Showing posts with label Bad Banks. Show all posts
Showing posts with label Bad Banks. Show all posts

Tuesday, 31 August 2010

South Canterbury Finance: ‘A lot of bets in the casino paid off big time today.’

It’s popular both in the “blogosphere” and on the Left to pan the mainstream media (MSM) for their often crappy reporting, bias in favour of the rich and powerful and so on. And most of the time this is right and true.

At the same time, bloggers often depend on “real” reporters to dig out and even explain news that we wouldn’t otherwise know about. The following article from the Herald is a good example.

It’s these “bargain hunting” speculators that the Tax Justice campaign is targeting with our call to “Tax Financial Speculation”.

Thanks to Peter, for forwarding this. Here are his comments:

$1.3 billion of government money paid out today to the speculators for Hubbard’s worthless South Canterbury Finance shares and bonds. Break out the $900 bottles of bubbly! Great news for the parasites, too bad for everybody else who happens to need a pay rise such as those pesky radiographers and teachers.

This will also be paid for by all those unemployed people having their entitlements chiseled away and disabled people being hammered by the ACC and WINZ. Maier’s face says it all...


Speculators reap fat reward as finance firm fails

from NZ Herald

Bargain hunters who bet against South Canterbury Finance in the NZX debt market will be rubbing their hands with glee today with the guarantee covering the failed financier’s listed bonds plus interest.

The Timaru-based finance company called in the receivers today, triggering the government’s retail deposit guarantee which will pay out the face value for the firm’s debenture and bond holders.

Prices for the company’s listed bond maturing in 2012, after the extended guarantee, fell to a deep discount earlier this year, with the yield reaching 40 per cent in March.

That meant audacious punters could buy them cheap and get paid out in full if South Canterbury failed.

“There will be a lot of money made in the listed bonds with prices up to 20, 30 and 40 per cent, which was all paid today,” chief executive Sandy Maier said in a conference call.

“A lot of bets in the casino paid off big time today.”

Sandy Maier

The yield had abated in recent weeks, and was last at 24 per cent before trading in the security was suspended.

The government will have to pay-out $125 million on the bonds.

Maier said the guarantee, which many commentators claim distorts the market, gave him confidence to accept money from “widows and children” as he sought to save the company from collapse.

The failure of the finance sector has seen a number of low-ball offers for debenture stock, and prompted the Securities Commission to warn investors to make an informed decision before accepting bids significantly below face value.

Hubbard’s ‘bad bank’

By Jenny*


While National MPs claim there is no money to pay teachers or doctors, the government prepares to hand over, up to half a billion dollars to private investors who bet on a lemon.

The lie is, that this must be done for the good of the economy.

It didn’t make any difference in the US and it won’t make any difference here.

Sinking deeper and deeper into recession, the American example shows that the idea that private sector bailouts are good for the economy is pure unadulterated bull. The only ones to benefit from public bailouts of private investment companies and bad banks, were private investment companies and bad banks, their overpaid managers and fat cat shareholders.

The US government and the country at large were impoverished by multi- billion dollar bailouts of bad banks and investment companies.

While wealthy investors were looked after, tens of thousands of average Americans who had their jobs and homes taken from them, due to the malfeasance of these same finance companies and bad banks – were shown no such largesse.

Why can’t New Zealand learn from what has what happened overseas?

The truth is that saving the economy is not what private sector bail outs are all about.

Taking care of the well off, at the expense of everyone and everything else, including the economy, is what it, is all about.

Yesterday, Liam Dann the Herald’s business editor, described how the National government has deemed Alan Hubbard’s “Bad Bank” as a New Zealand’s version of “too big to fail”.

Liam Dann on Hubbard:
Put the probe into his personal financial entities to one side. The real story is South Canterbury Finance – the $900 million liability hanging around the taxpayer’s neck…..
Hubbard lost control of that company earlier this year after it had breached its trust deed.
He was removed from the board and given the sentimental title of President for Life
By that point the Government had already effectively decided the company was too big to fail.
And:
The bad loan “bank” is up to its neck in $600 to $700 million of debt on assets that may yield as little as half of that when they are realised.
When it is euphemistically said that South Canterbury failed to “stick to its knitting” it is the bad bank that people are talking about.

For people on suffering the pain of minimum wages barely enough to pay the rent, without the luxury of spare savings to invest in high finance. It’s a bitter irony that wealthy and middle class investors should have their speculative losses made up by a government that viciously opposed raising the minimum wage. What do these people know about hardship?

While the government continues to do nothing about joblessness and low wages, the question is, how many more millions of dollars will they uselessly throw investors way, as the recession deepens and more finance companies go under?


