MY ADVICE TO THE PRIVILEGED ORDERS -- Henry B. Gonzalez, (TX-20) (House of Representatives - March 03, 1992)

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The SPEAKER pro tempore (Mr. Bacchus). Under a previous order of the House, the gentleman from Texas [Mr. Gonzalez] is recognized for 60 minutes.

Mr. GONZALEZ. Yesterday, Mr. Speaker, I reported on the Commodity Credit Corporation export promotion program that inured to the benefit of Iraq, and its arms buildup and its ability to wage war in the Middle East. I also illustrated, and I placed in the Record, which was printed and delivered to the Members, or accessible to the Members, today, the documentation that reflects these transactions and illustrated how the Bush administration used the CCC Program as a foreign policy tool, as well as the Export-Import Bank. I showed how the Banco Nacionale della Vordo, the Italian bank agency in Georgia, or, for brevity's sake, and BNL scandal, affected that program and, as well, the United States national policy, at least under this administration, toward Iraq. I also shed light on Secretary Baker and Deputy Secretary Eagleburger; that is, Deputy Secretary of State Eagleburger, in his role in prodding the National Advisory Council to approve the $1 billion in CCC Programs for Iraq in November 1989, and I revealed that, prior to the NAC decision, Secretary Baker met with the Iraqi Ambassador, Tariq Aziz, in October of that year to discuss the BNL scandal and the BCC Program.

Now we talk here about budget imbalances and the like. How in the world can we justify the parsimony with which the same administration and a good segment of the Congress, I must admit quite regrettably, deals with the domestic needs and our own ability to endure as a viable nation, let alone as a leader of the world when, so cavalierly, not thousands, or hundreds of thousands, or millions, but billions of dollars are paid for by the taxpayers, because all of these credit guarantees mean that, guaranteed by whom--the U.S. Government.

Well, what does that mean, the U.S. Government? The taxpayers. There is only one source of money for any government, and that is taxes, taxpayers.

So, Mr. Speaker, today I want to follow through and report on some of the events that occurred immediately after the NAC decision of November 6, 1989.

I also mentioned yesterday that we have learned nothing, apparently, through the years. As I said last week, we are like the old Bourbon kings. We learn nothing and forget nothing. But we are supposed to be a democracy, and the fact is that we have not learned anything because even today as I am speaking, not only on a Middle East level, but in far distant regions of the world, in the Far East, we are getting involved in the same kind of transaction in which directly and indirectly we are funding nations and activities that can very well imperil our national security tomorrow. Not next year, but tomorrow.

Now, as I said in yesterday's report, in November 1989, after intense lobbying by the State Department--and I have those documentations in today's Record--the NAC decided to approve a $1 billion CCC Program for Iraq.

It was decided at that time to offer the Iraqis in two tranches of $500 million each these guarantees, and under the protest this is the reason why Secretary Baker met with the ambassador, Aziz, who was saying, `Hey, look. We thought we were friends. What do you mean you're just going to let us have $500 million? We thought the deal was for a billion.'

Actually it was more than that. The total amount of guaranteed credits just through the CCC alone, not including the Export-Import Bank, the Record will show amounted to $5 billion, of which the taxpayer has ended up holding the bag for over $2 billion. That is incredible, and yet it is true.

Now one reason is that our banking laws are of such a nature, and have been, that the national interest is not protected. The people, as in other areas, for instance interest rates, and I will not go into that now, but I am just using that as an illustration of how the American people are stripped naked from any defense in the very basic things such as the allocation of credit. Allocation of credit has been from the beginning of our nationhood the prime issue. It was the issue in the First Continental Congress, in the Second Continental Congress, and then after the adoption of the Constitution in 1789, and under the impulse of the Secretary of the Treasury, Alexander Hamilton, the formation of the first U.S. bank, that was a big issue.

Mr. Speaker, I say to my colleagues, `If you think mean things are being said about bankers as a class today, you ought to read what Thomas Jefferson said and a few of the other leaders of that day,' and what was the issue? It was exactly that. Who is going to wield the power of allocation of credit to the Nation, to the people? And of course all through mankind's history that has been decided in a diverse manner and way.

But if we are talking about the greatest national interest, the greatest interest of the greatest number, then we have to go back to our roots, and we have to see how men like Jefferson did not capitulate as tragically as other leaders in the 20th century have particularly, and certainly since the adoption of the Federal Reserve Act of 1913, and more certainly in the latter two or three decades and when we emerged from the hot-shooting phase of World War II.

