Agreement of People website

Sign here if you support the campaign for a real democracy


Our blogs


 

AWTW FacebookAWTW Twitter

Your Say


 

 

Banks’ losses threaten action on climate change

Despite Government loans and guarantees in the region of £55billion and the sale of a choice part of its assets to J P Morgan, (perhaps coincidentally the first of Tony Blair’s private sector income streams), Northern Rock’s problems are not easing. It isn’t making enough to repay the penal interest rates charged by the Bank of England. Plans for a state takeover – nationalisation – are well-advanced.

For the Government, as reported on epolitix.com, a private deal is the preferred option, but potential bidders Virgin and Olivant are reported to have had troubles in securing financing for the deal as a result of the global credit crunch.
Asked if ministers had any concerns about offshore ownership of the bank, the Number 10 spokesman said: "The priority here is to protect the interests of taxpayers, depositors and savers." The chancellor told MPs that the government had put guarantees in place to protect savers, not shareholders.

Reassured? Not if you’re one of the huge number of people with mortgages from the former building society. No mention of their interests. And interest is what they will be paying in shedloads whoever ends up owning their debt. With many holding up to 125% of the value of the property when they bought it, house prices on the way down, food and fuel on the way up, defaults are sure to mount.

The £25billion or so already lent to the failing bank comes at a price. It isn’t money transferred from another budget somewhere. It’s another injection of invented billions to add to the crumbling mountain of credit and debt issued at an ever faster rate to sustain global growth over the last few decades. And the whole shaky pile is founded on the expectation of increasing wealth generation and the consequent ability of wage earners to repay their mortgages at interest rates high enough to generate a profit for shareholders.

But there’s a recession on the way, so it won’t work any longer. It won’t work for Northern Rock, and it won’t work for Citigroup, the world’s largest bank, which yesterday revealed a 40 per cent dividend cut, a $9.83bn fourth-quarter loss, $18bn in subprime-related credit writedowns and remaining exposure of $37bn to subprime mortgages. Neither will it work for Merrill Lynch which is due to report this week. A form of transfer into state hands – some call it state capitalism – is underway for both of them too. Only the funds are coming from elsewhere: governments - and private investors - in the Middle East and Asia, representing the biggest-ever single transfer of capital to US banks from abroad, in exchange for a stake in the business.

Next week, the World Economic Forum meets in Davos. Up for discussion is Global Risks 2008, a report written for the event by a team of collaborating organisations. It is hardly reassuring to know that Citigroup is top of the team. In the light of the ongoing and rapid economic deterioration that has come out into the open since the report was finalised, it makes pretty chilling reading. With uncertainty about the short- and medium-term future and about who is responsible for dealing with global risks ‘Action to mitigate climate change, for example, may be put in danger should the global economy weaken substantially – even though many of the political, economic and investment decisions which will shape the future path of global climate will need to be made in the next five years.’

In other words, attempts to ensure the survival of the capitalist world economy will take priority over action on climate change.

You won’t find a better or more urgent reason for joining us in building the means to put capitalism on the compost heap where it belongs.

Gerry Gold
Economics editor
16 January 2008

Comment on this article

Your name

Your E-mail (we will not publish your E-mail)