As the Northern Rock bank fell in Spring 2008 – the first British casualty of the “credit crunch” queues of customers formed in panic to get their money out before it was lost. To prevent the bank going under, Gordon Brown announced its nationalisation at a cost of £55 million – to be paid for by the income paid in tax by British workers. The catch was that only the bad debts of the bank were to be owned by the state. Granite, a profitable investment company and part of Northern Rock was left well alone. Now Northern Rock, the supposedly state-owned bank carries out more repossessions of people’s homes than any other. The Labour Party has made the working class pay to save the banks – only for the banks to steal their homes. Next they did the same with the Bradford & Bingley building society. It was part-nationalised with the profitable assets given away to the Spanish bank Santander. For capitalist hypocrites, nationalising losses is great – just don’t go near their precious profits.
Then it appeared that other banks like Natwest, RBS, HBOS were also in trouble. They approached Gordon Brown for help and received a bailout that dwarfed anything ever seen before. It was the same across the Atlantic. In October 2008, $2 trillion (a trillion is a million, million) were spent bailing out the banks in the UK and USA alone through the buying up of huge amounts of shares and guaranteeing loans with the state treasury.
In Britain, the bailout was supposed to come with strings attached. The banks were under instruction that these vast quantities of money from the taxpayer were not to be spent on the infamous bonuses to city investors, which in previous years had been (to give one example) spent on things like cocktails costing £333 each. Nor were they to be given to shareholders in the form of huge dividends. But it was almost immediately after the bailout that the Royal Bank of Scotland Group (RBS), who also own Natwest, assured investment staff and shareholders that they had “reached a deal” with the government and could do it anyway.
And then it was party time! RBS threw a huge bash near Edinburgh for executives costing £300,000 for the finest wine and no-expense-spared accommodation at a five-star hotel. HBOS, who are cutting 40,000 low paid call centre and admin jobs to save costs and “streamline” their operations had the same idea. Their party cost £330,000 to celebrate the “successes” of 302 of their top mortgage staff – all this given the disastrous crash in the property market.
No wonder that the anger of ordinary people exploded across the world! In the USA workers held placards up to Wall Street skyscraper boardrooms saying “Jump! You fuckers!” In London, students and workers took to the city on 10 October 2008 and pushed past police lines attempting to force their way into financial buildings shouting “We gotta get rid of rich!” The slogan “we won’t pay for their crisis” has been taken up in movements against privatisation, cuts and unemployment all over Europe.
What should be done with the banks?
Socialists are in favour of nationalising all the banks into one single state bank. This should democratically controlled by the organised working class for the benefit of society and should be done with no compensation at all for the greedy bosses.
The role of banks in capitalism is to centralise the wealth in society and distribute resources where they provide the highest return of profit – aside from what it does to any economy, the environment and workers in any industry. If they were merged into one state bank for the benefit of people, not profit, they could help those whose homes were at risk through buying them up and renting them back out more affordably. They could put forward the funds for massive infrastructure projects to improve health, transport and education, providing jobs in the meantime. They could abolish the huge debts that bleed the global south dry. When the bosses tell us that they need to cut our wages or lay us off, the state bank could publish the real state of their finances and strike a blow to business secrecy.
