), he described the pervasive lack of understanding of, or perhaps the deliberate blindness of many toward, what was really going on. “In hindsight, the corruption and the amount of money bled off from those companies was a lot more than anybody knew about, including the United States government, Citibank, and the CIA,” he said. “We based our loans on economic analyses—will the power plant supply enough kilowatts to pay back its loan?—without realizing that we also had to account for the fact that the head of the power plant was the dictator’s brother.”31
As all this happened across the developing world, a pinstripe army of bankers, lawyers, and accountants lobbied inside the United States to make it increasingly attractive to these rising tides of dirty money, successfully turning it into a secrecy jurisdiction in its own right, just as the memo Michael Hudson received in 1966 had suggested. Meanwhile, they continued to capture the legislatures in small tax havens to perfect the global dirty-money system. Playing all three corners of the dirty-money triangle—the source countries being drained of illicit wealth, the increasingly offshore-like economies receiving the wealth, and the offshore conduits handling its passage—turned global private banking into one of the most profitable businesses in history. “The rise of Third World lending in the 1970s and 1980s,” in Henry’s description, “laid the foundations for a global haven network that now shelters the world’s most venal citizens.”
Henry’s calculations suggested that at least half of the money borrowed by the largest debtor countries flowed right out again under the table, usually in less than a year, and typically in just weeks. The public debts were matched almost exactly by the stock of private wealth their elites had accumulated in the United States and other havens, and by the early 1990s there was enough flight wealth in Europe and the United States to service the entire debt of the developing world—if only its income were taxed modestly. For some countries, like Mexico, Argentina, and Venezuela, the value of the elites’ offshore illicit wealth was worth several times their external debts. Today the top 1 percent of households in developing countries owns an estimated 70 to 90 percent of all private financial and real estate wealth. The Boston Consulting Group reckoned in 2003 that over half of all the wealth owned by Latin America’s wealthiest citizens lay offshore. In June 2010 Henry reckoned that the total stock of flight capital financial wealth from developing countries in 2007 had reached $7–8 trillion—more than half under the custody or management of the world’s top 50 banks.
One U.S. Federal Reserve official noted: “The problem is not that these countries don’t have any assets. The problem is, they’re all in Miami.”
In 1982 Mexico’s President José Lopez Portillo gave a speech to parliament, outlining the offshore challenge facing his continent. “The financing plague is wreaking greater and greater havoc throughout the world,” he said. “It is transmitted by rats and its consequences are unemployment and poverty, industrial bankruptcy and speculative enrichment.” He blamed “a group of Mexicans . . . led and advised and supported by the private banks that have taken more money out of the country than the empires that exploited us since the beginning of time.”32
Lopez Portillo vowed to ignore the IMF, nationalize the banks, and introduce exchange controls, and within ten days