Mr. Speaker, I used to say, and we at the end of World War II used to say, `Well, there is no peace treaty,' and there still is not, but we had other things happen. We had the emergence of some of the defeated and conquered nations who today financially are in positions of tremendous strength.

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All through history when an individual, as well as the collective body known as a nation, forsakes its beginnings, forgets its hard beginnings, and it then sells or trades its inheritance `for a mess of pottage' in the words of the scriptures, there is only one thing happening, and that is to the detriment of that nation's interest.

When we add to that the lack of vision, and again, in the words of the Testament, where a nation has no vision or where there is no vision, `a nation perishes.'

We have gone down a dangerous road to the point where at this particular time, and with little incidents such as these Iraqi transactions, guaranteed by taxpayers, incredibly, and still going on, in fact, more than ever.

Let us look at the commitments the Export-Import Bank has made just within the last 6 or 7 months with Kuwait, with the tremendous wealth that Kuwait is supposed to have, and we will see that we have learned nothing.

But the banking laws, who would think, as so many of my citizens did not want to think just a few years ago, when they would ask me and say, `How come we have prime interest rates of 20 percent and 21 percent? We thought there was a law against usury.' I would say, `No, there is not. On the national level, the limitation we had from the beginning of the Nation was done away with in 1865 with the National Currency Act of that year.'

That was right after Lincoln died. When Lincoln died, that problem was the one that was uppermost in his mind, because he knew what the forces were and what was shaping up.

Nevertheless, be that as it might, it surprised many of my fellow citizens to discover that there was no such thing. In fact, it is the other way around. The States that had anti-usury or interest rate controls have, all with the exception of about two or three at the most, have been done in because of the Federal Government and its policies in removing any kind of interest rates.

Going back to the origins, and that big, big argument, who allocates credit, today who does allocate credit? Is it the Congress? Is it the President or the elected people who are supposed to be the agents of the people en masse? No, not at all. Those forces are now what they call, in fancy parlance, exogenous. They are not within the control of the people. Therefore, we do not have to be prophets to know we are in deep trouble.

To continue with this specific case, because it is revelatory of the malaise and of the illness, and at the bottom of it, the failure of the Congress, and rightly or wrongly, of the committees, such as the Committee on Banking, Finance and Urban Affairs that I have the honor to chair. It has been an anguishing at least 30 years that I have been here in the Congress, that I have belonged to the committee, and I cannot begin to tell the anguish over the almost demoralizing things that I could see palpably happening.

Fortunately, I had the sense of accountability to record that over the years in the record known as our Congressional Record. What I say now is in hindsight. It is what was obvious to anybody sitting on this committee charged with the sense of trust.

In law, down through the years in the American corpus of law we have the phrase known as `Cestui que trust.' That is considered as the trust that one who has the power of making and manufacturing money, which under our fractional system the bankers do. A bank can manufacture through the issuance of credit 10 times the amount of money it actually has in deposits. It always has, through our fractional currency system or reserve system, fractional reserve system.

In our tradition that is known as a trust. It used to be, and the law is still there and that phrase is still there, that banks were chartered. If one wanted to form a national bank, one then applied to the Comptroller of the Currency, who incidentally is not appropriated for by the Congress. The Comptroller of the Currency operates on the fees and monies he derived from the examination of the banks under his jurisdiction, so they have tended to be quite independent all through the years. I have had a series of Comptrollers come before the committee. If we lose the control, it is not there. The reason I am particularly sensitive to the need for adequate legislation is that despite the amendments we tacked onto the banking bill last November in this area known as the international banking law area, the reason I am continuing this is because I do not think it is still sufficient to provide that oversight and that accountability that ought to be on the part of our regulatory authorities acting in the name of the national interest of over $800 billion of this kind of international moneys in our country, high-velocity money.

As I said yesterday, just a small chunk of it has high leverage, and it is at the bottom of the substantial drug money laundering, noxious and abomination that our country is flagellated with, and which sooner or later is going to have to be plugged if we want to have any real control on that kind of crime.

In fact, it was this type of a bank that was able to get its charters in an area that, as a result of the first International Banking Act in 1978, which followed the hearings in my city and my district in 1975 that I caused. In fact, they were the only ones. They were so regulatory in the practices then, which incidentally, now, have been so much publicized in the last 2 or 3 years, that were evident with this high-velocity money coming across the border at will, with no accountability or anything.

