The government has now pumped about £60 billion of our money in loans and guarantees into Northern Rock. That's a lot of money - it's more than half what the health service costs. Now the NHS is looking after millions of people at any one time and hospital services are available round the clock for you in case anything goes wrong. It employs over a million people and its benefits are there for all to see.
What benefit are we getting from the money used to prop up Northern Rock? Why does a failed bank deserve to have all this money thrown at it? To New Labour's shame it is LibDem Vince Cable who points out, "This is a very small tail wagging a very large dog."
The vultures are hovering round Northern Rock. There are the shareholders on the one hand, people who think the rest of us owe them a living and, if they bet on a horse that loses, then we should just give them their money back. The existing management are still hanging on, selling off the bank's assets as fast as they can. Soon there will be nothing left worth having.
Then there are the profiteers like Richard Branson, always on hand when the government is handing out free money. Brown has made no secret that Richard Branson is the ‘preferred bidder' to take the Bank off his hands. British voters and taxpayers have the right to ask, what the bloody hell is Branson doing following the Prime Minister round China on what is supposed to be a state visit? Gordon Brown is acting more like a medieval monarch towards a fawning favourite than a modern PM. The King used to say, "I like the cut of your jib, son, consider yourself the Duke of Hertfordshire." Brown has no right to give our money away to his courtiers in this fashion!
New Labour fears that if Northern Rock goes down the tubes large chunks of the financial system could follow. And that would reverberate throughout the economy. Recession is on its way. A financial collapse could be the trigger. The right thing to do is staring Brown and Darling in the face. They should take over Northern Rock. That would not be a socialist policy. Thatcher took over the Johnson Matthey Bank for £1 after a similar collapse twenty years ago. She was a consummate representative of the capitalist system.
The government has not nationalised the Rock so far because of what Vince Cable calls their "ideological preoccupations against public ownership." They want to be seen as bigger Tories than Thatcher! They have been pathetically hoping against hope for a white knight to gallop along and solve all their problems. By dithering, they have of course made the financial crisis worse. Unite is also encouraging its members at Northern Rock to live in fantasyland by opposing nationalisation. It's time they snapped out of it.
Why are banks so special for capitalism? Why do they have to be bailed out when they fail? As Trotsky argues (Transitional Programme), "The banks concentrate in their hands the actual command over the economy." So when they have a crisis, we're all in the firing line. As Trotsky goes on, "They combine tendencies of monopoly with tendencies of anarchy... they organise high prices, crises and unemployment."
That is why, while other firms have had crises in their profits, the sums made by the financial institutions, and their share of the surplus value extracted by the working class, just goes up and up? Actually they're holding us all to ransom. And it's time it stopped.
Banks are not popular. At the time of writing I fought the Lloyds is in the charts. Even bank adverts emphasise the arrogance and poor service of ‘other' banks. The Office of Fair Trading (OFT) is taking the banks to court. They're sick of the arbitrary charges the banks put on people's accounts. Not only do the banks charge us for the privilege of borrowing our money. They don't even do us the decency of telling us how much the charges are - like selling goods with no price tag. Who will win the case? The banks will win. If the OFT gets free banking, the banks will just introduce a new structure of arbitrary charges so as to make sure their safe steady profits stay sky high.
Reject the government's Northern Rock rescue plan
The government is desperate not to nationalise Northern Rock. Goldman Sachs (described by the Financial Times as "an investment bank on the make") has come up with a plan to turn the loans New Labour have already pumped in to the Bank into bonds. In effect they are securitising the debt. This is ironic, since the collapse of the Rock is a direct result of the sub-prime mortgage scandal. What happened there was that various crooks and spivs made dodgy mortgage loans to people who couldn't possibly afford to repay them. Then these dodgy deals were ‘securitised' - turned into bits of paper that could be bought and sold all over the world. People panicked because they thought some of these toxic packages might have ended up as assets in the vaults of Northern Rock. So in August we saw the first run on a bank since the fall of Overend, Gurney and Co. in 1866, with people queueing all night outside the Rock's branches to pull their money out.
If the plan goes ahead, the government waving a magic wand over the debts of the Rock won't change anything in the essence of the matter. In effect they will just change the name of the debt to ‘bonds'. It's a con trick. The Bank was not a going concern before. It will still be a dead duck if and when the plan is pushed through. The plan just amounts to throwing good money after bad.
Robert Peston, political correspondent of the BBC, comments, "No British government has ever provided financial help on that scale to a business." No wonder Rock shares soared to 91p. They are literally not worth a penny without the government guarantees. The government are bailing out the shareholders. They actually get to vote on the rescue plan. Imagine the cries of ‘show us the money' at the shareholders' meeting!
The government are guaranteeing the mortgage holders. They are guaranteeing the value of savings in the Rock. And they are ‘guaranteeing' to waste billions of our money on a Bank that's gone belly up.
The opposition have it easy, like shooting fish in a barrel. Tory George Osborne says, "Gordon Brown is mortgaging the taxpayer to try to get him out of the political hole he's dug for himself. It looks like the British people could be billions of pounds in the red for years to come." He's right. Of course, the Tories are stronger on criticism than positive proposals. In reality Osborne would have done the same.
Vince Cable, the LibDem who has argued for nationalisation of the Rock argues, "The private sector isn't taking any risks. It is the taxpayer taking all the risks." The Financial Times agrees, "Those Treasury officials not under the spell of Goldman judged nationalisation the cleaner, more efficient option."
The proposed deal is a disgraceful waste of our money. It amounts to looting the state. It should be rejected out of hand. All capitalist governments have to regulate finance capital in view of its importance to the economy. New Labour boasts about the City's ‘light touch' regulation. Really it should be called soft touch regulation!
If the banks are always to be bailed out because they are so important to the economy, then we need to take them all over. They have vast resources. They can easily pay for the losses at the Rock out of petty cash. It's time to take over all the banks! They are a conduit through which everyone's money is channelled. If we want to plan the economy we have to own the banks and control where the money goes.
A socialist Labour government would take over the banks. Thus it could guarantee the value of your bank account, unlike Northern Rock, and compensate only the small shareholders. Generally the banks have had their hands in our pockets for long enough. No compensation to the fat cats who've fed off us for generations! Under capitalism the banks can never lose. And we can never win. Let's take them all over, eliminate their power over us and use the resources they control for the good of working people.