Mahathir’s man bankrupted Bank Negara

Raggie Jessy Rithaudeen

Mahathir has the habit of blaming the whole world for Malaysia’s financial problems. Earlier today, he lamented that the global market was tied to the US dollar and that this openned the Malaysian currency to manipulation.

“Just because that one country is affected, there is infection to the other countries. Malaysia was very stable way back in 1997… but because of the problem occurred in Thailand (during the Asian financial crisis), they said we must peg the Malaysian currency also.

“What happened? The currency traders sold the Malaysian currency down and the value of Malaysian currency depreciated.


However, what he failed to mention, was that he gave his own people in Bank Negara the ‘go-ahead’ to manipulate the British pound. In a so-called protectionist measure to protect the ringgit, in 1992,  Bank Negara stockpiled on the British pound to defend the unit against George Soros. But that was the late Tan Sri Jaffar Hussein’s version of history which Mahathir defends to this day. Truth is, Soros attacked the pound only because Jaffar – then the governor of Bank Negara – was illegally cashing in on the Bank of England’s more than lucrative interest rates. By 1994, Bank Negara had become so dry of reserves that it was on the verge of being declared bankrupt.

The people who put Soros up to the attack were former British premier Tony Blair and Clare Rewcastle Brown’s brother in-law, Gordon Brown. Back then, Blair was Britain’s Shadow Home Secretary while Brown was the Shadow Chancellor of Exchequer. The duo wanted to weaken the leadership of British premier John Major to facilitate their own entry into the frontline of British politics. On the 16thof September 1992 (see Black Wednesday), Major’s government was forced to withdraw from the European Exchange Rate Mechanism (ERM) following its failure to float the pound above the ERM’s floor value.

Major’s decision caused the British pound to drop like a sack of hot potatoes and saddled Bank Negara with billions in losses. The “fall of the Malaysian financial market” that ensued allowed Soros to teach Jaffar a good lesson – the billionaire was pissed that the Bank Negara governor had caused his Cayman interests to suffer when investors began diverting funds into offshore interests that were said to be linked to Tun Daim Zainuddin and one of Mahathir’s sons, Mokhzani Mahathir. Still, Daim and Mokhzani were the least of Blair’s interests.

For Blair, the most important outcome of the “Soros manoeuvre” was the destabilization of the British economy and the impact it had on Major’s leadership. The plan seemed to work – despite all efforts by Major to juggle the economy, he was blamed for not having protected the British pound enough. On the 31st of May 1994, Blair and Gordon met at Graita at Upper Street in Islington and entered a tête-à-tête on the issue of succession.


The tête-à-tête was meant to prevent infighting in the Labour party following the untimely death of its leader, John Smith. Gordon agreed to support Blair’s bid against John Prescott and Margaret Beckett in a subsequent leadership election that the Labour party called. Blair went on to become the leader of the opposition and promised Gordon the Chancellor of Exchequer post (equivalent to the Finance Minister’s post in Malaysia). The duo agreed that Gordon would be made Prime Minister in 2006.

To finish Major off, Blair and Soros agreed that the Asean economy needed to be weakened once more to fuel anxiety among British investors. With the help of the then United States (US) Ambassador to Malaysia, John R. Malott, Soros and Blair obtained inside information that could only have originated from the then head of foreign exchange transactions at Bank Negara. With the information, Soros instructed his associates at the Quantum Fund – a hedge fund he founded in the 70’s – to double its stock of the Thai Baht.

Behind the scenes, though, he began injecting Quantum with the billions he looted from the Bank of England in 1992. To strike fear in the hearts of British investors, Soros instructed media groups under his shadow – the likes of Washington PostNew York TimesThe Guardian and Wall Street Journal– to splash front page editorials insinuating that a second Black Wednesday was looming on the horizon. The media reports worried investors and caused some of them to pull their stocks from the British market. Both Blair and Soros – who knew that Major had to call elections before the 22nd of May 1997 – timed the reports in such a way that the impact on the UK economy was minimal yet politically significant.

The plan worked.

On the 2nd of May 1997, Blair’s Labour Party swept the general election to make him the second youngest person to take office as Britain’s Prime Minister. But Soros did not stop the planned attack on Asian currencies. A little over a week after Blair’s historic win, he got Quantum to bet just under one billion of his twelve billion dollar war chest against the Thai Baht, having been assured by Malott that Bank Negara would be caught off-guard. Back then, Soros already knew that the Bank of Thailand was almost dry of foreign reserves. Crippling the Malaysian economy allowed him to capitalise some of his foundations, weaken the Mahathir administration and make sure Blair wouldn’t get overconfident with his win.

But Blair was unfazed. The fall of the Malaysian economy worked in his favour as it did help weaken Mahathir, albeit temporarily. Blair wanted the Malaysian premier out of the way because he needed a Muslim stooge to mediate UK-Mideast nuclear agreements. And that was when Malott threw in the idea of having Dato’ Seri Anwar Ibrahim replace Mahathir as Prime Minister.

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