It took 3 years. It was not until 1978, 3 years after the 1975 hearings in San Antonio, that we finally got the first smithereen of an international banking law.

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Can you believe that? It was not until 1978. Then I wanted to amend the law further. Because when we finally got it in 1978, I was not chairman, and I was not chairman of the subcommittee that had jurisdiction. I had a hard time persuading them to go to hearings in San Antonio, so I did not have much of what they call around here clout in shaping the final outcome, which was a watered down version of what I had first proposed.

Through the years since 1978, I have been bringing to the attention of the subsequent chairmen of the committees we need to reinforce that act. The only reason we got the modicum of amendments last year was because of in November the BCCI scandals. I doubt seriously if we could have gotten anything absent BCCI scandals.

But has it been adequately addressed? No. You still have agency banks like this Atlanta BNL. What is an agency bank? An agency bank is really a branch of an otherwise foreign headquartered bank. In this case, the BNL, the headquarters for the U.S. operation was in New York, where they had been operating for a few years. But then they obtained agency charters from the States of Georgia, Florida, Illinois, and California.

In the meanwhile, I was focusing on trying to get the Federal Reserve Board to give me some statistics on the flow of cash transactions, because I knew they were tied in to the illicit narcotics business. I could not get anything as an individual member of the Banking Committee.

It was not until the chairman in 1981, that finally, in the name of the committee, we got some information. And it was highly revelatory. Even though it was fragmentary, it was not as complete as it should have been, it was very revealing.

But even then we could not get the law amended to take care of what was obviously an intimate transaction between banking activities and particularly those that were not supervised by either the Federal Reserve, which is supposed to have prime responsibility, or the State chartering commissions.

In the case of the BNL in Georgia, the State commissioner, after the scandal, came to us and said, `Well, we did what we could, but we had no idea because they cooked the books.'

When I said, `Well, what responsibility do you have toward dovetailing your auditing and examination with the Federal Reserve Board?'

`Well, it all depends,' was the answer. And I get the same answer from the Federal Reserve Board.

But the net result is that even today there is no agency, State or Federal, that can give the American people the accounting that they ought to have, much less the committees that are charged with the responsibility of either the substantive legislative responsibility, such as the Banking Committee of the House of Representatives, and the one in the Senate. It is a responsibility that is inescapable, because in our case it is our cestui que trust.

It is a trust. It is not a job, it is a trust we hold in trust temporarily during the period of time in which our constituents say we choose you to represent us, and that is all.

Of course, we are going to rise and we are going to speak forth. I say with a great deal of sadness have we been helped? No. We started 2 years ago almost and could not get much attention, even on the committee level.

Then when the thing got hot after the newspaper started getting on the scandal, and then the Italian Government, because the other thing I brought out consistently, and what is ignored even here in our country, and that is these banks known as foreign banks, the overwhelming majority of them are owned by their respective governments. They are not like theirs. So the BNL is really owned by the Italian Government.

It was not until it hit home in Rome that the Italian Government was going to be exposed to an equal loss of around $2 billion, like the taxpayer in the United States, that then the Senate, to its glory in Italy, the Italian National Senate, with the distinguished chairman, Senator Carta, then contacted me.

But in the meanwhile, the Committee on Banking, which to its great honor and sense of responsibility acceded to my request and issued over 100 subpoenas, to the Federal Reserve Board, the State Department, MX Bank, the Agriculture Department, CIA, and what do we get? We get a letter, after I refused to meet privately with the Attorney General of the United States, saying, `Stop your investigation. We don't think you ought to continue these investigatory hearings.'

I wrote him a letter and set forth the constitutional applicability in this case. This is our Attorney General. Thornburgh. Were we helped? No. Are we still obstructed? Yes. We still cannot get some of the subpoenaed documents.

Now, some of us, this great independent Federal Reserve Board, independent from everybody, from Congress, the President, all of a sudden says, as meek as a moaning kitten, `Oh, we cannot give you these documents, because the Attorney General says we shouldn't.'

Well, to his everlasting glory, Senator Carta gave them to us. But we still have some that have been denied the Italians and been denied us, right now, as I speak.

So where are we? After all this great publicity, and outcry, and scandal, what? We still have the challenge of doing something about it.

