Frits Bolkestein: BIS shelters money for dictators and deadbeats

Section:

Where Buenos Aires Hides its Cash

By Frits Bolkestein
The Wall Street Journal
Thursday, July 21, 2011

http://online.wsj.com/article/SB1000142405311190346110457645989066590612...

In December 2001 the Argentine state was finally served the bill for decades of economic Peronism. The government decided to default on a debt worth some $81 billion—the largest debt default in international monetary history. Now, 10 years later, international investors who lost significant sums still have no way of knowing whether they'll ever get their money back -- thanks in part to the Argentine government's unwitting accomplice, the Basel-based Bank for International Settlements.

The BIS has a long and checkered history. It was founded in 1930 as a transfer vehicle for the reparations agreed to in the Treaty of Versailles and subsequent international negotiations. During World War II, the Nazi regime used it as a shadow bank to hide most of its ill-gotten gains. During the Bretton Woods negotiations, John Maynard Keynes intervened to save it from disappearing along with most of the pre-war financial architecture. It eventually ended up playing a central role in the coordination of international capital supervision and helped to set benchmarks for the monetary policies of the world's central banks. As the de facto central bank of the world's central banks, the BIS also allowed its members to use its accounts to conduct a range of transactions.

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Prophecy Platinum Reports 10.97 Million Ounces Inferred
and 1.04 Million Ounces Indicated PGM+Gold in Yukon

An independent resource report on the Wellgreen project in the Yukon Territory in Canada has just confirmed that it as one of the largest platinum group metals projects in Canada and one of the few outside South Africa, Prophecy Platinum Corp. Chairman John Lee says.

The report, compliant with Canadian National Instrument 43-101, was written by geologist Todd McCracken of Wardrop Engineering Inc., a Tetra Tech company. It incorporated drill data from 701 diamond drill holes (182 surface and 519 underground) totaling more than 53,222 metres. Using a 0.4 percent nickel equivalent cutoff grade, the Wellgreen deposit now contains a total inferred resource of 289.2 million tonnes at an average grade of 0.53 g/t platinum, 0.42 g/t palladium, 0.23 g/t gold (1.18 g/t PGM and gold), 0.38 percent nickel, and 0.35 percent copper. Separately, the deposit also contains an indicated resource of 14.3 million tonnes at an average grade of 0.99 g/t platinum, 0.74 g/t palladium, 0.52 g/t gold (2.25 g/t PGM and gold), 0.69 percent nickel, and 0.69 percent copper.

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The BIS has played a vital role in creating a more stable and predictable international monetary system. Unfortunately, the fact that both the BIS and its customers have immunity from international jurisdiction and regulation provides an unintended legal loophole to regimes that care very little for the solidity of the international monetary system. From last year's Wikileaks scandal, we know that in the mid-1990s, Nigerian dictator Sani Abacha used that same legal loophole to store billions of dollars that he had stolen from his own people at the BIS, thus protecting it from litigation.

Which brings us to Argentina. Following its 2001 default, that country's central bank openly began transferring large parts of its capital reserves to the BIS, a process that accelerated after Argentina's 2005 debt restructuring. And indeed, even on the eve of the 2001 default, Buenos Aires announced its intention to move assets to other institutions such as the BIS, where they would be beyond the reach of creditors. Today, the Argentine central bank holds $45 billion in its account at the BIS -- a staggering 86% of Argentina's total capital reserves. By comparison, the size of other central banks' average deposits held at the BIS is a mere 4% of their total capital reserves.

By refusing to pay its bills, Argentina is defying the judicial systems of Italy, the United States, Germany, and Japan, which have issued hundreds of judgments ordering Argentina to repay its debt. By hiding its assets at the BIS, it has also been depriving its creditors the ability to settle their claims since the unilateral 2005 and 2010 debt restructurings. This is in clear violation of the ancient Roman legal principle of actio pauliana, which specifically forbade any transfer of property in the case of an imminent bankruptcy, when that transfer put a creditors' property beyond his reach.

Just recently Dow Jones Newswires reported that a number of Argentine bond investors have filed a complaint in a Swiss court accusing the BIS of complicity in money laundering. It is disappointing to say the least that the BIS, which has always championed transparency in central banks' monetary reserve policies, may have allowed itself to be used for these kinds of disappearing acts by its own member banks.

The BIS committee must now demonstrate its commitment to a sound global financial system by tackling what looks very much like the corruption of its own regulations. Rooting out abuses such as the Nigerian and Argentine cases is vital to re-establishing the proper mandate of the world's central bank.

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Mr. Bolkestein is an author, retired center-right Dutch politician, and former European commissioner for internal market and services.

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Golden Phoenix Q2 2011 Conference Call Posted at Company Internet Site

The second quarter 2011 conference call of Golden Phoenix Minerals Inc. (GPXM) has been posted at the company Internet site for immediate playback. The call includes updates on the start of gold production at the company's Mineral Ridge gold project in Nevada, the letter of intent to acquire the Santa Rosa gold mine in Panama, and the company's due-diligence efforts to secure a senior stock exchange listing.

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