Banking ‘reforms’ won’t stop them collapsing


Yesterday in parliament the Tory Chancellor, George Osborne, announced that the coalition government intended to accept ‘in full’ the proposals on reforming the banks contained in the report by Sir John Vickers into the spectacular crash of Northern Rock and Royal Bank of Scotland – crashes that came close to bringing down the entire UK banking system.

Total collapse, with the threat that ordinary people would not be able to get their money out, was only averted in the short term through the massive bail-out of the banks – a bail-out funded by the savage cuts inflicted by the coalition government on the Welfare State, workers’ pay and pensions cuts.

The Vickers report on how to avoid a banking collapse was published last September, and since then it has been reported that the banks have spent a small fortune in fees to lobbyists in an attempt to persuade Osborne and his LibDem sidekick Vince Cable to ‘water down’ his proposals.

This is pure nonsense, a story spread by the banks and the government and faithfully reported in the bourgeois press in an attempt to convince workers that it is possible under capitalism for the banks to be brought to heel and subjected to some kind of control.

Essential to this myth is the line that banks naturally fall into two distinct categories, good banks and bad banks.

The good bank lives in the high street where working people have their wages and whatever meagre savings they may have deposited.

The bad bank is the investment wing, wheeling and dealing, making risky investments and gambling in a reckless fashion.

The solution for Vickers is simple, split off the good from the bad banks.

The simplistic argument goes that if the bad bank goes belly-up it can be allowed to crash with no effect on the good bank, thus safeguarding the accounts of the ordinary customers.

When these proposals are looked at, it quickly becomes clear that this whole exercise is nothing more than a PR con-job on behalf of the banks designed to try and deflect the hatred and anger of workers and the middle classes directed against the bankers, who caused the crisis which we are expected to pay for.

For a start, Vickers and the government do not intend to bring in any changes to the banking regulations before 2019!

Given that the entire banking system internationally is swamped with debt running into trillions of pounds and the certainty of a new banking collapse in 2012, these reforms are just a window dressing irrelevance.

To give some perspective on the scale of exposure by UK banks to the eurozone crisis it is calculated that the four biggest banks hold a total of £42 billion of Italian debt, money that they have no chance of recovering as the Italian economy crashes.

Their exposure to French sovereign debt is even greater and France is almost certainly the next in line as the contagion from Italy spreads throughout Europe.

The sheer irrelevance of these proposals has not stopped the Labour leadership from greeting them enthusiastically.

Along with the coalition government these reformists are desperate to portray the capitalist crisis as something that can be avoided if only the banks act responsibly.

Even the governor of the Bank of England, Mervyn King, has admitted that the crisis is due to ‘systemic problems’ in capitalism, problems that cannot be solved by tinkering around with artificial splits.

The only solution to the capitalist crisis lies in the fight to bring down this government through the general strike and replacing it with a workers government that will nationalise the banks and building societies, not just their debt, and place them under the control of the working class.