Richard Murphy cracks Northern Rock

[Friday]

The people who queued to get their money out of branches of the Northern Rock bank this week were not panicked fools, and it is important that the truth about the first run on a bank in the UK for 150 years is made available for all to read.

Richard Murphy, whose Tax Research UK blog is hugely informative and brilliantly written, has uncovered the truth about Northern Rock’s liabilities:

I have spent some time talking to people about the ’shadow’ structure that Northern Rock created and which I wrote about earlier this week. My question was simple, and I needed to be sure of the answer. I’m confident that I am now.

That simple question was this:

Why did Northern Rock create such a complicated structure for its debt?

The answer is this:

So that it could put the claims of its depositors below those of the City if anything went wrong with the company.

The shadow structure (which no doubt someone thought it very amusing to call ‘Granite’) was not a tax trick, at least as far as I can tell. Almost certainly very little profit flowed through the whole operation, which is why I am also convinced it is a flagrant abuse (but not breach) of charity law to have claimed it was set up with that purpose in mind.

Instead it was designed to ensure that the Granite companies, which are theoretically independent of Northern Rock, could always recover their money come what may and (very politely) sod the customers of the bank in that case.

Look at this diagram of the last published Northern Rock balance sheet from their own 2006 accounts (page 38)(and laugh out loud at the nonsense written below it – with which the auditors must, by the way, have concurred):

The fact is that if Norther Rock did go down the 40% of securitised loans in the Granite companies and £30 odd billion in the ‘wholesale’ and ‘covered’ notes would all have had prior claim against the assets because of the way in which they were constructed. The people who were guaranteed to lose were the ordinary depositors of Northern Rock.

And because of the absurdly low capital structure of this so called bank follwoing its demutualisation a decade ago whilst the shareholders were always high risk takers in this game, they were vastly outnumbered in value by the depositors. Did those depositors know quite how much risk they were taking when lending funds to such an organisation?

Actually, instinctively they did. Those who queued this week were bang on the nail about the need to get out fast. They were at massive risk. But what’s really shocking is this:

1) The FSA did not say this;

2) The Bank of England have not said this;

3) The Treasury have not said this. In fact, they went out of their way to say the exact opposite for several days.

The reality must be that each of these knew that the depositors in this organisation were being exposed to excessive and unreasonable risk because its directors had exposed them to it, deliberately. And no one in the City, and not one of those who has regulated this bank has said at any time:

You ordinary people were right. You rumbled us. You were right to queue.

Nor have they said:

The directors of this company did not protect you. In fact they abused you.

And no one has admitted:

We did not protect you. Not until we had to. And we only did it then to ensure that our previous failure to protect you was not exposed.

And together they have not said:

All of us, directors, regulators and government alike put the interests of the City above the interests of the ordinary people of this country when regulating Northern Rock and as such let a bank operate to blatantly exploit you as a result.

But they should have. Because that’s what happened. And they all know it. But they were happy with that massive misrepresentation in the Northern Rock accounts about the strength of its balance sheet, because from their perspective and that of their friends their risk was covered whatever happened. Who cared in that case about the ordinary people? It seems no one did.

Well it’s time for many people to be called to account. Including those named above. I hope the Treasury Select Committee have fire in their bellies in this one. Because we sure need them to go into action, all guns blazing.

Dave Osler on the class politics of govt bail-outs

[Friday]

Now that the banks are in turmoil over the credit crunch, think back to previous financial crises the government didn’t intervene in, ones that have affected thousands of working people – who must now be feeling angry that the government didn’t step in to help them in their time of need.

Rather than put it into my own words, let me reproduce this must-read post from Dave Osler’s blog:

In October last year, 150,000 low-income families lost a total of £45m when dodgy Christmas hamper racket Farepak collapsed. As a result, some of Britain’s poorest yet most thrifty people – the very people who don’t whack a few hundred quid on the plastic to pay for their Christmas, because they can’t afford to – saw their festivities ruined. No government bail out for them.

About 125,000 workers and pensioners have lost some or all of their pension entitlement after their employers went under or shut down insolvent occupational pension schemes. No government bail out for them, either.

Of course Alistair Darling was right to guarantee the deposits of Northern Rock customers this week. But why the selective treatment? Building society savers have no more intrinsic merit than Farepak punters or pension contributors.