*First published as a Guest Post on the Standard, submitted by the author to UNITYblog.
The debate on this and other posts on the Standard is worth checking out for those wanting to get their heads around this issue.

Monday, 17 May 2010

The Death of Capital

taxMichael E. Lewitt
From John Mauldin’s “Outside the Box” newsletter
May 10, 2010

Two years ago, John Mauldin was kind enough to publish my initial proposals for reforming the financial system. Entitled “How to Fix It,” the April 2008 issue of The HCM Market Letter raised a lot of eyebrows and upset many established interests on Wall Street with its outspoken call for financial reform. Among the changes I called for were the following:

•    Compensation reform to better align the interests of Wall Street executives with those of society at large.

•    Requiring private equity firms and hedge funds to be registered with regulators.

•    Taxing private equity partners’ carried interests at ordinary tax rates instead of capital gains tax rates, and prohibiting private equity firms from going public.

•    Sharply reducing the leverage of financial institutions (including hedge funds).

•    Banning off-balance sheet vehicles such as Structured Investment Vehicles.

•    Reining in quantitative trading strategies.

•    Reinstituting the downtick rule with respect to short selling stocks.


At the time these proposals were considered controversial; in retrospect it is clear that they were not aggressive enough. While many of these suggestions have been adopted or are in the process of being adopted, much more needs to be done to stabilize the financial system.

Thursday, 13 May 2010

Activists send message to Key: “Make the banks pay!”

Bad Banks media release
13 May 2010

Prominent New Zealand activists and unionists are among the 53 public signatories to a letter to prime minister John Key calling for action to curb banking power and protect grassroots people. The full list of public signatories is included below.

The letter, written on behalf of grassroots people in New Zealand, reads:

Dear Mr Key,

Why are you wanting to raise GST? Food and everything else will be more expensive. It's already hard to make ends meet. Why don't you tax the banks and other fat cats that have been ripping us off? We want justice Mr Key, make them pay.

Signed,
Grassroots people of NZ

Thursday, 6 May 2010

10,000 US workers protest on Wall Street

Auckland wasn’t the only city to see big protests last week, on Thursday 10,000 trade unionists and grassroots activists marched on wall street, in what Russia’s RT News described as, “The largest anti-Wall Street rally since the credit crunch has taken place in New York. Thousands of workers and trade union leaders marched in anger over lost jobs and ruined lives, demanding answers from the source of the trouble – the banks.”



Hat tip Credit Writedonws

More coverage from Democracy Now:

Sunday, 25 April 2010

Something missing from GST debate: a Robin Hood Tax

BAD BANKS media release 
25 April 2010 


"There’s something missing from the current debate about GST, and that’s a tax alternative, one that targets the banks and financial speculators," says Vaughan Gunson, Bad Banks spokesperson.

"Instead of making food and other basics more expensive for grassroots people, New Zealand needs to introduce a Financial Transaction Tax, or Robin Hood Tax as it’s been named by a popular British campaign," says Gunson.

"A small percentage tax on financial transactions would net billions annually from the big banks and financial speculators, who shift enormous amounts of money around everyday," says Gunson. "We could then remove GST from our food and begin to phase out this horrible regressive tax altogether. This is the circuit breaker that the GST debate needs." 

"Following the global financial implosion, and the role played by the banks and financial speculators, the time is right to introduce a tax which hits the most hated global purveyors of greed and exploitation. Yet the government is heading in the other direction, wanting to give tax breaks to these parasites, while hitting us with a GST increase," says Gunson.

Prime minister John Key wants to reward international financial speculators with tax breaks and other incentives, as part of his dream of turning New Zealand into a financial hub. The plan rests on enticing global investors to New Zealand with the promise of tax breaks. A recent IRD report entitled ‘Allowing a zero per cent tax rate for non-residents investing in a PIE [portfolio investment entity]’ reveals what's being considered. Under this proposal, overseas investors would be allowed to operate in this country and not pay New Zealand tax on their international investments.

"John Key would say that removing GST from food is too complicated - yet it’s not too difficult to change the tax laws to gift more profits to international fat cats?" asks Gunson. "Whose side are you on Mr Key? Hardworking grassroots people or the financial parasites?"

The Bad Banks campaign has drafted a letter to the prime minister on behalf of the grassroots people of New Zealand. It reads:

Dear Mr Key,

Why are you wanting to raise GST? Food and everything else will be more expensive. It's already hard to make ends meet. Why don't you tax the banks and other fat cats that have been ripping us off? We want justice Mr Key, make them pay.

