Rubin met secretly with bankers before latest bailout

H.E. FOIA Inquiries Sent to Treasury and New York Fed

Top officials of six commercial U.S. banks that have at least $100 billion at risk in South Korea and other Asian nations met secretly with Treasury Secretary Robert Rubin at the Federal Reserve Bank of New York on December 24. (The banks' representatives were from Citibank, Chase Manhattan, J.P. Morgan, Bank of New York, Bankers Trust and Bank of America.)

The next day, Christmas, the Clinton Administration announced that $1.7 billion in taxpayer money would be taken from the U.S. Emergency Stabilization Fund and "loaned" to South Korea through the International Monetary Fund (IMF), a step for which congressional approval is not required, since Clinton and Rubin control the fund.

The money was part of a $10-billion overall emergency supplement to the ever-expanding Korean bailout. No reports were prepared and no minutes of Rubin's meeting with the bankers were taken, according to Federal Reserve Bank spokesman Dahlia Harmon.

Four days later, December 29, officials of five major investment banks also met secretly at the New York Federal Reserve Bank, then announced that they were working on a plan to refinance their loans to South Korea. No minutes of that meeting were taken either, said Harmon, and the names of the bank officials who attended would not be released. "We're just not doing that," said Harmon. "These were not open to the public."

Why the secrecy? And shouldn't Congress inform taxpayers about who ultimately benefits from the IMF bailouts, especially now that Rubin and Clinton-with the support of House Banking Chairman Jim Leach (R.Iowa)-are asking for an appropriation of up to $35 billion for the fund by month's end?

"When those guys from the banks are sitting around at the Fed, all they're thinking about is how they're going to get their original money back," Polyconomics President Jude Wanniski told HUMAN EVENTs.

"When you have creditors and they're in a mode of `how can we salvage something out of this disaster we've gotten ourselves into,' they say, `let's get the IMF involved.' Bob Rubin and Treasury undersecretary] Larry Summers and the Secretary of Defense [William Cohen] even went to the Republican Leadership Conference and said, `Oh, look, the North Koreans are going to bomb South Korea. The blood will be on your hands.'

"They went on and on and said, `Give us the money and then we'll prevent the Third World War'-and the money then goes back to these banks.... . The money never leaves the United States. They just change the accounts. The money always goes to pay down the debts of Chase Manhattan, Citicorp and whoever."

HUMAN EVENTS sent formal Freedom of Information Act (FOIA) requests to the Treasury Department and to the New York Fed on January 5, requesting any and all documentation concerning the meetings of December 24 and 29. The agencies have ten days to respond under the law.

However, Fed spokesman Dahlia Harmon told HUMAN EVENTS that a FOIA request "doesn't really apply" to those meetings. "There were no minutes. This was different. This was not something that typically happens. The banks were just invited here to meet and talk about the Korean situation. It wouldn't be applicable to [a FOIA]."

After Harmon refused to disclose the names of the bankers who attended the meetings, HUMAN EVENTS telephoned the banks. Only three of the 11 banks contacted responded.

Bank America spokesman Sharon Tucker told HUMAN EVENTS that "we were there" at the December meetings, but "we want to keep a low profile" and not associate ourselves with any "particular name" or individual.

"To my knowledge we are not commenting on the Korea situation,' a spokesman for Goldman, Sachs told HUMAN EVENTS. 'hat's just what I'm being told. We're not talking about it:"

Victoria Harmon of Salomon Brothers told HUMAN EvENTs: "Ihe only thing made public was the statement that came out of the Federal Reserve. There was a person there representing Salomon Smith Barney but we have not made that public. [Management] didn't want to make it public."

While the Fed refuses to disclose which bank officials attended the meeting with Rubin and what specifically was discussed, it has been reported that representatives of Goldman. Sachs-the investment bank Rubin was formerly paid $25 million per year to chair-attended the meeting on the 29th.

Jeff Shafer, vice chairman of Salomon Brothers International, and Richard Hormats, vice chairman of Goldman, Sachs Intemational currently are advising the South Korean government, as is E. Gerald Corrigan, a partner at Goldman, Sachs and the former president of the New York Fed.

Following news of the December 24 meeting with Rubin, U.S. banking stocks-and the portfolios of their CEOsrose: Citicorp up $3.93, Chase Manhattan up $2, and J. P. Morgan up $2.18. Too bad all American taxpayers can't share in the dividends-they paid for them.

Copyright Human Events Publishing, Inc. Jan 16, 1998
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