Why is New Labour hurling yet more of our money at the banks? The London ‘Metro’ screams that the latest deal is the “World’s biggest bank bailout.” It’s costing every household in Britain £2,000, on top of all the money wasted last time round.
This plan costs nearly £40bn, more than the £37bn the government pumped in to the banks a year ago. £40bn would build more than 1,500 schools, but the banks, we are told, are more important than our kids’ future. Brown boasted last year that he had ‘saved the world.’ Not quite, it seems. Now the banks are in further financial difficulties and back with their begging bowls.
The government is preparing to privatise Northern Rock and to withdraw its controlling stake in RBS and substantial holding in Lloyds over time. This is the opposite of what they should have done. The banks failed, and in failing destroyed the livelihoods of millions of workers. The Labour government should have implemented the socialist nationalisation of the entire financial sector.
This would have been the right thing to do, but it would have sent alarm bells out to the rest of big business, who New Labour are ever anxious to grovel to. So what have they done instead? They have just given Northern Rock £8bn of our money and now propose to put £33.5bn more into RBS and £5.7bn into Lloyds.
Let’s take Northern Rock first. Famous for financial recklessness and 125% mortgages the privately owned Rock was wildly driven into the ground and then taken into public ownership in the face of inevitable collapse in February 2008. As a so-called nationalised bank it has adopted a harsh policy towards borrowers. For instance it repossesses homes and makes people homeless four times as often as other banks do. The government, which owns the bank outright, just lets them get on with it. Darling’s plan is to divide the Rock into a ‘good’ bank with all the safe loans on its books, and a ‘bad’ bank with all the toxic stuff in its portfolio. The good bank will be privatised, sold for a song, while we taxpayers will get lumbered with the bad bank and its rotten debts.
The question at the top of Dan Roberts’ column in the ‘Guardian’ – Why do they keep bankrolling Rock?” – can only be answered by New Labour’s desperation to privatise it at all costs.Roberts was particularly scathing about this procedure (28.10.09): “I thought I was having a hallucination myself when I first saw the announcement this morning, but no, this is exactly what it seems: the government is proposing to invest yet more of our money in the infamously over-extended to allow it to lend guess what? – yes, more mortgages.” The house price bubble has burst and brought the banks low. The government’s answer? – Blow the bubble back up!
Then there’s RBS. The bank would not now exist without the government’s bailout last year. It’s still in intensive care, and we pay the ‘hospital bills,’ called the Government Asset Protection Scheme. Now Mr. Darling is pumping billions more of our money in as a transfusion. That’s very generous of him. Since nobody else wants to put money into RBS the government share in the bank has gone up from 70% to 84%. Let’s not forget that Fred ‘the shred’ Goodwin, who destroyed the 300 year old Royal Bank of Scotland with his greed and misjudgment, will get a pension worth £1 million a year for the rest of his life, courtesy of New Labour. That’s the reward for failure!
Lloyds is the most disgraceful case of all. Darling has allowed the bank to make a rights issue of shares, that is to give the option to existing shareholders to buy more bank shares Since it’s not in such a plight as RBS, the government now ‘only’ owns 43% of the shares, despite the latest handout. This means that Lloyds escapes from the Government Asset Protection Scheme (GAPS) that, at least in principle, gives the government some sort of control over the level of bonuses they pay out and the extent of lending they make. Now they can really party! Dan Roberts (30.10.09) explains that Lloyds’ behavior is, “like taking out house insurance during a fire, refusing to pay for it once the fire is out and sending the insurance company a bill for a new sprinkler system.” And can anyone doubt that, should Lloyds screw up again, New Labour would be on hand to throw still more of our money at the bank?
The government’s fig leaf for this massive surrender of our money to the banks is an agreement with the financial institutions to curb bonuses for the time being. We agree with Vince Cable (who has lived off the fact that he half-predicted the crisis in advance) who asked, “Why is it a great discipline and hardship to ask bankers to wait three years for their next Ferrari?”
The ultimate aim of the government and the EU is to make the existing financial behemoths divest themselves of some of their branches and create new banking groups in the high street ‘to increase competition.’ Competition among banks has always been a farce. Whichever bank we use, we’re all treated like dirt for the privilege of lending them our money. And, as Phillip Inman explains (Guardian 02.11.09): “A rebranded high street with several new banks will be difficult to achieve without taxpayers losing billions of pounds.” But what’s a few billion more quid to Brown and Darling? After all, it’s not their money.
Lloyds management are celebrating the escape from the embrace of GAPS as ‘independence day.’ Paul Mumford from Cavendish Asset Management claims that if Lloyds hadn’t escaped from GAPS then that would have left, “taxpayers with the upside of recovery, rather than shareholders.” There you have it. That would never do!
Taxpayers, ordinary working class people, are regarded as mugs who save the banks’ sorry livelihoods and are then expected to shovel ever more money into the maw of the rich and the private sector. Let’s not put up with this any longer. The case for socialist nationalisation of the banks is overwhelming.
This article first appeared on Socialist Appeal.
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This post was written by Mick Brooks