Signed,
Grassroots people of NZ

With the letter the Bad Banks campaign is raising three "common sense" measures to curb banking power and protect grassroots people, which includes introducing a Robin Hood Tax. They are:

1. Stop forced mortgagee sales
Regulatory muscle used to stop banks turfing people out of their homes. A government body to oversee the re-negotiation of mortgages based on current market values and ability of the homeowner to pay.

2. Turn Kiwibank into a proper public bank
Offering 3% interest loans to first home buyers, zero-fee banking for people on modest incomes, and low interest loans to local bodies for sustainable eco-projects in the public good.

3. Introduce a Robin Hood Tax (also known as a Financial Transaction Tax)
A small percentage tax on financial transactions would net billions of dollars from banks and global financial speculators. GST could be phased out.

"We’re inviting people to sign-on electronically to our letter to prime minister John Key via the Bad Banks website www.badbanks.co.nz (or go directly to http://www.ipetitions.com/petition/badbanks/). We think a clear message needs to be sent to the government and John Key that it's the banks and other financial fats cats who must be made to pay," says Gunson.

The cartoon by KLARC accompanying this media release is available to be reproduced in print and web publications. For a bigger resolution image contact Vaughan at the email below.

For more comment, contact

Vaughan Gunson
Bad Banks spokesperson
svpl(at)xtra.co.nz
(09)433 8897
021-0415 082

Wednesday, 17 March 2010

Bad Banks leaflet #6: MAKE THE BANKS PAY

The latest Bad Banks leaflet is out now (leaflet #6). It features on the front a "letter" to prime minister John Key, which reads:
Dear Mr Key,

Why are you wanting to raise GST? Food and everything else will be more expensive. It's already hard to make ends meet. Why don't you tax the banks and other fat cats that have been ripping us off? We want justice Mr Key, make them pay.

Signed,
Grassroots people of NZ
On the back of the leaflet, under the headline 'Make the Banks Pay' are three demands:

1. Stop forced mortgagee sales
Regulatory muscle used to stop banks turfing people out of their homes. A government body to oversee the re-negotiation of mortgages based on current market values and ability of the homeowner to pay.

2. Turn Kiwibank into a proper public bank
Offering 3% interest loans to first home buyers, zero-fee banking for people on modest incomes, and low interest loans to local bodies for sustainable eco-projects in the public good.

3. Introduce a Robin Hood Tax
(also known as a Financial Transaction Tax)
A small percentage tax on financial transactions would net billions of dollars from banks and global financial speculators. GST could be phased out.

These "common sense" measures to curb banking power and protect grassroots people should hit the mark with people who already have negative attitudes towards the banks, which is the majority of New Zealanders. Early feedback from people on the street to the new leaflet has been positive.


SIGN ON TO OUR "LETTER" TO JOHN KEY

To go with the new leaflet, there's a 'Make the Banks Pay' sign-up sheet where people can give their support to our "letter" to John Key and the three demands.

If you would like bulk copies of Bad Banks leaflet #6 and the 'Make the Banks Pay' sign-up sheet, contact Vaughan svpl(at)xtra.co.nz or 021-0415 082.

Send all completed sign-up sheets to Socialist Worker/Bad Banks, PO Box 13-685, Auckland.


SIGN ON ONLINE

There's an online version of the 'Make the Banks Pay' sign-up. Go to http://www.ipetitions.com/petition/badbanks/ to add your signature. Tell your friends, family and workmates. We want to get as many signatures as possible, to grow the campaign and hopefully get crucial media coverage.

You can also join, and invite others to join, the 'Make the Banks Pay' Facebook group. Go to http://www.facebook.com/#!/group.php?gid=392390694275&ref=ts


IN THE MEDIA AT BUDGET TIME


There's going to be a lot of media coverage either side of the upcoming budget (20 May) about an almost certain hike in GST, as well as other policies the National government will be implementing in response to the global economic crisis. It's possible that the alternative message of the Bad Banks campaign: "make the banks pay, not grassroots people", could break through into the media. That possibility will be increased if we can build some campaign momentum on the ground and online over the next couple of months.

If we work hard we may be able to lift the Bad Banks campaign to the next level. The three "common sense" measures are necessary to curb banking power and protect grassroots people in New Zealand. If we act together we just might be able to deliver a blow to the banks.

In solidarity,

Vaughan Gunson
Bad Banks campaign manager
svpl(at)xtra.co.nz
021-0415 082


Monday, 15 March 2010

ANZ wins Roger Award 2009






by Murray Horton



The full Judges’ Report is available at www.cafca.org.nz, follow the Roger Award links from the Homepage.

