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 are just changing
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.
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!
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 vultures are
circling. Northern Rock management are greedily selling off the remaining
assets of the Bank. In effect they are stealing everything that isn’t nailed
down. By the time the Rock is in new hands, there won’t be anything left worth
having.
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.
All capitalist
governments have to regulate finance capital in view of its importance to the
economy. In an anarchic capitalist economy only money links people and firms together.
As Trotsky says, “the banks concentrate in their hands the actual control over
the economy.” New Labour boasts about the City’s ‘light touch’ regulation.
Really it should be called soft touch regulation!
Brown is
embarrassingly grovelling to failed capitalists. In a sense he’s stolen the
Tories’ clothes. Actually Brown hasn’t really got the hang of running a
capitalist economy. He thinks it’s just a matter of throwing other people’s
money at any rich man who goes past. But in 1984 Margaret Thatcher nationalised
the Johnson Matthey Bank for just £1 when it collapsed. That was not in the interests
of JMB shareholders. But it certainly was in the interests of capitalism as a
whole.
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.”
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.
The proposed deal is a disgraceful waste of our money. It amounts to
looting the state. It should be rejected out of hand. Forward to the
nationalisation of the whole banking sector!
