|Year 2008 No. 84, September 30, 2008||ARCHIVE||HOME||JBBOOKS||SUBSCRIBE|
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The government is due to emerge today as the second biggest mortgage lender in Britain, as it takes into state ownership the mortgage side of the Bradford & Bingley Bank.
The future of the biggest mortgage lender, Halifax Bank of Scotland, still seems uncertain, despite Gordon Brown's claims to have "brokered" a takeover by Lloyds TSB. HBOS shares are trading at a discount, suggesting that the markets are nervous about whether the deal can be delivered, analysts say. The government is expected to legislate to stop the Monopolies Commission from delaying the Lloyds takeover.
The B&B deal itself will mean that the government underwrites up to £40bn of mortgage debt of Bradford & Bingley, to add to the £87bn portfolio of debt that it has held since the nationalisation of Northern Rock in February. It is reported that the combined total of £127bn makes the government an even bigger owner of mortgage debt than Nationwide or Abbey.
The Treasury is to ensure that any unsecured deposits and borrowings, together with accumulated interest, will be repaid when falling due. The guarantee arrangements also cover unsecured derivative contracts. Secured derivatives and borrowings will be guaranteed by the Treasury to the extent that those obligations exceed the proceeds of the relevant realised security.
Santander, the Spanish banking monopoly and owner of Abbey National, has bought Bradford & Bingley's £21bn savings business. The subsidiary Abbey is to take over management of B&B's retail deposits and branches. This leaves the Treasury to nationalise the B&Bs £50bn loan book, it is reported. Santander, which last month also agreed to buy Alliance & Leicester, is to acquire B&B's depositor base of 2.7m customers and its network of 197 leasehold branches. It is reported that the Santander group would pay about £150m for this business, which is little more than half the Bradford & Bingleys market capitalisation at the end of last week.
The nationalisation of Bradford and Bingley is set to push the combined burden of public sector debt and exposure to the housing market resting on the shoulders of the British people to almost £1 trillion. At around 65 per cent of Gross Domestic Product, it will make a mockery of the government's "sustainable investment rule", which aims to keep net debt at below 40 per cent of GDP, reports the Independent.
According to the Times, bank charges and insurance premiums are set to rise after high street banks and insurers were ordered to pay up to £14bn under the terms of Bradford & Bingleys nationalisation. All banks face huge increases in the levy they pay to the deposit lifeboat, the Financial Services Compensation Scheme, after it borrowed £14bn from the Government to underwrite Bradford & Bingley deposits transferred to Banco Santander. Banks and building societies will be asked to chip in £900m a year just to pay the interest on the bill. That works out at more than £100m each for large banks such as Royal Bank of Scotland and Barclays. The Financial Times adds that the move prompted an angry reaction from the Britains 59 building societies. "We are concerned at the use of the Financial Services Compensation Scheme to help rebuild a nationalised banks balance sheet," said John Goodfellow, chairman of the Building Societies Association. "As deposit taking institutions our members will be badly hit by this."
The whole mechanism of parcelling up debts as assets, and the outlook that the greater the debt, the more healthy the financial institution, cannot but give rise to crisis without furthering impoverishing the working people. With the working people further impoverished, the need to suck more added value from the labour of the people becomes ever more urgent. Now the government intends to ensure that claims on the social product by the financiers will take priority, as they are guaranteed by the state. Furthermore, it is the taxpayer who shoulders the burden of risk.
This nationalisation of B&B, of course, took place in the shadow of the Bush administrations efforts to bail out the US financial oligarchy with a £700 billion "rescue" package. Gordon Brown had travelled to Washington to tell anyone that might listen that he supported the bailout. However, the US House of Representatives in a vote that was said to have shaken the government, Wall Street and markets around the world, defeated the bailout. It is certain that the many spontaneous demonstrations, phone calls and e-mails of opposition from the American people were decisive in blocking this obscene bailout of the rich. US stocks suffered their worst one-day fall since the 1987 crash.
From Northern Rock to Bradford and Bingley, the government has led the way in doing everything possible to ensure that the parasitic finance capitalists are supported. No one is fooled that "nationalisation" means that these banks are being administered for the public good. It has become clear that after an orgy of greed and parasitism, the financial oligarchy could feed off the peoples debt and mortgages no more. The interest, fees and repayments that the people were forced to disgorge to the financiers on their mortgages, their credit cards and their loans could not be sustained. The finance capitalists treated this debt as though it were produced wealth to be bought and sold, bet on, creatively accounted, and fiercely competed for. Now the rich want to be bailed out, and the people are not standing for it. They are taking a stand to stop paying the rich with the social product that they have produced.
Who decides, has become a major issue. Who is in control? Who is setting the direction of the economy? It is a public issue and ways and means must be found to ensure that it is the public good which is followed and not the interests of those who are sucking the social economy dry. It underlines that there is a need for the working class to organise for a change in the direction of the economy, and create the conditions for the people to decide on the direction of the economy. In the present system, the financial parasites have been turning the whole of the socialised economy into a reservoir of funding for their enrichment. Crisis is the fellow traveller of this system, and the present financial crisis is an indication that this sucking of the wealth from the socialised economy by the financial parasites is unsustainable. The situation is calling out for the workers to rise to the occasion to take the lead in turning things around.
As with Northern Rock, the government is putting the interests of the finance capitalists in control with Bradford & Bingley, HBOS, and the banking system as a whole. They are continuing to operate as commercial concerns but bolstered with the funds from working people. The same finance capitalists remain in control. The governments primary concern is for the finance capitalists, particularly the parasite capitalists whose capital is not directly connected with wealth-creation but rather as gamblers and leaches on the body of the socialised economy. It is not with the plight of those in debt.
This meltdown in Britain, the US and across the capitalist world is putting on the agenda that the people discuss what are the alternatives so that economic renewal can take place. It is of vital importance that the working class and people discuss the economic crisis and work out alternatives for renewal. It is clear that it cannot be business as usual. The sentiment of the people is that enough is enough, and that private interests which have caused such havoc must not be rewarded for their abuse and wrecking of the economy. Who benefits from the "nationalisation" of these failed banks? What is the government guaranteeing? Should not there be measures to create a stable currency and credit system such as seizing the assets of these failed institutions without compensation, and setting up a state bank that can work with small and medium sized businesses and co-operatives to invest for the public good? Should not the wrecking that comes in the form of war and warmongering also be outlawed and the militarisation of the economy ended?
The "nationalisation" and bailout of these banks highlights that the working class and people need to discuss economic renewal, not just from the point of view of guaranteeing jobs and curbing excesses, but with the outlook of the necessity for change, and actually organising to change the direction of the economy. This means changing the direction of the financial and credit system away from usury, parasitic fees and private profit into not-for-profit investments in social programmes to benefit the people. A bold step forward in defence of the rights of all would be to challenge monopoly right to dominate the financial and credit system for private gain and privilege. The working class and people must set the agenda within the political programme to stop any and every scheme which pays the rich, and to massively increase investments to safeguard the future of the health service, the education system and all other social programmes.
Stop the Bailout of the Rich!
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