Finalists: ANZ, BNZ, Infratil, Newmont, Rio Tinto Aluminium NZ, Rymans, Telecom, Transpacific and Westpac. There were two finalists for the Accomplice Award – the Business Round Table, and the Auckland City Council and its officials (as part of the nomination of Transpacific Industries).

Criteria: the transnational (a corporation which is 25% or more foreign-owned) which is worst in each or all of the following:  Economic Dominance - Monopoly, profiteering, tax dodging, cultural imperialism. People - Unemployment, impact on tangata whenua, women, children, abuse of workers/conditions, health and safety of workers and the public, cultural imperialism. Environment - Environmental damage, abuse of animals. Political interference - Cultural imperialism, running an ideological crusade. 



Monday, 1 February 2010

Ensuring tax-payers money ends up in right hands

United States:
“It was Treasury Secretary Tim Geithner, then head of the Federal Reserve Bank of New York, who insisted that the nationalized insurance company AIG pay its debts at 100 cents on dollar — which meant that tens of billions in US taxpayer money flowed through AIG into the coffers of big US and European banks. “AIG paid $12.9 billion of taxpayer money to Goldman Sachs — and now, Goldman is set to pay out around $22 billion in bonuses … “So far, the U.S. government has loaned or guaranteed up to $13 trillion to financial institutions and other businesses — a figure nearly the size of the entire annual economic output of the U.S.”
— January 19 US Socialistworker.com article, “Laughing all the way to the bank”. Britain:
“[In November, 2009] it was revealed that the Bank of England had advanced £61.6 billion of our money to two banks, Royal Bank of Scotland (RBS) and HBOS, last autumn. “Bank governor Mervyn King explained to a committee of MPs that it had been necessary to send out a convoy of dumper-trucks filled with £50 notes to refill the coffers of the two busted banks so as to ‘prevent a loss of confidence spreading through the financial system as a whole’.”
— November 26 Belfast Telegraph article by Eamonn McCann. After bail-out, profits soar
“Profit at Goldman Sachs Group Inc. nearly doubled to US$8.4 billion during the first nine months of 2009 from the previous year's level, and analysts expect its full year profits to top US$10 billion. “Goldman set aside US$16.71 billion from January through September for compensation, which includes salaries, bonuses and associated costs such as benefits and payroll taxes. That puts it on pace to meet the record US$20.2 billion in compensation costs it had for all of 2007.”
— January 21 eTaiwannews.com article.

Bad banks — New Zealand’s black sheep

By Paola Harvey
from Green Left Weekly, Australia
30 January 2010

Although New Zealand, like Australia, has not been as badly affected by the global economic crisis as the US or Europe, workers are facing hardship.

Bronwen Beechey, an activist from Socialist Worker New Zealand (SWNZ), told Green Left Weekly: “There’ have been a lot of redundancies, places have been closed down.”

Beechey and SWNZ activist Peter Hughes were in Sydney to attend the January 3-6 Socialist Alliance national conference. They spoke to GLW about the SWNZ’s “bad banks” campaign, which takes aim at the cause of the global financial crisis — neoliberal capitalism.

“For people on low incomes life’s just been getting tougher because [they are] losing their jobs and food prices and rents and all of it have not come down substantially”, Beechey said.

“All the indicators, the social services, people asking for assistance, for food parcels, people losing their homes — they’ve all skyrocketed.”

Hughes said employers have used the crisis to justify attacking workers’ wages and conditions. “In the last 12 months, there have been no less than eight lockouts of workers.

“One of the most shameful examples was a service provider for the elderly that insisted that if the workers in that field did not accept the minimum wage [NZ$12.50 per hour] they’d be locked out.

“That’s quite a serious indication of how they [the bosses] see the crisis being resolved to their advantage and workers’ disadvantage.”

The New Zealand government’s response has been the same as capitalist governments around the world — bail out the banks and the big capitalists, and make the workers pay.

But they are not getting it all their own way. The government’s attempt to impose an unofficial wage freeze in the public service was recently challenged. Support staff in the education sector won a small wage rise.

That win will set the tone for the upcoming nurses’ and general education unions’ wage negotiations. “No less than that, will be the call, I’m sure”, said Hughes. “So that’s a good sign.

“I heard at the [Socialist Alliance] conference, that [Australian Prime Minister Kevin Rudd] said that the recovery’s going to be worse than the recession.

“I’m quite sure that’s their intention for us in New Zealand as well, working people will be made to pay for the recovery — if there’s going to be one.

“But our assessment is that there can be no real recovery in the current market economy, not in the foreseeable future. That’s going to lead to all sorts of crises for them, which they will try to push on us.

“We have to organise people to resist that.”