In round numbers, seeing the Farepak clientele alright would have cost exactly 1% of the £4.55bn value that the taper relief tax break extends to venture capitalists every single year.

As Nick Ferguson, head of SVG Capital, pointed out recently, venture caps pay a lower rate of tax then their cleaning ladies. And cleaning ladies are the kind of people that save with Farepak and who at best have a couple of grand in savings. A Labour government should consider their interests too.

Ah, but it won’t. Because it is a Capital government…

Hungarian rights?

[Friday]

Resisting privatisation can get you in trouble at the best of times, but this is something else…

The entire leadership of the Hungarian Communist Workers Party is being placed on trial on Friday 21 September at the City Court of Szekesfeheervar. The prosecution arises from a previous legal action by the Budapest City Court in 2005. This ruled the proceedings of the party’s 21st Congress in June 2005 to be null and void. The Presidium of the HCWP declared this judgement to be political and an unjustified interference in the internal democracy of their party. It is for this statement that the Presidium is now being prosecuted. If sentenced, they face two years imprisonment.

The leadership of the HCWP argue that the prosecution is in clear violation of Article 61 of the Hungarian constitution guaranteeing freedom of expression.

The Communist Party of Britain and other Communist and Left parties based in Britain are picketing the embassy in protest at the prosecution. A letter will be handed in to the Ambassador calling on the Hungarian government to defend the civil rights of the Hungarian people.

Robert Griffiths, general secretary of the Communist Party of Britain, comments:

“This prosecution represents a serious attack on civil liberties of concern to all progressive people across Europe. It is an attempt to silence the main political force in Hungary which is currently resisting the current tide of privatization being imposed by the Hungarian government. The HCWP has already collected two million signatures against the privatisation of the Hungarian health service. The prosecution comes after previous anti-communist legislation that makes it illegal to wear a red star or display the hammer and sickle. As well as being in breach of the Hungarian constitution it also violates the declarations on human rights by the Council of Europe. We call on all those concerned with civil liberties to make their own representations”

Check out Neil Clark’s blog for more details.

I’ve blogged on anti-communism in Europe before, back in April when there was rioting in Estonia:

The bourgeoisie in the former socialist countries in Europe are keen to portray the restoration of capitalism as the restoration of democracy and liberty. But there is no evidence to suggest workers wanted privatisation, structural unemployment, migration, deprivation, people-trafficking and prostitution.

It is obvious now that a shake-up of the socialist systems of Eastern Europe, involving the retention of the planned economy and the extension of worker management, would have been preferable to the restoration of capitalism. The beneficiaries of the ‘liberation’ from the ‘Soviet Empire’ were not millions of workers but the millionaire bosses in Western Europe and the newly-crowned oligarchs. There was never a clear choice offered to the masses of Eastern Europe, but few would have chosen neo-colonialism.

[...]

The reason for the banning of the KSM [Communist Youth Union] was not, as originally claimed, their supposed espousal of violent revolution, but their support for public ownership of the means of production! This is a frightful notion for the bourgeoisie – a planned and managed economy is not focused on the accumulation of wealth for the disposal of a minority. The ban was because of the success of the group in gaining support among workers, not because they were planning violent acts against the state.

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Craig Murray censored by Alisher Usmanov

The following blog post is by Craig Murray, former British Ambassador to Uzbekistan, whose site had been taken out by his ISP at the request of Mr Usmanov’s lawyers. It was brought to my attention by Wonko, who rightly says, “If Alisher Usmanov or his lawyers, Schillings, have proof that this is libelous then they should seek redress through the courts. The fact that they simply threaten ISP’s and the media with legal action instead would suggest that the evidence doesn’t exist.”

A rich man can shut silence one person, but he can’t silence us all.

Please reproduce the following on your own blog:

Alisher Usmanov, potential Arsenal chairman, is a Vicious Thug, Criminal, Racketeer, Heroin Trafficker and Accused Rapist

I thought I should make my views on Alisher Usmanov quite plain to you. You are unlikely to see much plain talking on Usmanov elsewhere in the media becuase he has already used his billions and his lawyers in a pre-emptive strike. They have written to all major UK newspapers, including the latter:

“Mr Usmanov was imprisoned for various offences under the old Soviet regime. We wish to make it clear our client did not commit any of the offences with which he was charged. He was fully pardoned after President Mikhail Gorbachev took office. All references to these matters have now been expunged from police records . . . Mr Usmanov does not have any criminal record.”

