THE governor of the bank of England, Mervyn King, has launched a scathing attack on the major UK banks, accusing them of trying to make huge profits at the expense of the taxpayers.
King was up in front of MPs at the treasury select committee where he faced charges of not doing enough to bail out the collapsing capitalist economy; in particular he was accused of failing to secure funding for small and medium-sized businesses (SMEs).
Pumping money into SMEs is the main plank of the coalition’s and last Labour government’s desperate attempt to ‘kick-start’ the economy.
In order to overcome the problem of the banks refusing to risk their money making these loans, the coalition last year sat down with them and came up with project Merlin, a supposed agreement by which the banks and the government would lend money to SMEs
What has driven the normally sanguine King to engage in an all-out assault on the banks is the simple fact that they are refusing to go along with allowing the government to act as joint lenders in all loans to these SMEs. what the banks are insisting on is that they, and they alone, should be the lenders to those businesses that they believe are viable and will return a handsome, guaranteed profit, while risky loans should be made exclusively by the government.
King said: ‘In discussing with the present government a scheme to lend to SMEs, the banks were unhappy about the idea of a scheme in which the government would participate in all SME lending.
‘Why? Because they didn’t want to share the fruits of the most profitable loans to small businesses. We’d (the taxpayer) end up being left with the bad ones.
‘Unless there’s an element that tries to prevent the banks picking and choosing which SME loans they share with government, and which not, there is a risk of adverse selection and the taxpayer gets a bad deal.’
When the governor of the Bank of England savages the banking system for being nothing more than a bunch of freeloading scavengers out to cream off profit at no risk, and leave the state (taxpayer) with all the bad debts, it is clear that this is a system that is rotten to the core.
King also dammed the last Labour government for caving in to the banks at the time of the government bail-out that staved off their collapse saying: ‘They (the Labour government) negotiated with the banks and if the banks didn’t like it, that was what came out.’
King gives us an insider picture of who really rules the roost under capitalism. The banks pick and choose exactly what they want to do in order to reap profits, and the bourgeois politicians meekly sit back and do as they are told.
In much the same way, the big bourgeois like Rupert Murdoch felt able to dictate to governments and buy off the capitalist state to operate as the real power in the land.
But today the economic crisis is smashing up all these relationships.
King, the man who has faithfully served the capitalist class and the banking system for all his life and has praised the way that inflation and mass unemployment are cutting wages and weakening reformist trade unionism, has been forced to turn on the bankers and denounce them as the jackals they really are, for putting their superprofits way above the interests of the capitalist class as a whole.
At the same time, the Murdoch empire is reeling with the son and heir apparent, James Murdoch, thrown overboard as all the corruption surrounding News International and its relations with state officials, and its aim of being bigger than the government, comes out into the open.
The important thing about King’s outburst is that it provides an unanswerable case for putting an end to this rottenness and corruption once and for all through the nationalisation of the banks and all the major industries, without compensation and under workers control, to bring in a planned socialist economy and a better life for all.