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Section: Daily Dispatches

8:47p ET Tuesday, September 2, 2003

Dear Friend of GATA and Gold:

Lyndon LaRouche, the economist and perennial presidential
candidate, said some time ago that J.P. Morgan Chase
was actually an agency of the U.S. government. He's
supposed to be a complete nut case ... except that
Morgan Chase is where most of the gold derivatives live,
and now, as you'll see from the CBSMarketWatch story
appended here, Morgan Chase has been put in charge of
creating a banking system in Occupied Iraq.

So welcome to your liberation, Iraqis. And by the way,
would you happen to know who might liberate US?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

J.P. Morgan in Iraq:
The U.S. bank is betting that Iraq will hold together

By David Weidner
CBS.MarketWatch.com
Tuesday, Sept. 2, 2003
a href=http://www.marketwatch.com/news/story.asp?siteid=yhooamp;guid=%http://ww...
7B59DC7FCB%2D7D86%2D4B1E%2DAD4A%2D3450E73B502F%7Damp;

NEW YORK -- As bombings and attacks continue to make
Iraq one of the world's most dangerous places, a consortium
of banks led by J.P. Morgan Chase is putting a beachhead
in Baghdad.

On Friday, J.P. Morgan was named to lead a coalition of
13 banks from 13 countries that will run a trade bank for
the Coalition Provisional Authority. The bank will extend
credit to the government and eventually to private
companies working in the country.

On the surface, the short-term prospects for running the
trade bank are slim. The contract will pay only $2 million
to the banks in the consortium and is in force for only
one year. A second year could be tacked on as an option.

Stumbling blocks remain. Iraq's assets have been seized in
many countries, and it's unclear when Iraq's $21 billion in
sovereign debt will be repaid.

The banks will back about $100 million in spending a
month, according to the authority, though that number
could balloon to $500 million. Banks would earn interest
on those loans, which will be guaranteed by the new
government.

Iraqi assets are still subject to confiscation in most
parts of the world, particularly since the country is in
default on most of its obligations.

In a country that appears on the brink of anarchy,
that's a pretty limited payoff.

To be sure, J.P. Morgan isn't about to send hundreds
of bank tellers to Baghdad and Basra. The Iraqi finance
ministry will run the trade bank and employees will be
Iraqis trained by J.P. Morgan.

But experts say the instability of post-war occupation
makes Iraq a dangerous environment for banking much
less anything else. Yet the quick establishment of a
banking system is essential for making the country
stand on its own.

quot;It sounds like it's like a Wild West situation over there,quot;
said Clyde Prestowitz, president of the Economic
Strategy Institute in Washington. quot;But if I'm Paul
Bremer (post-war administrator in Iraq), I'm very interested
in getting a banking system operating.quot;

The reason, Prestowitz said, is the immediate needs of
the country. The authority, under pressure from
Washington to keep costs down, needs to establish
credit for Iraq itself. By using the country's ample oil
reserves as collateral, the authority can shoulder the
greater-than-expected costs of rebuilding.

quot;We miscalculated badly what the aftermath of
knocking out Saddam's regime would be,quot; he said.
quot;We have a dysfunctioning economy. We need help
but the administration doesn't want to give up much
authority.quot;

Prestowitz said that a good benchmark for U.S.
occupation would be the U.S. occupation of Japan
following World War II. U.S. forces spent seven years
rebuilding that country between 1945 and 1952.

But the lure of Iraq is oil. With 114 billion barrels in
proven reserves, Iraq has the second largest supply
of oil in the world, second only to Saudi Arabia, with
261 billion barrels, according to the Central
Intelligence Agency.

In 2002, Iraq had $58 billion in gross domestic
product -- 66th in the world. Until the war, Iraq was
producing 2.45 million barrels of oil a day. But that
was under United Nations sanctions that limited its
oil sales to exchanges for food. With those restrictions
being phased out, Iraq and its 26 million citizens
could be a major economic force.

No surprise then that 58 banks applied for the trade
bank assignment.

quot;When they become a going concern they are going
to be a serious source of business,quot; said Ross M.
Starr, a professor of economics at the University of
California, San Diego. quot;By getting in now, they have a
beachhead; they're unlikely to get thrown out.quot;

Starr says the payoff will be the ability of banks such
as J.P. Morgan to do investment banking in the country.
A trade bank, he said, functions mostly as a commercial
bank, making loans and earning meager returns in the
form of interest.

But should the Iraqi economy get rolling, companies will
seek to expand and companies will need bonds, stocks,
and other investment banking products. Those products
and services are fee-based and generally more lucrative,
Starr said.

quot;Right now there's not much in the way of risks,quot; he said.
quot;Other than the fact you're doing business in a war zone.
We're not talking big bucks here. J.P. Morgan is really
doing a public service, but it could become very lucrative.quot;