Let me make it quite clear that Alisher Usmanov is a criminal. He was in no sense a political prisoner, but a gangster and racketeer who rightly did six years in jail. The lawyers cunningly evoke “Gorbachev”, a name respected in the West, to make us think that justice prevailed. That is completely untrue.

Usmanov’s pardon was nothing to do with Gorbachev. It was achieved through the growing autonomy of another thug, President Karimov, at first President of the Uzbek Soviet Socilist Republic and from 1991 President of Uzbekistan. Karimov ordered the “Pardon” because of his alliance with Usmanov’s mentor, Uzbek mafia boss and major international heroin overlord Gafur Rakimov. Far from being on Gorbachev’s side, Karimov was one of the Politburo hardliners who had Gorbachev arrested in the attempted coup that was thwarted by Yeltsin standing on the tanks outside the White House.

Usmanov is just a criminal whose gangster connections with one of the World’s most corrupt regimes got him out of jail. He then plunged into the “privatisation” process at a time when gangster muscle was used to secure physical control of assets, and the alliance between the Russian Mafia and Russian security services was being formed.

Usmanov has two key alliances. He is very close indeed to President Karimov, and especially to his daughter Gulnara. It was Usmanov who engineered the 2005 diplomatic reversal in which the United States was kicked out of its airbase in Uzbekistan and Gazprom took over the country’s natural gas assets. Usmanov, as chairman of Gazprom Investholdings paid a bribe of $88 million to Gulnara Karimova to secure this. This is set out on page 366 of Murder in Samarkand.

Alisher Usmanov had risen to chair of Gazprom Investholdings because of his close personal friendship with Putin, He had accessed Putin through Putin’s long time secretary and now chef de cabinet, Piotr Jastrzebski. Usmanov and Jastrzebski were roommates at college. Gazprominvestholdings is the group that handles Gazproms interests outside Russia, Usmanov’s role is, in effect, to handle Gazprom’s bribery and sleaze on the international arena, and the use of gas supply cuts as a threat to uncooperative satellite states.

Gazprom has also been the tool which Putin has used to attack internal democracy and close down the independent media in Russia. Gazprom has bought out – with the owners having no choice – the only independent national TV station and numerous rgional TV stations, several radio stations and two formerly independent national newspapers. These have been changed into slavish adulation of Putin. Usmanov helped accomplish this through Gazprom. The major financial newspaper, Kommersant, he bought personally. He immediately replaced the editor-in-chief with a pro-Putin hack, and three months later the long-serving campaigning defence correspondent, Ivan Safronov, mysteriously fell to his death from a window.

All this, both on Gazprom and the journalist’s death, is set out in great detail here:

http://www.craigmurray.co.uk/archives/2007/06/russian_journal.html

Usmanov is also dogged by the widespread belief in Uzbekistan that he was guilty of a particularly atrocious rape, which was covered up and the victim and others in the know disappeared. The sad thing is that this is not particularly remarkable. Rape by the powerful is an everyday hazard in Uzbekistan, again as outlined in Murder in Samarkand page 120. If anyone has more detail on the specific case involving Usmanov please add a comment.

I reported back in 2002 or 2003 in an Ambassadorial top secret telegram to the Foreign Office that Usmanov was the most likely favoured successor of President Karimov as totalitarian leader of Uzbekistan. I also outlined the Gazprom deal (before it happened) and the present by Usmanov to Putin (though in Jastrzebski’s name) of half of Mapobank, a Russian commercial bank owned by Usmanov. I will never forget the priceless reply from our Embassy in Moscow. They said that they had never even heard of Alisher Usmanov, and that Jastrzebski was a jolly nice friend of the Ambassador who would never do anything crooked.

Sadly, I expect the football authorities will be as purblind. Football now is about nothing but money, and even Arsenal supporters – as tight-knit and homespun a football community as any – can be heard saying they don’t care where the money comes from as long as they can compete with Chelsea.

I fear that is very wrong. Letting as diseased a figure as Alisher Usmanov into your club can only do harm in the long term.

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Tony Benn’s last straw?

[Friday]

Tony Benn, writing in The Guardian yesterday, expressed his fears about New Labour’s plans to exclude the membership from proposing policy debates at the party’s conference.

