We need a state bank to lend to businesses, says John McFall

From the Morning Star:

Labour MP calls for a state bank
(Friday 09 January 2009)

THE government should seriously consider establishing a state bank so that businesses are able to obtain credit during the recession, Labour MP John McFall said on Friday.

The Treasury select committee chairman suggested that the Post Office transform itself into a full provider of financial services.

But he said that if a new state financial institution was required to deliver much-needed lending, then “so be it.”

Mr McFall said that credit lines to cash-strapped businesses were “drying up” and the chances that bank lending would soon return to 2007 levels were slim. The most trusted institutions now resided in the public sector, he pointed out.

“We have seen savers flock to trusted, publicly owned institutions such as Northern Rock, the Post Office and NS&I, as well as mutual organisations,” said Mr McFall. “The government is well aware of the level of public trust that exists for these institutions.”

He added: “The Post Office, having secured a vote of confidence from the government with the renewed Card Account contract, now needs to transform itself into a full provider of financial services.

“What better way to set it on this route than to provide it with responsibility for realising the government’s lending ambitions? However, if it takes a new state financial institution to deliver this much-needed lending, then so be it.

“A year ago such a demand from a left-wing politician would have provoked a ‘loony left’ response. But no more – after the extraordinary self-induced implosion of the financial system, the future of the market system now rests in the hands of governments.”

3 Responses to “We need a state bank to lend to businesses, says John McFall”

  1. Robert Says:

    The problem is of course that companies who want to lend money right now will be those close to going under, so a bank that lends to companies which are failing is likely to add to the problems of the credit crunch.The fact is lending to large companies has to be done by the government we are talking now about very large companies imagine Woolworth’s getting large scale loans because lets be honest Woolworth has been on the edge for years many years, so you keep it going and then bang it’s gone and your left with egg all over your face and the banks then totters and fails.This down turn recession was caused by Labour and the USA allowing banks to buy and lend to anyone for god sake even I who is disabled was offered a £25.000 loan and I only get £125 a week in benefits.

  2. charliemarks Says:

    My understanding is that even businesses that are doing well find it hard to get credit at affordable rates – most especially SMEs. As we’re heading into a recession, the expectation is that more firms will go bust. This, along with the problems the banks have already been experiencing, is leading to a shortage of affordable credit. Yet the taxpayer has bailed out the banks to the tune of billions on the understanding that lending to business would resume at affordable rates.

    As for Woolworths, it was profitable but highly indebted. It’s closure was because the creditors – mostly foreign banks – called time on the business, demanding their money back.

    You are right about the irresponsible practices of the banks. I believe the private banking sector should be nationalised – remember that the government is not in the same position as private banks and can renegotiate the terms of lending, rather than pull the plug. This would be a good way of getting companies to implement environmental protections, health and safety standards, union recognition, and even to establish forms of workplace democracy.

  3. David Lindsay Says:

    We are already subsidising several banks.

    Well, no subsidy without equity, and no equity without control of policy.

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