Global Power Project: Part 1
by Andrew Gavin Marshall / October 10th, 2013
This is the first of a series of exposés focusing on the
Institute of International Finance (IIF), the very “visible hand” of
financial markets. It is a continuation of the Global Power Project
produced by Occupy.com. Part 1 examines the origins of the IIF.
Founded in 1983, the Institute of International Finance (IIF)
describes itself as “the world’s only global association of financial
institutions” with a membership that includes “most of the world’s
largest commercial banks and investment banks,” along with sovereign
wealth funds, asset managers, hedge funds, insurance companies, law
firms, multinational corporations, development banks, multilateral
agencies, credit ratings agencies and an assortment of other global
financial and economic organizations. In short, the Institute of
International Finance is the very visible hand of the global financial
markets.
As the IIF notes
on its website,
its “main activities” include providing so-called “impartial analysis
and research” to its members in order to “shape regulatory, financial,
and economic policy issues….influence the public debate on particular
policy proposals….[and work] with policymakers, regulators, and
multilateral organizations… with an emphasis on voluntary market-based
approaches to crisis prevention and management.”
It is also there to “provide a network for members to exchange views
and offer opportunities for effective dialogue among policymakers,
regulators, and private sector financial institutions.” The IIF
proclaims it “is committed to being the most influential global
association of financial institutions,” seeking to “sustain and
enhance…. our extensive relationships with policymakers and regulators.”
The Institute of International Finance was formed at the beginning of
the debt crisis of the 1980s, designed to establish a formal
organization and representation for the interests of the world’s major
banks and financial institutions. A meeting at Ditchley Park, England,
was hosted by the National Planning Association (NPA) in May of 1982,
which brought together senior representatives from major commercial
banks in the industrialized Organization for Economic Co-Operation and
Development (OECD) countries, as well as the Managing Director of the
International Monetary Fund (IMF), Jacques de Larosiere; other top IMF
and World Bank officials; the Comptroller of the Currency of the U.S.,
C.T. Conover; and the Head of Banking Supervision at the Bank of
England, Peter Cooke, among many others.
The meeting was designed to discuss the general international
financial situation at the time. One of the main conclusions of the
meeting was that banks needed access to more up-to-date and accurate
information regarding the financial standing of debtor nations, for
which it was felt that “an institution within the banking community
might be created.” The information would be provided by major banks
along with multilateral agencies such as the IMF, World Bank, and the
BIS, which all “exhibited a willingness to assist in the efforts of the
commercial banks… and to make as much data as possible available to the
new institution.”
The participants at the Ditchley meeting became known as the
“Ditchley Group.” But their suggestions for a new banking institution
did not stop at creating a mechanism for making better information
available to banks. The group also envisaged a role for the new
institution to undertake meetings directly between debtor nations and
private banks, and to send teams of officials to nations to meet with
senior government representatives to conduct economic and financial
“reviews” of various countries around the world.
The Ditchley Group agreed to invite other banking institutions from
the OECD countries to meet and discuss the possibility of creating such
an organization, and a second meeting – “Ditchley II” – was held in New
York in October of 1982, with the participation of 31 major banks from
the U.S., Japan, UK, France, Canada, the Netherlands, West Germany and
Switzerland, along with officials from the World Bank, IMF, Bank of
England and the BIS.
The meeting resulted in an agreement to establish such an
institution, termed a “nonprofit corporation,” to be based in
Washington, D.C., which could “suggest independence” from the large Wall
Street banks and also “because it would provide proximity to the
headquarters of the IMF and the World Bank.”
The organization would have a small and expert staff, overseen by a
board of directors made up of individuals from many of the banks with
the largest exposure to international loans, and that membership would
also be granted to other institutions with significant international
exposure. On January 11, 1983, the Institute of International Finance
was incorporated in Washington, D.C., with the participation of senior
officers from 37 major banks from Europe, Japan, and North and South
America.
Among the original participating banks were: (from Canada) the Bank
of Nova Scotia, Canadian Imperial Bank of Commerce, the Royal Bank of
Canada, and the Bank of Montreal; (from France) Banque Nationale de
Paris and Credit Lyonnais; (from Germany) Dresdner Bank, Commerzbank and
Westdeutsche Landesbank; (from Japan) Bank of Tokyo and Mitsubishi
Bank; (from Switzerland) Credit Suisse and Union Bank; (from U.K.)
