Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles.
Her work shows her research skills to be very good indeed. Since Ellen has written 11 books, this short
presentation will be very incomplete. And, in the interest of brevity, I have removed details that enliven
and expand the information of the original articles I excerpted. For starters, Ellen regards our current
banking system as an elaborate Ponzi scheme.
""The Ponzi scheme that has gone bad is not just another misguided investment strategy. It is at the
very heart of the banking business, the thing that has propped it up over the course of three centuries.
A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at
the bottom to support the investors at the top. In this case, new borrowers must continually be sucked
in to support the creditors at the top... The scramble to find new debtors has now gone on for over 300
years - ever since the founding of the Bank of England in 1694 - until the whole world has become mired
in debt to the bankers' private money monopoly. The Ponzi scheme has finally reached its mathematical
limits: we are “all borrowed up.”
""When the banks ran out of creditworthy borrowers, they had to turn to uncreditworthy “subprime”
borrowers; and to avoid losses from default, they moved these risky mortgages off their books by
bundling them into “securities” and selling them to investors. To induce investors to buy, these
securities were then “insured” with credit default swaps... When the subprime borrowers quit paying,
the investors quit buying mortgage-backed securities. The banks were then left holding their own
suspect paper..."" (Dr. Ellen Brown, "Credit Default Swaps: Evolving Financial Meltdown and Derivative
Disaster Du Jour," Global Research, April 11, 2008).
You will note that this article is about Credit Default Swaps. Ellen defines them this way.
""Credit default swaps (CDS) are insurance-like contracts that are sold as protection against default on
loans, but CDS are not ordinary insurance... Insurance companies are regulated by the government, with
reserve requirements, statutory limits, and examiners routinely showing up to check the books to make
sure the money is there to cover potential claims. CDS are private bets..."
""Credit default swaps are the most widely traded form of credit derivative. They are bets between two
parties on whether or not a company will default on its bonds... CDS thus resemble insurance policies...
The premiums are “free” money - free until the bond actually goes into default..."
""To the extent that CDS are being sold as “insurance,” they are looking more like insurance fraud; and
that fact has particularly hit home with the... recent collapse of Bear Stearns, a leading Wall Street
investment brokerage.... Bear Stearns was the twelfth largest counterparty to credit default swap trades
in 2006. These players have been major protection sellers in a massive web of credit default swaps, and
when the “protection” goes, the whole fragile derivative pyramid will go with it."" (Ibid).
""The latest jolt to the massive derivatives edifice came with the collapse of Bear Stearns on March 16,
2008. Bear Stearns helped fuel the explosive growth in the credit derivative market, where banks,
hedge funds and other investors have engaged in $45 trillion worth of bets on the credit-worthiness of
companies and countries. Before it collapsed, Bear was the counterparty to $13 trillion in derivative
trades. On March 14, 2008, Bear's ratings were downgraded by Moody's, a major rating agency; and on
March 16, the brokerage was bought by JPMorgan for pennies on the dollar, a token buyout designed to
avoid the legal complications of bankruptcy... The CEOs managed to salvage their enormous bonuses,
but it was a “bailout” only for JPM and Bear's creditors. For the shareholders, it was a wipeout. Their
stock initially dropped from $156 to $2, and 30 percent of it was held by the employees. Another big
chunk was held by the pension funds of teachers and other public servants. The share price was later
raised to $10 a share in response to shareholder outrage, but the shareholders were still essentially
wiped out; and the fact that one Wall Street bank had to be fed to the lions to rescue the others hardly
inspires a feeling of confidence..."" (Ibid).
Ellen continues with the plight of the banks:
""Institutional investors have lost a good deal of money in all this, but the real calamity is to the banks.
The institutional investors that formerly bought mortgage-backed bonds stopped buying them in 2007,
when the housing market slumped. But the big investment houses that were selling them have billions'
worth left on their books, and it is these banks that particularly stand to lose as the derivative
""Now that some highly leveraged banks and hedge funds have had to lay their cards on the table and
expose their worthless hands, these avid free marketers are crying out for government intervention to
save them from monumental losses, while preserving the monumental gains raked in when their bluff
was still good. In response to their pleas, the men behind the curtain have scrambled to devise various
bailout schemes; but the schemes have been bandaids at best. To bail out a $681 trillion derivative
scheme with taxpayer money is obviously impossible."" (Ibid).