I am proud to say that the Committee on Banking, Finance and Urban Affairs of the U.S. House of Representatives is committed to doing that, and will persist, and will continue. This is, of course, with the help and union of the majority, overwhelmingly, of the committee. In fact, the votes were unanimous. We got the required majority to issue the subpoenaes with no dissent. So that is our big comforting ray of hope.

But it seems to me that there should be no resistance, whether it is out of fear of embarrassment because of what happened 2 years ago. We understand that 2 years ago you had a different diplomatic format. We do not understand why anybody--Iraq or anybody else--would have the taxpayer exposed to billions of dollars worth of tax responsibility. That I do not understand now or at any time.

But I do understand the diplomatic dilemmas then. But what about now? You have the same dilemmas in other countries.

We are doing the same thing now with Iran, that just recently released the last hostages. The reason they did was again based on a banking matter, which was at the bottom of the whole trouble when the first hostages were taken in 1979. That was the $10 billion involving one of our biggest banks in our country, where the former Secretary of State went back on a stipend as a consultant, and naturally it involved the moneys that Iran and the revolutionary government of Iran felt was theirs and ought to go back.

So they did something that had not happened since the Middle Ages, they took hostages.

But has the American people ever been told? No. I did my best to get the chairman then to have an investigating committee. In fact, I was the first one after the hostage taking to recommend such things as a freezing of assets.

But even that was done through conniving on the part of that large bank that had this $10 billion exposure, even though that $10 billion exposure was really a syndicated exposure. That is a financial word meaning they had partners, foreign banks, all the way from Britain to France and everywhere else that were involved.

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But the freezing of those assets was done in such a way that it was done to perpetuate not only the hostage difficulties but everything else going with it. And it was not until one of the last payments was made just recently and other yet to be determined goodies, such as arms, that the last hostages were released, but not until then.

As I said, at the bottom of everything is banking and finance, everything. So we had Secretary Baker hearing this Ambassador from Iraq saying, `How dare you do this to your buddies.' And the Secretary said, `No, no, no, no, you are going to get this whole billion dollars this time.'

Of course, the exposure turned out to be twice, over twice that amount. But on that particular occasion, the Iraqis were afraid of the revelations that were beginning to come out and which caused our attention.

How do my colleagues thing I started the interest of the committee staff to look into this? Because in 1989, in the Wall Street Journal there was a little article saying about a letter of credit, $2 billion, Atlanta Bank. And I said, $2 billion, Atlanta. And I could not get any answers. But shortly after that the FBI suddenly decides that something has gone wrong and amiss in that Atlanta branch. And that is why I want to kind of regurgitate that a bit.

All we know is that we had high-ranking Iraqi officials making repeated trips to the U.S. Embassy in Baghdad and even to the United States to visit key administration policymakers. We had, once President Reagan took Iraq off of the list of terrorist nations in 1983, the sluice gates were open for what, American interests trade promotion with Iraq. And then with the very agile help of Mr. Kissinger and associates, we had over 80 of our leading corporations doing substantial business, forgetting that again, as in the case of government ownership of these banks, in these countries the minister of trade, or foment, or the economy, is also the minister of our equivalent of defense. In one particular instance there, for a couple of years, that happened to be Saddam Hussein's son-in-law. So that the credit base of the CCC and Eximbank credit guarantees were used to promote everything else, including the acquisition of chemicals used for atomic weaponry, nuclear weaponry, the Big Gun--the giant gun--the fellow that was developing

that was assassinated in Belgium. He had gone a long way in assembling it, and a lot of that money came from the association of banks and consortiums that resulted from these guarantees of the BNL.

Lobbying by the U.S. agriculture community was also very intense. With a $500 million tranche in U.S. agricultural sales at stake, the members of the Committee on Agriculture bombarded the administration policymakers to ensure the release of the second installment of the $500 million of the CCC programs.

As the documents obtained by the committee indicate, and I include those in this day's speech, the Iraqis had a powerful ally in the State Department. At the end of 1989 and into 1990, indications that Saddam Hussein was becoming increasingly unstable were growing stronger. Among some of the other complaints, Saddam feared that Israel, the United States and several of the Arab emirates were engaged in a scheme to cripple Iraq financially.