Barclays, Lloyds and Midland Bank; (from the United States) Bank of
America, Bankers Trust, Chemical Bank, Citibank, Manufacturers Hanover
Trust, Mellon Bank, Morgan Guaranty Trust, Chase Manhattan and the First
National Bank of Chicago.
By the mid-1980s, the IIF had a membership of 189 banks from 39
countries, representing more than 80% of the total international bank
exposure to the “Third World.” And all this following the Institute’s
“ultimate aim” to “improve the process of international lending” in the
midst of the 1980s debt crisis.
While commercial banks established the Institute in order to
“coordinate their activities” in the international arena, the banks and
the powerful industrial nations and international organizations had
worked to prevent such coordination from taking place among debtor
nations of the Third World. The Group of 77 – a counterpart to the G7
which represents the majority of the word’s population – held a summit
in 1983, where the debt crisis was of major concern.
The Latin American debtor nations, in particular, “were under
considerable pressure from the U.S., the European Economic Community
(EEC) and the IMF/World Bank not to entertain any idea of a “‘debtor’s
cartel,’ or even to exchange and coordinate information.” So while the
world’s major banks established a formal organization which essentially
functions as an institutional banking cartel, the world’s debtor nations
were pressured to avoid even sharing information with one another
regarding the debt crisis.
Thirty years after it was founded, the IIF today boasts a membership
of more than 450 institutions in over 70 countries around the world. The
IIF hosts a series of meetings every year, the most prominent being its
semi-annual full membership meetings, taking place over the course of
two days with presentations by private bankers and public officials and
including roughly 800 members and guests.
The speakers at these events, according to the IIF report “The First
25 Years,” constitute “a Who’s Who of international financial
policymakers and leaders of the global financial industry.” William R.
Rhodes of Citigroup (and a former top IIF official) referred to the
meetings as ensuring that the IIF became “the leadership organization of
its kind.”
The Managing Director of the Institute of International Finance from
1993 until 2013 was Charles Dallara, who had previously served as a
managing director at JPMorgan & Co. from 1991 until 1993. Prior to
his banking career, Dallars was the U.S. Executive Director of the IMF
from 1984 until 1989, and held senior positions in the U.S. Treasury
Department between 1983 and 1989. Today, Dallara is a member of the
Council on Foreign Relations, the Executive Vice Chairman of the Board
of Directors of Partners Group, a member of the boards of the
Bertelsmann Foundation and the National Bureau of Economic Research, the
Vice Chair of the Board of Overseers of the Fletcher School of Law and
Diplomacy at Tufts University, and is a member of the International
Advisory Board of the Instituto de Empresa.
The current president and CEO of the IIF is Timothy D. Adams, the
former managing director of The Lindsey Group and former Under Secretary
of the Treasury for International Affairs from 2005 until 2007, prior
to which he served as the Chief of Staff to the U.S. Treasury Secretary
from 2001 to 2003. Adams is concurrently a member of the board of the
Atlantic Council, a member of the Atlantic Council’s Business and
Economics Advisors Group, a Senior Advisor at the Center for Strategic
and International Studies, a director of the Center for Global
Development, a delegate at the China Development Forum, a member of the
Council on Foreign Relations, and a member of the Business 20 (B20), a
counterpart conference to the G20 meetings designed to provide the input
of the world’s business community to the leaders, finance ministers and
central bank governors of the world’s leading twenty nations.
The Institute of International Finance (IIF) represents the very
“visible hand” of financial markets, wielding immense influence and
boasting unparalleled access to central bankers and top policymakers
from around the world. Look for the next parts in this series on the IIF
as part of Occupy.com’s Global Power Project.
• This article was first published at
Occupy.com
Andrew Gavin Marshall is an independent researcher
and writer based in Montreal, Canada, writing on a number of social,
political, economic, and historical issues. He is co-editor of the book,
The Global Economic Crisis: The Great Depression of the XXI Century.
Read other articles by Andrew Gavin, or
visit Andrew Gavin's website.
This article was posted on Thursday, October 10th, 2013 at 10:52pm and is filed under
Banks/Banking,
Finance.
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