Brown to clobber the banks”. “PM takes on City of London”. “Brown levy on bankers causes fury”. No, you can’t see it, can you. Barack Obama may appreciate the political opportunity presented by headlines like that, but for some reason the leadership of the British Labour Party cannot. Alistair Darling has ruled out applying a levy to bank profits in Britain because “the circumstances are different”.
The real reason is that Labour is afraid of being accused of class war, of fighting an election on ‘core values’, of bashing bankers. But what’s wrong with core values when it comes to taking a moral stand against excessive reward and irresponsible greed? Surely it is the historic mission of the British Labour Party to express the outrage of the many when they are taken to the cleaners by the few?
And what’s wrong with bashing a few bankers? If team Obama realise that tapping the public’s justifiable anger at the bonus culture is an election winner, why can’t team Brown? The irony is that a number of British banks could actually find themselves paying Obama’s levy through their US operations. It makes a nonsense of the claim that taxing British bankers will make them depart for Wall Street.
The Street’s outrage at the Obama levy is actually pretty ritualistic, if not synthetic. These guys aren’t stupid. Paying back around $120 bn over ten years isn’t going to break any banks – certainly not the ones who’ll be charged, since they are the $50bn behemoths left standing after the credit crash. The bankers realise that they screwed up, awesomely, and that some kind of atonement is in their best long term interests.
Moreover, they know they’ve been handed the keys to the kingdom and will be able to make even greater profits and greater bonuses in future because there is less competition. JP Morgan, the bank that hired Tony Blair, is handing out a staggering $6 billion in bonuses on $12bn profits this year. Wall Street as a whole will be paying out around $100,bn in bonuses for the very year they were bailed out by the taxpayer. This profiteering will continue without restraint – until the next crash when they come calling to the taxpayer for another bail out.
So, the levy is the least Wall Street could expect. A small price to pay, even though they will squeal ‘socialism’. They know that Obama has his own constituency to think of – the main street dudes who have lost their jobs, their small businesses, their homes thanks to the crash. They know that the President has mid term elections to think about and that a lot of his support is deeply troubled at the way this great people’s leader has come to an early accommodation with mammon. Obama has to beat the banks.
So why the hell can’t Labour do the same? What is it about Gordon Brown that he would rather lose a general election than upset the City of London? Roosevelt famously said, of the plutocrats, “I welcome their hatred”. If I were in charge of Labour’s election strategy I would be doing hatred in spades. What about some righteous anger at the return of ‘Sir” Fred Goodwin, unchastened and unrepentend, as an adviser to the architects RMJM. In fact there were actually around 20 executives in Royal Bank of Scotland who were paid substantially more than he did. What about some righteous anger about them? Stephen Hester, the new RBS boss, has admitted that his own mother thinks he’s overpaid – but that hasn’t stopped him making the ludicrous assertion that public money will be wasted if RBS employees are denied their million pound bonuses.
Labour should ask what planet are these people living on. Do they not realise that the median wage in this country is little more than £26,000 a year? The ordinary working families of Britain have every right to expect that their interests are protected and that the greed of the bankers is challenged by the people’s party – the Labour Party. These are the people who have, through their taxes, paid the cost of the biggest banking bail out in history – a total of £1.2 trillion of public money.
The latest plutocratic obfuscation to argue that the public money is all going to be paid back. Indeed, that the shares bought by the government in banks like RBS will end up yielding a profit when they are finally sold. But this ignores the central fact about the banking bail out. RBS is only in existence because the state took on the risk of its £2 trillion loan book at a time when many of its loans were effectively worthless. It was the preparedness of the taxpayer to stand behind he banks that saved them. Had the banks been left to the vagaries of the free market – for which bankers are generally evangelists – they would have ceased to exist.
Yes, had banks like RBS been allowed to collapsed their would have been economic chaos. Almost certainly another Great Depression. Millions of businesses would have gone bust because they couldn’t get finance. The stock market would have collapsed and house prices would have plummeted. Rapid intervention to ensure the preservation of the financial system was the first obligation of government. But this does not mean the system has been vindicated because that intervention succeeded. It does not alter the fact that the banks had behaved with ruinous irresponsibility in the run up to the crash. Indeed, we now run the even greater risk of another boom and bust as state-backed banks that are “too big to fail” return to their old practices secure in the knowledge that they can raid the treasury again if things go pear shaped.
History is already being rewritten. Commentators like Anatole Kaletsky in the Times are now saying that the whole financial crisis was overplayed and that it was just a normal ‘correction’that got out of hand. It was not: the banking crisis was a systemic crisis of epic proportions which brought the world to be brink of ruin and required unprecedented amounts of public money to forestall economic collapse. Our children will be paying for this for decades.
Never again. The banks should, of course, have been nationalised – they are now effectively state-guaranteed agencies. There is no market discipline in finance, just a usurer’s cartel. The same people are paying themselves the same bonuses and looking forward to business as usual. The people of Britain have the right to be protected against this financial kleptocracy. And Labour should wake up if it wants to survive: bashing bankers is not only morally justified, it is good politics.