On the eve of the G20 meeting in Toronto this weekend, which will see further attempts to bring about a recovery from global economic and financial crisis differences have emerged between the US and Europe. Representatives of the world's 20 richest nations will be arguing over how to "manage their divergence".
US president Barack Obama has criticised the European imposition of austerity programmes of spending cuts and tax increases. At this point, the US is much more concerned with increasing spending to stimulate demand than reducing sovereign debt. This international tension is the political reflection of the battle between opposing teams in the Capitalist Rescue cup.
When the debt-fuelled global financial system went into meltdown in 2008, there was a sudden rush of enthusiasm for a new age of regulation that would, it was said, prevent a recurrence of the conditions that resulted in the worst credit crisis since the 1930s. The ghost of economist John Maynard Keynes was raised from the grave.
In the panic-stricken meantime central banks and governments around the world turned to the injection of ‘liquidity’ in the form of trillions of every currency to prop up the previously hugely profitable but now bankrupt commercial and investment banks and non-bank financial institutions. The marvellous rediscovery of the fool's gold of ‘quantitative easing’, the modern, electronic equivalent of printing money, allowed balance sheets and credit to be further expanded – miraculously treating like with like.
Controversy raged around the world about the actions to be taken over institutions judged ‘too big too fail’. Some were indeed ‘taken over’ by the state. Others were allowed to go to the wall.
Many of the best brains in banking and finance were set to work, tasked with designing a package of measures that would restore a degree of sanity to the madness that had drowned the world in a tsunami of unserviceable credit and debt. The team in favour of regulation, led by the Basel Committee on Banking Supervision, have been on the pitch, slugging it out with their opponents, amongst them the Institute of International Finance. The IIF are worried about the damaging effects of regulation. Basel’s captain Nout Wellink says ‘Raising capital and liquidity standards will reduce the probability of the event of a crisis. We will get greater stability of economic output and associated increases in welfare.” The IIF fought back with a warning that ‘global growth in the eurozone, the US and Japan would be cut by three percentage points between now and 2015 and as a result, 9.7m fewer jobs would be created over the period.’
Amongst the most important of the reforms put forward was to be a return to a more prudent relationship between a bank’s easily available capital assets and the amount of money it lent out.
Despite the chorus of calls for regulation, the pressure for a return to growth continues unabated, and the banks have lost little, if any, of their power. As a result synchronised bubbles and speculative excesses will re-emerge to undermine those who seek to regulate the financial markets.
As the G20 opens, the Financial Times reports that ‘Plans by global regulators to compel banks to set aside billions of dollars in extra capital to cope with future crises are to be pared back after intense lobbying by the industry. The committee is likely to shelve the idea that banks should be forced to maintain a longer term “net stable funding ratio” that aligns the maturity of their assets and liabilities.’
And then comes the bottom line ‘Analysts had also calculated that the Basel III reforms, were they implemented in conjunction with new taxes around the world – such as the liability tax announced by the UK government this week – could have cut a typical bank’s return on equity from 20 per cent to 5 per cent.’ For the capitalists and the masters of finance that would be an entirely unacceptable attack on profitability.
The rest of us need a way of ending the rule of the banks. Protests, resistance, shaking fists or even blasts from the vuvuzela won’t be enough. We need to build the forces which can take the economic and financial systems into social ownership and recast them on a not-profit basis.
Gerry Gold
Economics editor
For revolutionary solutions to create a sustainable, not-for-profit economy in place of global capital alongside a real democracy based on People’s Assemblies. Visit our web site at www.aworldtowin.net
Showing posts with label Banks bail-out. Show all posts
Showing posts with label Banks bail-out. Show all posts
Friday, June 25, 2010
Friday, October 31, 2008
Banks get quids but there's no quo
It is not long since Prime Minister Brown announced a £400 billion bail-out package including a £37 billion gift to the banks, but the big lie has already been exposed. The story a month ago was that the government and the Bank of England were going to do whatever it takes “to maintain the stability of our system and to make sure that there is stability for families and for businesses right across our country”.
In reality, capitalist governments in the UK and in the rest of the world are unable to anything effective to stop or even offset the impact of the global slump. Sales by leading retailer John Lewis dropped 9.8% on the year. Shares in Asia and Europe fell on Friday, heading for their worst month ever, anticipating a deep and long lasting downturn. In a renewed desperate attempt to stave off the worst effects, Japan cut interest rates for the first time in seven years on Friday, expecting severe stress in the global economy to persist, while banking giant Barclays said it was raising £7.3 billion in capital.
