October revolution for the banks?

What a cast of characters.

Fred the shred losing his head – well, his cushy job at the bank he ran into the ground.

The reluctant nationalisers, Chancellor Darling and Prime Minister Brown.

The reluctant supporters, the Tories and their City mates.

From the Morning Star:

We should have a say
(Monday 13 October 2008)

AS of Monday, we all became part owners of 60 per cent of Royal Bank of Scotland and 40 per cent of Lloyds TSB-HBoS, which ought to enable us to have a say on which direction the economy should take.

But the Prime Minister and Chancellor of the Exchequer seem embarrassed by the prospect of the public extending its ownership of the economy.

Both Gordon Brown and Alistair Darling insist that ministers will have no say in running the banks, that the public will be represented by people with experience in banking, that the banks will run on a commercial basis and that their aim is to liquidate the public stake in due course once the investment has been paid back to the exchequer.

The two men also insist that they will seek international agreements to lay down rules for a renewed global finance system that is transparent and responsible.

It is reasonable that ministers should not have day-to-day responsibility for running RBS or Lloyds TSB-HBoS. They should be run at arm’s length from Whitehall.

But that does not mean that the government’s regulations on controlling bonuses and offering loans at 2007 levels to small businesses and private individuals ought to be the sum of our ambitions.

We have already seen what leaving the banking system to be run by people with experience in banking has led to.

Northern Rock, Bradford & Bingley, RBS and Lloyds TSB-HBoS were all driven into the ground as part of the banking system’s accepted code of behaviour of seeking to maximise profits through taking risks.

Each institution had its own specific reason for going belly up, but the underlying causes were greed and an unworldly belief that credit could continue to be expanded without a day of reckoning.

And the good times brought their rewards in huge salaries, share options, bonuses, pensions fund top-ups and impressive dividends – at least for the board room and the big shareholders.

The danger now is that, if the government simply hands decision making back to those who bear responsibility for the current situation, they will seek to make bank staff pay for the crisis in jobs lost.

The trade union movement must be ready to defend members’ jobs, but it must go further.

Bailing out the banks, getting the banking system back on track, surviving the threatening recession and then handing everything back to the speculators must not be acceptable.

Announcing government stakes in the two banks, the PM bemoaned excessive risk taking, regulation failures and the scandal of credit rating agencies exaggerating banks’ status as though these were new phenomena.

Not only were they subject to critical comment years ago but Mr Brown himself had pooh-poohed the need to tackle them.

That situation has to change. A transition back to where we were is unacceptable. There can be no attempts to rebuild the credibility of a failed neoliberal dream.

Instead, the government should retain its stake in the banks, put in directors who understand the need for a new economic approach and use them, as John McDonnell says, to promote investment that defends jobs, housing security and environmental sustainability.

John McDonnell speaks in a discussion with a banker, here on Channel 4 News:

By the way… the public utilities that the Tories flogged off to their mates could be in trouble, too, thinks Peter Hain. Renationalisation is “moonshine” sez he – I’ll make him drink his words when it happens…

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