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Outrage against bankers spurs Obama on
"If these folks want a fight, it's a fight I'm ready to have," were the stirring words of US president Barack Obama when he announced plans to curb the major US banks. "I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low and cannot refund taxpayers for the bailout ... never again will the American taxpayer be held hostage by a bank that is too big to fail", he pledged.
This strident talk followed hot on the heels of the shock defeat of Obama's Democratic Party in the Massachusetts byelection. The Democrats had held this Senate seat for 58 years, but faced with anger at the lack of Obama's promised 'change', and particularly at escalating unemployment, they lost the seat to the Republicans and with it their 'filibuster proof' majority in the Senate.
The need to draw a line under this disastrous episode and to counter further public outrage on the day that Goldman Sachs bank announced its astronomical bonus payments, led Obama to make his stepped-up attack on the banks. He referred to "obscene" bonuses and said he will limit the amount of debt that deposit-taking banks can take on, limit their size and stop them from engaging in activities like betting their own money, running hedge funds and investing in private equity. These are in addition to a previous proposal, for a $117 billion, 10 year levy on banks' liabilities, in order to help repay the Federal Reserve for bailing the banks out.
Any measures, including these, that could help safeguard the taxes, savings, and banking and credit facilities of ordinary people are welcome. But although they amount to the most far-reaching restrictions on banks since the 1930s, they are only merely tinkering with the banks' profit-seeking activities.
Also, Obama is only trying to take concerted action when the financial 'masters of the universe' have repeatedly sneered at pleas for restraint in awarding themselves huge sums, and ordinary people are at boiling point with their anger. A US trade union leader, Andy Stern, summed up the brazen actions of the bankers when he said that they "backed the truck up to Fort Knox in broad daylight ... they emptied it out, we rescued them and they get $150 billion in bonuses".
That Goldman Sachs is paying an average of $498,200 per employee for 2009, just a year after getting a $10 million taxpayer bailout, defies belief for most people. Other multinational finance institutions are also paying out huge sums, with by far the highest amounts going in every case to those at the top.
This is while most people in society are still suffering the effects of the economic crisis and will do so for a prolonged period of time, through unemployment, debt, loss of homes etc.
Fund manager George Soros expressed the unease of some of the super-rich when he commented: "The elections in Massachusetts sent him [Obama] a powerful message that he is not doing the right thing - nationalising the liabilities of the banks without nationalising the banks". The banks and financial institutions should certainly be fully nationalised, as The Socialist has repeatedly pointed out. And they should be placed under democratically elected workers' control and management. Only then can the obscene excesses be abolished and the banks be made to serve the interests of working class people, small businesses, homeowners etc.
The US based multinational banks will try hard to water down Obama's proposals and they may not get through the US Congress and Senate; even some of the leading Democrats will oppose them. If they do make progress towards becoming law, the banks will try various ways of circumventing them.
Will Gordon Brown's UK government take on some of Obama's measures? Chancellor Alistair Darling has rejected size limits on banks and a forced split in activities, saying that the problem is rather the 'connectivity' between financial institutions. Northern Rock and Bradford & Bingley failed despite having no exposure to the activities to be banned by Obama.
But British banks operating in the US like HSBC, RBS and Barclays will be affected in any case. And Brown and Darling are still facing great anger from working class and middle class people. A FT/Harris poll showed this week that 75% of people want the government to crack down further on bankers' pay, over and above the 50% tax on earnings over £150,000 already decided and the 50% tax on bonuses announced last month.
As well as the outrage from below, many non-finance based capitalists are alarmed at the escalating wealth of the financial elite and see this wealth as depleting the 'surplus' that could be invested in industry or that could at least be more evenly spread within the ruling class!
So under pressure, further proposals could be floated, and as the governments of the major world economies are still discussing ways of 'de-risking' global finance, similar measures to Obama's could eventually be adopted more widely.
However, while they may curb some ignominious practices, none of the measures being considered by capitalist governments will 'de-risk' the global economy, as they will not stop the 'exotic financial instruments' being traded in vast quantities from having the potential to wreak havoc in the global financial markets, nor can they end the inevitable capitalist cycles of 'boom and bust'.
We need, not the non-existent "creeping socialism" that the bankers shriek about when a few of their many paths to self-enrichment are blocked, but real, genuine socialism that would block all those paths forever. Then the banks would become institutions for serving the interests of the overwhelming majority in society, rather than bodies that cream-off massive wealth for the top few.
- Not a penny to the bankers in 'bonuses'! No bailouts for the fat cats!
- Increase income tax for the super rich, not the low paid. Increase the tax paid by big corporations and stop their evasions!
- For a socialist, democratic, nationalised banking and financial sector that could offer cheap loans and mortgages for housing and small businesses and for the planned development of industry and services.
- Nationalisation should be carried out with minimum compensation, on the basis of proven need of shareholders.
In The Socialist 27 January 2010:
Socialist Party election campaign
Socialist Party news and analysis
Socialist Party workplace news
Socialist Party feature
Workplace Feature: IT workers in mini strike wave