""The banks will therefore no doubt be looking for one bailout after another from the only pocket
deeper than their own, the U.S. government's. But if the federal government acquiesces, it too could be
dragged into the voracious debt cyclone of the mortgage mess. The federal government's triple A rating
is already in jeopardy, due to its gargantuan $9 trillion debt. Before the government agrees to bail out
the banks, it should insist on some adequate quid pro quo. In England, the government agreed to bail
out bankrupt mortgage bank Northern Rock, but only in return for the bank's stock... In Norway,
according to one Norwegian adviser, “The law was amended so that we could take 100 percent control
of any bank where its equity had fallen below zero.” If their assets were “marked to market,” some major
Wall Street banks could already be in that category."" (Ibid). (Note that the national debt is over $14
""Nationalization has traditionally had a bad name in the United States, but it could be an attractive
alternative for the American people and our representative government as well. Turning bankrupt Wall
Street banks into public institutions might allow the government to get out of the debt cyclone by
undoing what got us into it. Instead of robbing Peter to pay Paul, flapping around in a sea of debt trying
to stay afloat by creating more debt, the government could address the problem at its source: it could
restore the right to create money to Congress, the public body to which that solemn duty was delegated
under the Constitution."
""The most brilliant banking model in our national history was established in the first half of the
eighteenth century, in Benjamin Franklin's home province of Pennsylvania. The local government
created its own bank, which issued money and lent it to farmers at a modest interest. The provincial
government created enough extra money to cover the interest not created in the original loans,
spending it into the economy on public services. The bank was publicly owned, and the bankers it
employed were public servants. The interest generated on its loans was sufficient to fund the
government without taxes; and because the newly issued money came back to the government, the
result was not inflationary. The Pennsylvania banking scheme was a sensible and highly workable
system that was a product of American ingenuity but that never got a chance to prove itself after the
colonies became a nation... The bankers' money-creating machine has had two centuries of empirical
testing and has proven to be a failure. It is time the sovereign right to create money is taken from a
private banking elite and restored to the American people to whom it properly belongs."" (Ibid).
After three years of watching the federal government "flapping around in a sea of debt trying to stay
afloat by creating more debt" (Ibid), I am more than ready for alternate solutions. Ellen advises states to
escape the world's continuing financial crisis by owning their own banks, a model that has been highly
successful in North Dakota.
""When a bank makes a loan, neither the bank’s own capital nor its customers’ demand deposits are
actually lent to borrowers... (the banks) simply extend accounting-entry bank credit, which is
extinguished when the loan is repaid. Creating this sort of credit-money is a privilege available only to
banks, but states can tap into that privilege by owning a bank..."
""The state-owned Bank of North Dakota (BND) has allowed North Dakota to maintain its economic
sovereignty, a conservative states-rights sort of ideal. The BND was established in 1919 in response to
a wave of farm foreclosures at the hands of out-of-state Wall Street banks. Today the state not only has
no debt, but it recently boasted its largest-ever budget surplus. The BND helps to fund not only local
government but local businesses and local banks, by partnering with the banks to provide the funds to
support small business lending."
""The BND is also a boon to the state treasury, having contributed over $300 million to state coffers in
the past decade, a notable achievement for a state with a population less than one-tenth the size of Los
Angeles County. In 2008, the BND returned a 26% dividend to the state. That beats most Wall Street
investments by a country mile..."" (Dr. Ellen Brown, "How Wisconsin Can Turn Austerity into Prosperity –
Own a Bank," Global Research, March 7, 2011).
I have only sampled Ellen's articles, but what I have read suggests that her work is a textbook for those
who wish to understand the world's financial crisis. She has two websites, www.ellenbrown.com and
www.webofdebt.com and many articles on-line at www.GlobalResearch.ca. To access her work at Global
Research, scroll down to any of her articles and select it. At the end of that article, there will be a link to
an index of Global Research articles she has written.
Amo Paul Bishop Roden