TEXAS PACIFIC GROUP’S decision to cut and run, taking with it the £179 million that was to be used to buy 23 per cent of the ailing Bradford and Bingley Bank, at 55p a share, is the proof that today every bank is a Northern Rock Bank just waiting to be bankrupted by the developing capitalist crisis.
TPG ran for the hills after the Moody’s Ratings agency decided it was going to lower the B&B’s grade, so that the TPG purchase at 55 pence a share would be undercut.
TPG are notoriously ruthless private equity capitalists.
They organised the Gate Gourmet onslaught that saw workers treated to shock and awe tactics, replaced by specially recruited workers on August 10 2005. With specially recruited bodyguards, SIS security personnel and armed police on the site, 800 workers were sacked by megaphone.
They are the ‘stormtroopers’ of capitalism, specialising in buying failing companies, loading them up with even more debt, and then making war on the labour force to make the business more profitable before selling it on and getting out.
They repeated the Gate Gourmet experience at Debenhams, which has never recovered from the ‘shock therapy’.
If TPG was forced to quit Bradford & Bingley in some disarray then the situation of the bank is truly hopeless, as far as profitability is concerned.
With TPG retreating at high speed, the City of London was forced to mount an emergency rescue operation, to prevent an even bigger collapse than that at Northern Rock Bank bringing down the British banks.
Leading City institutions have been pushed into providing the £179m of vital equity.
The City watchdog, the Financial Services Authority, played a central role in the emergency fund-raising from the bank’s biggest shareholders, Legal and General, Standard Life, Insight and the Prudential.
These had to be pressed into service. They are the same institutions that were behind Clive Cowdery’s recent attempt to take control of B&B.
This attempt was given up when Cowdery was refused access to B&B’s books, a refusal that did not inspire any confidence at all in the real state of the bank – Cowdery walked away.
Now the same group have had to return to prop up the bank, based on buy to rent mortgages, to try to prevent an even bigger city collapse than that which was caused by the collapse of the Northern Rock Bank.
The rights issue has now been underwritten by the investment banks, Citigroup and UBS, both of which have had to be propped up themselves after massive asset writedowns.
That the rush to prop up B&B is just a temporary holding operation, was made clear by Moody’s when it made its downgrading, after remarking that there was a ‘substantial deterioration in the bank’s asset quality’.
This was accompanied by a health warning that the arrears will worsen on its buy-to-let mortgages in coming months, as huge price increases undermine the ability of the rentpayers to pay their way.
B&B’s share price fell yesterday by a further 12 per cent, with other banks being dragged into the vortex of B&B indebtedness.
Barclays share price fell by 3.3 per cent and the Alliance and Leicester (the bank being tipped for the next major crash) fell by 6.7 per cent.
Capitalism is heading into its greatest debt crisis ever, in which the operation of the law of value will see the destruction of the mountains of debt that have been built up and the destruction of whole sections of the productive forces.
This crisis will create a situation of slump, acute class struggles in the major capitalist countries, and wars to redivide the resources of the planet.
It will also drive forward revolution. In fact, workers revolutions to put an end to the anarchy of capitalist production and go forward to a nationalised and planned world economy, based, not on accumulating private profit, but on the satisfaction of people’s needs.