You would think that a protest vote on this or that issue, with no outcome in terms of party policy, would not be enough to keep people in the Labour party. I kind of hope that the leadership succeeds in its intentions – then at least those genuine socialists in the party might consider challenging New Labour from the outside…

Bob Wareing had to be ousted before he would admit there is no future in Labour. Perhaps it will take this year’s conference to get Tony Benn to admit there is no way that the party can be “reclaimed”.

Here’s the body of his article:

Next week’s may be the last real Labour conference I shall attend after 65 years membership of the party. For if constitutional amendments put forward by the leadership are accepted, delegates will no longer be permitted to pass any resolutions on any policy questions.

The argument put forward is that when there is a Labour government it is unacceptable for members of the party, at conference, to be able to vote for policies that are in conflict with government policy. This process began in the 90s, when New Labour came to power and most proposals were referred to the national policy forum in which the government had a permanent majority.

But it was agreed that eight resolutions could be put to the conference every year – four from constituency parties and four from the unions. The conference was able, for instance, to vote for a restoration of the link between pensions and earnings. The government did, however, succeed in preventing discussion on other sensitive issues like Iraq and its decision to go ahead with Trident.
If the new proposals – now endorsed by the NEC and apparently some major trade unions – are accepted, delegates will only be allowed to identify issues they want looked at by the policy forums, and the manifesto that emerges will be put to a referendum of party members to accept or reject in full, with no possibility of amendment. This would complete the New Labour project under which the conference becomes a platform for ministers and a few handpicked delegates – and, of course, a big trade fair. There would be no point in joining the party locally or affiliating as a union in the hope of discussing policy.

In short, party members will only have one campaigning function – to get councillors and a government elected with policies which they have played no part whatsoever in formulating. If this divorce happens, policy campaigning will revert to those outside the party and parliament. This would be a tragedy, but it would indicate clearly that the New Labour leadership’s attitude to the party and the movement is not only that they don’t want certain policies passed but also that they don’t want any decisions reached they do not control.

Of course this would also affect MPs, who would become elected “civil servants”. I very much hope conference rejects the change, and makes clear that it intends to strengthen its role in policymaking; this the delegates in Bournemouth will have the power to do. But those who want to deal with issues not on the government’s agenda will have to campaign vigorously outside parliament and build a body of opinion so strong no political party would be able to ignore it. Since I left parliament, all my work has been along those lines – against the Iraq war, privatisation, student loans; and for comprehensive education, union and workers’ rights, civil liberties and public housing. The focus of these campaigns has hitherto been the conference, but if that opportunity is removed, the party will deprive itself of the support of activists when polling day comes.

Conference will then be an annual meeting for the fan club of the parliamentary bigwigs and their business friends. Even the fringe meetings which are now so vibrant could disappear, because those who attend them will know the issues they are interested in will never get on to the conference floor.

That is the choice that has to be made in Bournemouth – and it is the biggest decision since the party was founded, for it could also end the role of parliament as the buckle that links the demonstrations on the street to the legislation on the statute book upon which democracy itself depends.

An excellent article from this week’s issue of The Socialist, offers the way forward:

Time for a new party

The new merged union ‘Unite’ is leading a lobby of Labour Party conference on Sunday 23 September. A whole list of grievances will be presented to the Labour leadership in defence of the rights of working people. But millions of trade union members will be asking, how can the big unions still remain handcuffed to New Labour, in the face of its pro-business agenda?

Rob Williams, Unite convenor, Swansea Visteon plant, personal capacity

These union general secretaries correctly denounced Brown for his ‘meet and greet’ session with Thatcher. Aware of the disgust that workers will have felt looking at the pictures, they embarrassingly rushed out statements attacking Brown.

Yet the very same leaders refuse to carry those sentiments through to their logical conclusion – stop giving millions of our union subs to New Labour and launch a new mass workers’ party. Thatcher called the miners “the enemy within” and is now paraded by a Labour prime minister in front of No.10.

Of course, New Labour prime ministers, like Thatcher herself, are war leaders as well. Millions live in poverty but billions are spent in the illegal war and occupation of Iraq and Afghanistan.

Tens of thousands of miners and steelworkers were sacked by Thatcher, just as Brown announced over 100,000 civil servants losing their jobs live on TV when he was chancellor. Yet the union leaders have been doing their best to try and persuade us that Brown is different to Blair. But he is an architect of the New Labour regime.