The failure of the package of taxpayer-funded public sector debt to deliver the credit needed by small companies and individuals reveals the governments’ total subservience to the privately-owned finance sector. In keeping with their requirement to make profits, as economic conditions deteriorate lenders are tightening terms, making borrowing less available and more expensive.
Despite the shouts of glee from the supporters of state intervention and delight from some over what they dubbed “nationalisation” of the failing banks, including Northern Rock, Royal Bank of Scotland, Lloyds TSB and HBOS, there were no constraints or requirements of any kind placed on how the money should be spent.
Even Vince Cable, the Liberal Democrat Treasury spokesman, has been able to denounce the government’s “utterly pathetic” position, saying: “The whole point about this deal with the lenders was that there was supposed to be a tough quid pro quo. It’s perfectly obvious now that the banks got the quids and there’s no quo.”
As events unfold, Brown and Chancellor Darling are reduced to begging at the rich men’s table. On Thursday, Darling admitted that the government’s requirement that the banks make lending available at 2007 levels simply means “the pool of money is there”. Decisions on whether to lend that money, and at what cost, remained with the banks. “In any banking operation, whether it is lending to individuals or to businesses, there must be discretion,” he said. And Brown added “I urge banks not to change the terms and charges for existing lending to small and medium-sized enterprises.”
In operating the real, brutal laws of the busted capitalist market, the bankers have a far better grasp of what is required than Brown or Darling. “We don’t sense any purpose in providing small businesses with loans that they cannot afford to repay,” said Eric Leenders, executive director retail, at the British Bankers’ Association.
What better reason than this could there be to end the operation of a system of fantasy finance that exists solely to extract value produced by workers in the real, productive economy in order to distribute it as profits to shareholders and dreamland bonuses to City traders? The profit-serving banks should be turned into mutually-owned, democratically controlled not-for-profit institutions. Then decisions can be taken and implemented on how to best provide the essential financial services needed to build an equitable and environmentally sustainable economy.
Gerry Gold
Economics editor
In reality, capitalist governments in the UK and in the rest of the world are unable to anything effective to stop or even offset the impact of the global slump. Sales by leading retailer John Lewis dropped 9.8% on the year. Shares in Asia and Europe fell on Friday, heading for their worst month ever, anticipating a deep and long lasting downturn. In a renewed desperate attempt to stave off the worst effects, Japan cut interest rates for the first time in seven years on Friday, expecting severe stress in the global economy to persist, while banking giant Barclays said it was raising £7.3 billion in capital.
The failure of the package of taxpayer-funded public sector debt to deliver the credit needed by small companies and individuals reveals the governments’ total subservience to the privately-owned finance sector. In keeping with their requirement to make profits, as economic conditions deteriorate lenders are tightening terms, making borrowing less available and more expensive.
Despite the shouts of glee from the supporters of state intervention and delight from some over what they dubbed “nationalisation” of the failing banks, including Northern Rock, Royal Bank of Scotland, Lloyds TSB and HBOS, there were no constraints or requirements of any kind placed on how the money should be spent.
Even Vince Cable, the Liberal Democrat Treasury spokesman, has been able to denounce the government’s “utterly pathetic” position, saying: “The whole point about this deal with the lenders was that there was supposed to be a tough quid pro quo. It’s perfectly obvious now that the banks got the quids and there’s no quo.”
As events unfold, Brown and Chancellor Darling are reduced to begging at the rich men’s table. On Thursday, Darling admitted that the government’s requirement that the banks make lending available at 2007 levels simply means “the pool of money is there”. Decisions on whether to lend that money, and at what cost, remained with the banks. “In any banking operation, whether it is lending to individuals or to businesses, there must be discretion,” he said. And Brown added “I urge banks not to change the terms and charges for existing lending to small and medium-sized enterprises.”
In operating the real, brutal laws of the busted capitalist market, the bankers have a far better grasp of what is required than Brown or Darling. “We don’t sense any purpose in providing small businesses with loans that they cannot afford to repay,” said Eric Leenders, executive director retail, at the British Bankers’ Association.
What better reason than this could there be to end the operation of a system of fantasy finance that exists solely to extract value produced by workers in the real, productive economy in order to distribute it as profits to shareholders and dreamland bonuses to City traders? The profit-serving banks should be turned into mutually-owned, democratically controlled not-for-profit institutions. Then decisions can be taken and implemented on how to best provide the essential financial services needed to build an equitable and environmentally sustainable economy.
Gerry Gold
Economics editor
Subscribe to:
Posts (Atom)