Now, there is another thing we must keep in mind, sort of an overarching fact behind this whole thing. Iran, which at the time was at war with Iraq, is a non-Arabic country. Israel has been in a state of war with Iraq since before 1950, and is still in a state of war. These things should have made a difference while all of this scurrying and running about was going on, but it did not.

But Saddam Hussein says, `Wait a while, I think I am getting ganged up on.'

Most of the major industrial nations had suspended their credit programs with Iraq, some of them because of Iraq's questionable ability to pay. Our law governing the Export-Import Bank, which our Committee on Banking, Finance and Urban Affairs had jurisdiction of, mandates that that is the key feature in extending these guarantees, the ability of that nation to repay. Unlike the Commodity Credit Corporation dictates a program, and this is the only thing that halfway saved the Export-Import Bank from getting a greater exposure.

As it was, even there on that level the taxpayers will be out, because of these guarantees to Iraq, on the Export-Import level, about $200 million.

Now, $200 million, some people do not think that is much. Well, I am old-fashioned enough to think it is a tremendous amount, horrendous amount. I still find it very difficult to accept the concept of a trillion dollars.

I used to think it was kind of mind-boggling to think of a billion dollars, but today it seems like, well, $200 million, more or less.

But I am chairman of the subcommittee on Housing and Community Development, and how do my colleagues think I feel when we cannot get this administration or even the leadership of our Congress to say, all right, we will provide what we should have provided in 1980, a reasonable modicum of help, which would be less than the taxpayers' exposures on the letter of credit to Iraq. For what? For community development. To once again pay attention to our crumbling infrastructures, our water systems, sewage systems.

The city of New York, for instance--alone--cannot attend the fact that it loses and wastes more water each day than it consumes because it has a delivery system that dates back 110 to 115 years ago, wooden pipes.

Now, the city of New York--and even with the help of the State of New York--does not have the resources. This is a national dilemma. We have taken this committee, in the name of the committee and the subcommittee this year, beginning on January 7, we started in Bridgeport, CT, where last year an effort was made by the city governors then to declare bankruptcy.

Can my colleagues imagine that? Today over 65 percent of our cities are in financial distress. And is this where the administration, the President and the Congress is targeting? No. We are having to fight, as if we are asking for the blood money that was so easily shed for countries like Iraq. Not to mention others, like believe it or not, China.

What are we going to do there, where the Chinese have just thumbed their nose at our distinguished leaders who go there. Secretary Baker was there just last November saying,

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Now, boys, you are not supposed to be selling those arms that we licensed you to make like the Silkworm missile, which was the one that Iraq and Iran got.

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And incidentally, now that Syria is supposed to be a reformed nation, as of about 6 or 7 months ago Syria got 300 new, improved Scuds. From whom? North Korea. North Korea or China?

What about the Silkworm? How could China produce that? We gave them the license. We have had three Secretaries of Defense and three different Presidents go over there. I think what Secretary Baker thinks is that maybe they can get a more gentler and kinder Communist out of China.

I think it is tragic. I think it is a terrible travesty. I think it is almost criminal negligence, as I think these loan guarantees to Iraq should be considered. Just look where it has ended us up, in the loss of lives, war, an affront that is still there. We have not withdrawn totally from those sands, treacherous as they have been through the centuries. We still have considerable armament and personnel.

In Panama. We have forgotten about that. We have two-thirds of the troops in Panama that we had at the height of the invasion, and we had better not remove them. Drugs, we have had twice the volume of illicit drug trading through Panama than when old General Noriega was in charge. Why? Because we installed the President, and the First Vice President, and the Second Vice president, all of whom have been bankers in Panama involved in drug money laundering. We put them in charge of those people. We installed that government, and the reason we have over 15,000 soldiers there is that the moment we remove them, they are gone, and also no American life will be safe.

What about the Middle East? How much armament do we still have there in those sands? I ask my colleagues, if they want to know, call the research service and they will tell you. Substantial. How many forces do we still have there, active duty? I thing quite a bit. Compared to the 540,000, more or less that we had at the peak, maybe not. But what does that mean? It means we are embedded in that dry quicksand of the Middle East, and at a cost to us. All of this cavalier nonsense that these other countries have saved and defrayed the cost is nonsense. I will remind my colleagues that in the last dire supplemental appropriation, emergency supplemental appropriation you voted for $300 billion plus for Desert Storm. That is just an installment. That is American taxpayers. That did not come from Germany and Japan and the other countries that are supposed to have contributed.

