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
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
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.”
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
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
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
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.
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
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