by Daphne Liddle
THE STOCK markets are falling again in London and New York after rallying for just three days.
The new policies of governments buying shares in banks to rescue them and putting up billions and trillions of pounds/dollars/euros to guarantee depositors’ money seemed to be working for a little while. Governments heaved sighs of relief; Armageddon had been postponed and Prime Minister Brown had come out of it like a banking super-hero who had, by pointing the way forward, delivered capitalism from its self-inflicted wounds.
But they had underestimated the greed and arrogance of the banking shareholders. After the Government had used billions of pounds of taxpayers’ money to rescue them, the banks reported that the terms and conditions that Prime Minister Brown had imposed were deterring shareholders.
The bankers criticised the Government for its decision to stop dividends being paid out and asking banks to resume lending and called on Gordon Brown to water down the terms and conditions of the bail out in line with the package unveiled by George Bush.
Bush and his Treasury Secretary Henry Paulson had followed Brown’s example and taken a £250 billion stake in vulnerable American banks, apologising as they did so.
The semi-nationalisation is totally contrary to their free-market dogma. “This is not what we ever wanted to do,” said Paulson, “but there is a lack of confidence in our financial system.” friendlier
But Bush set friendlier terms for the bankers on Wall Street than Brown had done. The American taxpayers must foot the bill but Bush has no intention of imposing the sort of conditions that would defend their interests.
Bush’s rescue package was announced after the weekend’s meeting in Washington of G7 finance ministers and banking chiefs from the US, Canada, Great Britain, France, Germany, Italy and Japan. The 15 heads of the Euro Group, plus Gordon Brown, met immediately afterwards in Paris.
Once again the leaders of the rising economic powers: China, India, Russia, Venezuela, South Africa and so on were excluded.
The G7 powers agreed a five-point plan involving colossal sums of money but without setting precise figures or estimates. They pledged to prevent any bank going to the wall and to guarantee that financial institutions have access to liquidity and capital through the governments buying shares in the banks.
Even while the rest of the stock markets were enjoying a brief recovery, shares in the banks RBS, HBOS and Lloyds TSB were still falling.
Then on Wednesday the National Audit Office released figures showing that unemployment is rising steeply and the enormity of the coming recession swept away all remaining confidence on the London stock exchange and the FTSE started to nosedive again. similar fears
Wall Street was also falling amid similar fears of the coming recession. And many of the speculators who bought two days previously with prices at rock bottom were selling again to pocket a profit.
The problem with the G7 rescue plan is that it sends a signal to speculators that they can freely start runs on any bank or financial institution they like and the taxpayers are sure to bail them out.
It leaves the governments hostage to spend every pound and dollar they can scrape together – and the speculators will not stop until all the coffers are empty. As Peter Schwarz, writing in Global Research put it: “Governments have literally handed over the keys to their treasuries to the banks. The massive redistribution of wealth from the working layers of the population to the rich elite during the last three decades is to be continued and accelerated in the course of the current financial crisis.”
This is the madness of capitalism. The media is blaming the banking chiefs for their reckless lending and lack of control over recent years. But if any banker had refused to chase the easy profits that behaviour yielded and insisted on a more sober and cautious approach, they would have been sacked.
It is a system in which the greediest and most venal always rise to the top.
This is why semi-nationalisation cannot work; it must be full-nationalisation with full government control and democratic accountability.
The billions that have been stashed away by the profiteers during the last three decades must be taxed at the highest possible rate to return the stolen wealth to the workers who created it.