Link to this page: http://www.socialistparty.org.uk/issue/527/3962
From The Socialist newspaper, 2 April 2008
FSA Northern Rock report
Capitalism gambles with our lives
WHEN NORTHERN Rock collapsed last year, the Financial Services Authority (FSA) set up an internal review of its regulation of the bank. Now, in the words of The Guardian, the FSA "did not have a clue" about the risky practices that Northern Rock was engaging in to raise money for mortgages. The FSA itself said its monitoring was "totally unacceptable".
Kevin Parslow
Northern Rock did not collapse because of direct exposure to subprime mortgages - it had very little in its portfolio. But its rapid expansion of mortgage lending, providing mortgages at up to 125% of a property's value, was financed by the use of complicated products and borrowing in the banking markets.
When the subprime crisis exploded last year, the interest rates at which banks lent money to each other shot up - no banker would trust any other. As a result, Northern Rock was unable to finance its dealings.
When its application for emergency funding from the Bank of England was revealed, the first run on a British bank since 1866 occurred, with queues of worried savers scrambling to withdraw their money. The FSA admitted they had not treated Northern Rock as a risk, and had paid little attention to its dealings in the two years before its collapse.
New Labour set up the FSA in 1997 by merging the Bank of England's regulatory functions with the old Securities and Investment Board, which was a self-regulatory body of the City financial businesses.
The FSA was supposed to stop the financial scandals of the Tory years in office recurring. But New Labour allowed the FSA to have 'light touch' supervision of the markets and companies, with the consequence that dealers were inventing ever more risky products at the possible expense of savers and, the crisis has revealed, the financial system itself.
"Regulation, regulation, regulation" is now the mantra for sections of the capitalist class, who see that their tolerance of the casino economy in banking and finance has led to the possibility of worse recession in the world economy, maybe even a deep one. Savers could have lost their deposits, and others may yet do so, as the credit crunch is not over yet.
But for workers, the bankers' speculation will mean redundancies, falling living standards, maybe cuts in pay and longer hours, if we don't struggle through our trade unions and organisations. Capitalism gambles with our lives; our demand should be "Nationalisation, nationalisation, nationalisation" of the finance industry, as part of a socialist plan of production that could end the capitalist system.
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In The Socialist 2 April 2008:
End Labour's 'them and us' society
Capitalism gambles with our lives
Editorial: For a 35-hour week with no loss of pay
Socialist Party campaigns
Victory shows campaigning can save out NHS!
"Halve your expenses and save our post offices"
Environment
The devastating effects of biofuels
Airports: Expanding profits at our expense
Socialist Students
ID cards: No to students being used as guinea pigs!
National Union of Students rejects constitutional changes
Workplace news and analysis
Fight back against the Unison witch-hunt!
Jaguar/Land Rover: Uncertain future for workers
Tube workers strike to defend network safety
NUJ Members fight attacks on jobs and conditions
National Shop Stewards Network second conference
Marxist analysis: history
International socialist news and analysis
USA elections: Break with the two parties of big business!
Kazakhstan socialist jailed for protesting
Socialist Party review
From Russia: French and Russian master paintings 1870-1925 from Moscow and St Petersburg
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