The BoE and Brown gamble with workers wages jobs, homes and pensions

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THE Bank of England yesterday launched its government-backed scheme to allow the major banks to swap their dodgy mortgages for UK Treasury Bonds, in a desperate bid to build up the cash in their vaults so that they can carry on doing business.

The scheme is indemnified by the Treasury, with the taxpayer taking on the risk of default, and the consequences – state bankruptcy, and the devastation of millions of workers’ wages, jobs, homes and pensions.

The bank’s statement justifying taking this gamble with millions of people’s lives stated: ‘With markets for many securities currently closed, banks have on their balance sheets an “overhang” of these assets, which they cannot sell or pledge as security to raise funds. (News Line emphasis). Their financial position has been stretched by this overhang so banks have been reluctant to make new loans, even to each other.’

The position of the major banks, and the capitalist system, is desperate, the BofE statement admits. The role of the working class is to make major sacrifices and to risk losing all, so that a rescue attempt can be mounted to save the banks from the crisis of their own capitalist system.

The BofE statement continues: ‘Under the Scheme, banks can, for a period, swap illiquid assets of sufficiently high quality for Treasury Bills. Responsibility for losses on their loans, however, stays with the banks.’

This will not help the working class and middle class taxpayers if bankrupt banks are unable to take up their ‘responsibilities’ for ‘losses on their loans’, or if the property market crashes, leaving the Bank holding worthless mortgages that have all been ‘indemnified’ by the Treasury.

The BofE states that the ‘swap’ will be for up to three years.

The banks will also be able to ‘enter into new asset swaps at any point during a six-month window, starting today. Those swaps will be for a term of one year’, renewable each year for three years.

It also emerges that the ‘loan’ of £50bn is just the start of the operation.

The BofE statement says: ‘Usage of the scheme will depend on market conditions. Discussions with banks suggest that use of the scheme is initially likely to be around £50bn.’

The reality is that a blank cheque is to be extended to the banks and that the depth of the crisis will decide whether the loan is to amount to £50bn, or £500bn, or even a trillion.

We must bear in mind that the BofE has already committed some £200bn to the Northern Rock bank and to the major British banks.

The scheme is to last for three years. As the statement says: ‘So by October 2011, all assets will have been returned to the banks, all Treasury Bills to the Bank of England, and the Scheme will close.’

During this time the mass of the working class and middle class will be devastated by rising prices and vicious government sponsored wage cuts, job cuts, privatisations, and additional taxation measures, to try and prevent a catastrophic run on the pound sterling as the financial crisis deepens, bringing the mother of all crises for bankrupt British capitalism.

As well, for all Brown’s talk of more regulation of the banks and cuts in mortgage interest rates, the banks are required to do nothing except to hand over their dodgy mortgages to the BofE in return for Treasury bonds.

This is truly a government that is completely committed to capitalism, and will do anything to try and keep this bankrupt system going, instead of using its crisis to mobilise the masses to go forward to socialism.

Brown is willing to commit workers’ jobs, wages, homes, and pensions, to a throw of the dice into an already sinking market.

Workers will reject this scheme to rescue bankrupt capitalism at their expense.

The WRP is the only party that has a policy for this crisis. This is to mobilise the working class in a general strike to go forward to a workers government that will expropriate the bosses and the bankers and bring in socialism.