The banks: compensation without nationalisation?

Submitted by martin on 4 November, 2009 - 11:40 Author: Rhodri Evans

Back in January, John McFall, a mainstream New Labour MP and chair of Parliament's Treasury select committee, called for the complete nationalisation of Lloyds Bank and the Royal Bank of Scotland.

It's a pity he didn't stick to that, and that unions and others in the labour movement did not take up the call, extend it, and force the Government to nationalise the whole finance sector with minimal compensation.

Instead, the Government went for pumping taxpayers' money into the banks to help them scrape through the crisis and come out of it as much as they went in - as private-profit machines. Even when the money-pumping took the form of buying up large numbers of shares - making the Government by far the biggest shareholder in RBS, and thus effectively nationalising it - bosses were left free to run their banks.

Now, on 3 November, the Government has pumped another £31 billion into RBS and Lloyds, buying more of their shares, and promised another £8 billion to RBS if it wants it. As the Tories have pointed out, the sum comes to £2000 for every household in the country, paid into the bank bosses' pockets.

Socialists have habitually called for nationalisation without compensation where capitalism leads industries to collapse. This is more like compensation without nationalisation, or... nationalisation without nationalisation.

Dan Roberts, in the Guardian, rightly skewers the "Treasury orthodoxy that insists the stockmarket is the only judge of long-term value and the reliable source of capital. Neither seems to be the case at the moment, and instead the taxpayer is paying a high price to preserve the fiction that British banking is back on its own two feet".

Chancellor Alistair Darling has defended the new cash-pumping by saying that it will enable the banks to opt out of the Government's scheme to insure their risky assets, and thus reduce the Government's total commitments.

The fact remains that the Government is handing over huge amounts of hard cash to the banks in return for paper assets (shares) with dubious prospects. It sees sustaining the banks as central to sustaining the whole economy in a way that sustaining jobs, welfare, and public services is not. And, if capitalism is the economy to be sustained, that is true: the banks are central.

The Government promises some limits on bankers' bonuses, but these are cosmetic. Simultaneously, the banks are axing ordinary bank workers' jobs.

RBS made a loss in in its half-year to 30 June 2009, but generally banks and financial institutions - helped by cheap loans from governments - have been doing quite well in recent months. There is a serious risk of new financial bubbles swelling up - with another real economic crash when they burst - scarcely a year after the last big bubble-bursting, in September 2008. Pumping up the less successful banks may just help swell the bubbles.

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