He is planning to remove the last vestiges of democracy and trade union representation from the already neutered Labour Party conference. Why do we need to waste more time and money? We need to cut the links with Labour now.

The trade unions are campaigning to get the Trade Union Freedom Bill passed. The anti-trade union laws were used to defeat the miners and the printers at Wapping. Yet these laws remain today, even after ten years of a Labour government.

Surely, if Labour MPs don’t deliver yet again, the penny needs to drop, lets cut the links and launch a new party that can link together the millions that have opposed this government, from the anti-war protestors to the anti-NHS cuts campaigners.

The home secretary’s obstruction of justice over corruption inquiry

[Friday]

Someone’s obstrucing a criminal investigation.

Who could it be?

Well, it’s definitely not that new (ish) Home Secretary, Jacqui Smith, who is in charge of this sort of thing. We can rule her out, can’t we?

Oh, no. Actually, it is her.

British ministers are refusing to cooperate with the US criminal investigation into allegations of corruption against BAE, Britain’s biggest arms company, the Guardian can disclose.
More than two months after an official request for mutual legal assistance (MLA) was received from Washington, the home secretary, Jacqui Smith, has not yet allowed it to be acted upon. The US investigators believe the British are being obstructive.

But legal sources said yesterday that the inquiry team had not been deterred by the UK government’s hostile attitude. Some have already begun taking statements from key British witnesses.

How awkward. And King Abdullah’s visiting next month…

The formal request for assistance came from the US department of justice earlier in the summer, but Ms Smith has refused to pass it on to the Serious Fraud Office for processing in the normal way.

This is unusual behaviour towards a major ally, with whom legal cooperation is normally automatic. Last night, the Home Office said its failure to pass on the request was “not unprecedented”, but could not give any example of similar behaviour.

It’s not often that the British government refuses to co-operate with the US authorities. In fact, I think this is a first.

I wonder if the UK government will similarly refuse to co-operate with the US government in the coming war with Iran?

The SFO possesses important files on BAE gained from its own major inquiry into £1bn of payments to Prince Bandar of Saudi Arabia and other Swiss bank accounts linked to the Saudi royal family. But SFO investigators are not allowed to speak to US authorities until Home Office officials forward the paperwork.

The agency was forced to halt a criminal investigation earlier this year by the then prime minister Tony Blair, who said it threatened the national interest and was upsetting the Saudi regime.

National interest had to be the excuse, not “British jobs” (which we know the government doesn’t care about). Supposedly the Saudis would allow terror attacks to take place in the UK or against British forces in the Middle East…

Last week, Saudi Arabia signed a fresh arms deal with Gordon Brown’s administration worth up to £20bn for BAE’s Typhoon aircraft.

The Saudis had been threatening to withdraw from the contract.

The real motive for obstructing justice?

The government wants to secure BAE’s profits; it is the servant of big business. That’s why New Labour has kept secret the details of Thatcher’s al-Yamamah deal and is rather coy about when and where the latest deal took place. As for British jobs, a majority of the work will take place in Saudi Arabia. State monopoly capitalism, y’all.

Not all of BAE’s shareholders are happy at what’s going on, mind:

A fresh front against BAE was opened yesterday, when shareholders in the US launched a multimillion dollar lawsuit against the company’s directors accusing them of corruption. A spokesman for BAE, which is 50% owned by US shareholders and holds lucrative contracts with the Pentagon, said: “The company intends to vigorously defend any such proceedings.”

Prince Bandar, who is also named as a defendant, has not denied receiving cash and a free gift of an aeroplane, but he says it was for legitimate purposes.

Other defendants named in the US suit include former Conservative defence secretary Michael Portillo, who was given a post on BAE’s board after helping negotiate an arms deal with Qatar; Sir Nigel Rudd, who recently joined BAE’s board as a non-executive director; and Sir Dick Evans, the original architect of the £43bn al-Yamamah arms deal at the centre of the allegations.

The Washington claim has been made in the name of a small pension fund, the City of Harper Woods employees’ retirement system, which only holds the equivalent of 14,000 BAE shares, less than 1% of the company’s stock. But it is intended that other US shareholders will join in.

The suit claims that BAE’s directors have wrecked the company’s reputation and exposed it to heavy fines and penalties, by conniving at “improper and/or illegal bribes, kickbacks and other payments”, while claiming all the while in public that BAE was a “highly ethical, law-abiding corporation”.

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