Socialist Worker

Gordon Brown backs bank robbers

Billions for Northern Rock bailout

Issue No. 2078

As the vultures circle around Northern Rock the government seems set to feed them with billions of pounds from the public purse.

Not content with buying into the bank at a knock down price, these asset strippers and privateers want working people in Britain to subsidise their takeover.

Chancellor Alastair Darling has already handed out £24 billion to bail out the bank and is set to shell out up to £50 billion. That is more than double what New Labour spends on housing and the environment, and two thirds of what it spends on education every year.

Families on the housing waiting list or children being taught in Victorian schools with leaking roofs might wonder why they are valued less than the hedge funds and speculators seeking to profit from Northern Rock’s collapse.

Public sector workers might ask why Gordon Brown demands they accept below inflation pay rises – wage cuts in other words – for the next four years “because the country can’t afford it”.

A year ago 150,000 people, many low paid workers, lost up to £40 million they had saved with Christmas hamper company Farepak. Now they face a second Christmas having received nothing back and with no sign of compensation. A report by the public sector union, Unison, this week revealed many have been forced into a “cycle of debt”.

One of the report’s authors, Richard Garside, director of the Centre for Crime and Justice Studies, said, “Many are asking why, if the government was prepared to underwrite Northern Rock to the tune of billions of pounds, no comprehensive help has been forthcoming.”

The government has refused to publish its Companies Investigations Branch report into Farepak’s collapse, from which directors walked away scot free. Meanwhile some people centrally involved in the Northern Rock scandal will be having a merry Christmas despite its collapse.

The chief executive of the bank, Adam Applegarth, was allowed to sail away into the sunset last week with £2.2 million in his pension and having trousered £2.7 million after selling his shares prior to the collapse.

Among those circling round the bankrupt bank is Richard Branson, who wants to rebrand it as Virgin Money.

Joining Branson’s consortium is Wilbur Ross, an American millionaire investor who has just bought up the loan servicing unit of the bankrupt American Home Mortgage Investment Corporation. He paid $500 million for the unit which handles mortgages worth $40 billion.

Last week Ross predicted that between 1.25 million and

2 million homes in the US would face repossession next year following the financial collapse there.

Also in the chase are the US private equity firm JC Flowers, which has bought up a string of banks.

In 2000 it acquired the Long Term Credit Bank of Japan, renamed it Shinsei Bank, cut jobs, and four years later sold it on for a big profit. They and other investors in the buy out took six times what they paid in.

Investment company Olivant says if it got its hands on Northern Rock, it would invest between £80m to £100m in it.

That sounds like big money but when compared to the value of the Rock’s deposits and mortgages, it amounts to very little.

All the bids rely on continued financial support from the British state. Yet there is an alternative to subsidising these vultures. A word that New Labour thought it had excised from the dictionary has crept back into the debate – nationalisation.

It has found favour among some in the City of London and political circles. They want a state takeover that “rewards investors”.

There is a better alternative – Northern Rock should be nationalised without compensation for the bosses, while providing a guarantee to those who saved or borrowed from the bank.

This move would penalise all the parasites that sought to profit from Northern Rock but who are now demanding that they be shielded from all the risk.

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Tue 20 Nov 2007, 18:58 GMT
Issue No. 2078
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