We are still mired. This time it is not wet quicksand, it is dry quicksand. But it is those sands that have buried

empires before, hundreds, and hundreds of years through, and will likely bury us if we do not stop.

At the end of 1989 and late 1990 indications that Saddam Hussein had become increasingly unstable, because he was shaky there, were clear. Iraq's financial condition had deteriorated to the point where it started to accumulate arrears in its paybacks, and in particular the CCC program. The Eximbank, to its credit, suspended at that point in late 1989 for a temporary default on its obligations at the bank. But Iraq was also in arrears with other creditor nations, some of whom we had involved in helping Iraq. Iraq had driven itself to the brink of bankruptcy, and the second $500 million installment of the CCC program offered Iraq a financial oasis in that desert of angered creditors.

As the United States-Iraq relations deteriorated in 1990, remember that finally on August 2, I do not see how we could ever have thought that Saddam Hussein would not think that his long protested claim to especially those areas in Kuwait were not going to be exerted if we had done everything to show that we are for him. The bad part is that on the other hand President Reagan was also lending assistance to its enemy, Iran. Remember Iran-Contra? And the TOW missiles we sent over? What cupidity could have governed the minds of our leaders to think either one of these contestants would not be cynical and knowledgeable of the fact we were aiding both sides?

The State Department and White House zeal to assist Saddam Hussein was clearly being accelerated during 1990. That is before August 2. I will report more on this at a later time because there is more documentation that needs to be placed in the Record, as I have done all along.

I would like to now discuss the important issue of the pending $350 million CCC payment to BNL and whether or not the taxpayer should be stuck with this bill. BNL was the largest participant in the CCC program, because for letters of credit you need your bank. Everybody needs a bank. As I pointed out, even at the beginning of our country, the first Continental Congress they had to charter the North American banks. The big issue was that the bankers did not want to come into Philadelphia unless they could charge interest rates that Jefferson said you are not going to get, and it was not until Jefferson said you are not going to get any more than 6 percent that they finally said all right, we will come in.

There is another, modern day sequel to that. All during World War II Franklin Roosevelt, waging world war, utilizing over 46 percent of our total gross national product for the conduct and the waging of the war and the winning of it, on

the Federal level never paid more than 2 percent interest. How could that be done? Why is it the Government pays as much as, and it has reached the point where it was paying as much as 17 percent on long-term bills and notes? Preposterous. But why? There is a reason. It was not accidental, it was not happenstance. It is because at least Franklin Roosevelt had the leadership ability to surround himself with a Secretary of the Treasury who knew what to do. So when the first borrowing started with the bonds and the bankers said no, we are not going to get into that, you do not pay enough, what did Morganthau do? The President got excited and worried and said, `Secretary, what do we do?' He said that the Federal Reserve Board Act at that time provided what it said at the beginning of the Federal Reserve Board Act, which says that the Federal Reserve Board is to be the fiscal agent of the U.S. Treasury. Of course, it is no longer the fiscal agent of the U.S. Treasury. It is the other way around. Take any dollar you have got, or $5, or $10 and see what it says. It says, `Federal Reserve note.' It used to be, `U.S. Treasury note.' There is a big difference in that, and this is why we are now sunk in what a predecessor speaker said earlier today was this monstrous interest payback. Of course, our Government is paying compound interest.

In our history we had more noble, dedicated and truly loyal to the public interest leaders like Franklin Roosevelt. And I just want to make this note for my colleagues who will see in the Record what was said here previously about this egregious interest burden, that all during World War II in fact it did not even average 2 percent, it was below 2 percent, and there were reasons. That is they stood up to those who no matter how much they had will always want more.

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Because the name of the game is always power, and when you deposit power to allocate credit to a certain segment of the country and that segment has to be the one that is in that business of making money, and then turn over the manufacturing of the money to them, because the Federal Reserve Board is not a Federal agency, it is not a Federal agency, I repeat, it is the creature of the commercial banking system of the United States. That is what it is pure and simple. That is the one that is making the decisions directly and indirectly.

So here we have BNL, the bank, through its agency. And what is an agency? An agency bank, unlike the definition of a branch, is that it does not do regular banking business. It does not take any deposits, thank God it does not. The Federal Reserve Board did not give full banking facilities to the BCCI. Other less fortunate countries, including England, which incidentally had not had a big, major bank failure in 100 years until BCCI, because once you part with that power and you remove it from the control of the people through its elected representatives and agents who, in a cestui que trust, hold that power.

