Wednesday, 1 October 2008

Hands Across the Water?

How far is there any discernible difference between what Brown is doing in this financial crisis and the American reaction?

It seems to me that the UK, at least in the case of Bradford and Bingley, has sold off the profitable parts of the bank and 'nationalised' the debts of £40 or 350bn - but there is a feasible chance that many of these debts will eventually come good and, in any event, there is some obscure baking industry self insurance scheme whereby the remaining banks have to guarantee upto £15bn of this debt if it doesn't come good. So, in a way, this is a weak, extremely market orientated version of the so-called 'Swedish solution'(i.e. nationalise now, fatten up and sell back to private investors later). But Bush and Paulson seem to simply want to hand money directly over to the existing banks full stop. So there is a difference.

But it's not at all clear to me that the UK could support a general application of the methods used in the Northern Rock or Bradford & Bingley cases - a true systematic failure would make it impossible. & the UK alone can't sustain the international financial system, only the US can do that. Or possibly not even the US as so much of their financial structure is, in reality, held by Chinese or other foreign investors - hence the rescue of Fanny Mae and Freddy Mac. So these differences may simply be a reflection of the different speeds of development of the crisis in the two different financial centres.

My question remains: how do we rescue the system without simply bailing out the bankers at the expense of ordinary people? How do we manoeuvre the situation so the Masters of the universe and the foreign sovereign wealth funds take at least part of the pain? Because a systematic collapse would be unthinkable - a Depression to match the 1930's. yet to not clip the wings - a modest enough aim - of the bankers and their allies would be to acquiesce in the most dreadful daylight robbery....

& Cameron is now making 'statesman-like' noises, as if as a prelude to a government of national unity.We only get such governments when the establishment wants to rule out any possible alternatives to what must be done - in wartime and when the basis of our class society is under threat. But we're not there yet - and, in any case, if class privilege is under threat it is because the Masters of the Universe have created the conditions of their own possible destruction. It's not because of any challenge from below. Or it hasn't been up to now, anyway.


& Will Hutton shares this cheery news in today's Guardian
" The US is a continental economy; it can find $700bn for its toxic debts. The UK is a medium-sized economy - but has giant banks. Royal Bank of Scotland has 2 trillion euros of assets; HSBC 1.6tn; Barclays 1.5tn; and Lloyds/TSB/HBOS 1.4tn. Together those 6.5tn euros of assets are four times Britain's GDP. It seems incredible, but these huge banks are now so concerned about each others' business model and creditworthiness that they have stopped lending normally to each other in a form of City of London bank run - forcing the London Interbank Offer Rate (Libor) to record levels."

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