None of us in our system has a quitclaim deed on our job, thank God. But do the people still remain? Well, I think that is what our big, and it used to be the $64 question, but that was during the Depression. That was before inflation. But that phrase is still good. That is the question. Well, that will be determined by us, maybe not individually, but certainly the majority here and now, right at the time that we are asked to reaffirm the basis upon which this country was founded 200 years ago.

The answer will be written as we go along, not in the year 2000. Year 2000 is today. What happens in 2000 and anytime after that depends on what we do or do not do now and tomorrow and the day after before 2000.

In February 1991, the Department of Justice, acting through the U.S. attorney's office for the Northern District of Georgia, indicted 10 defendants. Now, for months they were saying, `Look, give us time, but in the meantime, do not do anything. Do not dare have hearings. Do not do this. Do not do that. Above all, stop.' And then I had to read Supreme Court decisions after Supreme Court decisions, because the Congress has abdicated its constitutional grants of power except one, maybe two, still remaining, and one of them is the power to know, and so Supreme Court decisions after Supreme Court decisions had hailed that notwithstanding a pending criminal investigation or criminal law procedure or another investigation elsewhere, the Congress has unimpeded and supreme right to know. It is investigatory power, in other words.

But the investigatory power is not unrestrained. We do not have the right, as some tried in the 1950's, to run roughshod just because we have the right to investigate.

We have rules now that we obey rigorously in the Committee on Banking and Urban Affairs to govern that, that we do not abuse anybody's right.

But the power to seek and obtain information is supreme, but information for what purpose, to legislate. You must have a legislative purpose, and that is what we are trying to do.

Mr. Speaker, with that, and noticing the arrival of our distinguished colleague, the ranking member of the Committee on Rules, I am including in the Record the documentation in support of the statements made here today, and will announce that these documents are at the end of this special order.

Washington, DC, January 31, 1992.

Hon. Edward Madigan,
Secretary, Department of Agriculture, Washington, DC.

Dear Mr. Secretary: I am writing to you concerning Iraq's participation in the Department of Agriculture's Export Credit Guarantee Program and Intermediate Export Credit Guarantee Program, referred to as the GSM-102 and GSM-103 programs, respectively.

Specifically, I am interested in the status of the payment of the guarantees to the Banca Nazionale Del Lavoro (BNL) or its agency operation in Atlanta known as BNL-Atlanta, by the Agriculture Department's Commodity Credit Corporation (CCC).

Please provide the Committee with the following information:

1. A summary of all claims filed under the CCC guarantee programs for Iraq including the total U.S. exposure;

2. The total amount of all payments that have been made to date on claims that were filed under the CCC program for Iraq;

3. The total amount of all claims filed by BNL under the CCC program, including the original principal amount owed to BNL and the amount of accrued interest and the rate used to calculate the interest;

4. The total amount of all payments that have been made on claims under the CCC program that were filed by BNL; and

5. Any and all additional documents the Department of Agriculture has that are relevant to this matter.

Additionally, it has come to my attention that the Agriculture Department recently solicited opinions from various agencies regarding the payment of these guarantees. Please provide the Committee with all documents, including those generated by the other agencies, related to the Department of Agriculture's consideration of BNL claims.

Finally, please provide the Committee with the Agriculture Department's position concerning the payment of these guarantees.

Thank you for your prompt attention to this matter. If you have any questions, please call Ms. Debra Carr at 225-2924.


Henry B. Gonzalez,



OCT 89.
Subject: Banca Nazionale del Lavoro Concerns re Atlanta Branch.
Ref: Rome.

1. Confidential--entire text.

2. Summary: The chairman and the director general of Banca Nazionale del Lavoro (BLN) called on Ambassador to express their concerns about developments in the BNL-Atlanta affair. They suggested that the matter should be raised to a political level, and indicated their desire to cooperate fully with USG authorities while at the same time making it fairly clear they want to achieve some kind of damage control.

Ambassador said he would pass on their concerns but could not otherwise be helpful with or comment on a matter under criminal investigation. Separately, Treasury minister Carli has blocked an effort by opposition senators to conduct an investigation into the BNL-Atlanta affair. End summary.

3. The chairman of Banca Nazionale del Lavoro, Giampiero Cantoni, and the director general, Paolo Savona, called on the Ambassador on October 19. The meeting was at Cantoni's request, made during the return flight from the U.S. with President Cossiga. Both Cantoni and Savona had been in the U.S. with President Cossiga's delegation.

4. Cantoni expressed concerns about prospective developments in the BNL-Atlanta affair. He said BNL's U.S. lawyers were uring hime to raise the issue to a `political' level. He said that his U.S. lawyers thought that charges would be filed under the Rico Act and that BNL and/or Iraqi assets could be frozen. Savona was concerned about losing the CCC guarantee on roughly one billion dollars of BNL Atlanta's three billion dollar exposure. The men alluded to legislation under consideration in Congress providing
for USG credits to Iraq being affected by the investigation/charges. Cantoni said FBI agents remained in the Atlanta branch, or had sealed the books. He also maintained that the ex-Atlanta branch manager Drogoul was available and willing to testify to appropriate officials.

5. Cantoni and Savona both made the point that they were willing and anxious to cooperate with USG authorities. They also said their U.S. lawyers would be in Rome on October 25.

6. The Ambassador said he would pass on the concerns of BNL and their willingness to cooperate to Washington, but that he was unable to comment or otherwise be helpful on a matter under criminal investigation.

7. On a separate note, Treasury Minister Carli responded negatively on October 24 to a request by opposition senators to conduct an investigation into the BNL-Atlanta affair. Carli said that a number of investigations by Italian and U.S. officials were underway. He also noted that bank secrecy laws impeded the bank of Italy from providing information to the Senate.

8. Comment:

The remarks on the need to raise this to a political level are interesting as the case has already become a political issue in Italy. The President has become involved as witnessed by the inclusion of Cantoni and Savona in his party in the U.S. Cantoni and Savona, while new to BNL, have close political connections, Cantoni to Craxi and the Socialists, and Savona to Cossiga (a fellow Sardinian) and to Carli, his mentor at the Bank of Italy and later at confindustria. The Treasury is the majority shareholder of BNL.

BNL is an upstart bank by Italian standards, dating only to 1913 and owing its growth to its role as the key bank for the Government in the 1920s and 30s. It continued to grow in the post-war period, but has been having problems in the past few years. The recently sacked chairman, Nerio Nesi, has been engaged in an effort to pare down the staff of the bank and separate out some functions while at the same time increase the bank's capital. To achieve the latter, he worked out a deal where by the state-owned insurance agency, ANA and the state pension system INPS would take the proceeds from the sale of shares in Crediop and invest them in BNL. The result will be a capital increase that will reduce the Treasury's ownership from 75 percent to 56 percent. INA's also making a subordinated loan. The capital increase was approved by the BNL board in mid-October, and is to be presented to the shareholders (Treasury, INA, INPS plus a scattering of other, mostly public, institutions) on December 13.

BNL's reputation within the Italian banking community and even among its own staff has been suffering for some time. The BNL-Atlanta affairs, even if contained, will aggravate BNL's problems. Not the least of these are loans to Latin American countries. BNL is said to be one of the two largest lenders to Mexico and has been active in South America as well.



Washington, DC. February 25, 1992.

Hon. Charles Bowsher,
Comptroller General, U.S. General Accounting Office, Washington, DC

[Page: H929]

Dear Comptroller General Bowsher: The Committee on Banking, Finance and Urban Affairs is conducting an investigation into the operations of the Banca Nazionale del Lavoro (BNL). Part of this investigation involves BNL participation in the Export-Import Bank (Eximbank) program for Iraq. The Committee requests your assistance with this investigation.

The Banking Committee has obtained numerous documents during its investigation that demonstrate that Iraq was not creditworthy, yet, was able to obtain Eximbank financing. The Export-Import Bank Act states that all transactions supported by the Bank shall `. . . in the judgment of the Board of Directors, offer reasonable assurance of repayment. . . The Committee is concerned that Eximbank extensions of credit to Iraq were approved in violation of this particular provision of its charter.

Accordingly, the Committee requests that the GAO investigate whether or not Eximbank extensions of credit to Iraq were property given the above mentioned provision in its charter. Please make sure to examine the decision-making process used by the Eximbank to grant credit to Iraq. In addition, please determine the role the State Department and other `outside factors' played in the decision to grant credit to Iraq.

Thank you for your time and consideration. The Committee looks forward to the results of your investigation.


Henry B. Gonzalez,