The discussion about neoliberalism at the NZ Council of Trade Unions’ 2009 conference has opened up more space on the left to fight back against these future crises.

At the conference, union activists talked about workers’ cooperatives, building and strengthening the union movement and not accepting the neoliberal capitalist model as the only option.

Beechey said: “It also talk[ed] about climate change and the need for an alternative economic strategy which is an implicit criticism of neoliberal capitalism.”

Hughes added: “While it’s not a policy position as such, it’s a discussion that’s been opened up within the trade union movement.

“It’s not an accepted policy, it could be watered down significantly and it’ll come down to how different unions interpret that for building a broader perspective in the membership.

“[But] when you think about how closely linked the trade union movement has been to the Labour Party … this is a departure.

“The fact that they’re daring to criticise publicly this position opens up a space on the left for us to work with trade union activists in a much more healthy and progressive way.”

Many people in New Zealand continue to struggle with little indication of their situation improving in the near future.

There has been an increase in the number of houses sold due to people defaulting on their home loans. A large proportion of these have been people with one home — not property speculators.

Hughes said the defaulters “simply cannot pay because they’ve lost their job, they’ve been made redundant and they have reduced incomes”.

“That’s pretty devastating for families and has shown no sign of abating at all.”

The actions of the banks have been completely shameful. Before the crisis, banks were advertising loans for 100% of the price of a house.

But after the crisis, their ruthless approach to lending has meant many people who were lured into the property market by these loans have had their home repossessed.

“Our campaign around ‘bad banks’ is trying to make them pay really”, said Hughes. “Because they’re the ones that have played a big role [in the crisis] and they’re plundering the profits of working people.”

The bad banks campaign is focusing on demystifying what the banks actually do and how they caused the financial crisis. It is also calling for a financial transaction tax, as opposed to a goods and services tax.

A GST is a regressive tax, that is it affects the poorest the most, because the poor are taxed the same as the rich for goods despite having less ability to pay.

A financial transaction tax, on the other hand, would be a progressive tax. It would affect banks, corporations and the wealthy the most, because they account for the vast majority of financial transactions.

“We see the bad banks campaign as striking right to the heart of neo-liberalism”, Hughes said. “These banks have got their fingers in the lives of every working class person, whether it’s controlling their mortgage, their credit card, or their bank charges.

“They’re bloody pillaging basically. Their pockets are huge, they’re not paying their taxes.

“They’re not very popular with workers at the moment.”

Sunday, 10 January 2010

A “public option” against the banks

by Daphne Lawless, editor
Editorial from UNITY Journal: Bad Banks: what are the alternatives? 
December 2009

A criticism often made of the radical left in this day and age is: “what is your alternative?” With the ruling class offensive against our living standards and the planet which started in the 1970s still going on, so much of our political practice is necessarily negative – protesting, fighting back, resisting. It is sometimes easy to forget that the struggle for a new world needs a positive – a program of concrete demands, based in the here and now, which point the way to what a better world might look like.

This issue of UNITY is an attempt to start the process of doing this for the Bad Banks campaign. If the banks are greedy, corporate vandals, who distort our society’s economic decision-making for their own profit, promote ecological vandalism and wreck lives and communities in the process... then what else might be done?

As socialists, we believe in the “transitional method”. It’s no good dreaming up a “revolutionary” schema of what we’d like to see, and presenting it to the masses as a way forward. The response will be – and rightly so – “who do you think you are?” Marxism isn’t a series of eternal principles, handed down through the generations like religious commandments. It’s a science of analysing a concrete situation and drawing conclusions for political and social activism.

So – the question of what practically can and should be done, here and now, to fight the Bad Banks starts in a clear analysis of what is actually happening. And, as we explained in the last UNITY journal, one of the things that is actually happening is that the banks are losing credibility.

The banks know this better than anyone. The Australian-owned trading banks are frantically trying to make good PR for themselves – to make themselves look less like the corporate criminals they are.

So, Westpac suggests bringing back small “community branches” in suburbs and small towns – those same branches they closed wholesale in the 1990s. Meanwhile, the ASB (owned by Australia’s Commonwealth Bank since 1989) are trying to convince us all that they’ve been “a Kiwi bank since 1847”. By the time UNITY journal goes to press, Bad Banks protests will have been held outside ASB outlets to show this up for the shameless lie it is.

Interestingly enough, though, that piece of ASB spin shows that the state-owned KiwiBank is ruffling feathers. KiwiBank – which, even though owned by the state, acts more or less just like a private bank – has been conducting its own spin over the last couple of years. Its ad campaign suggests that choosing KiwiBank is like being part of some kind of “resistance movement” against Australian bank domination! The clear success of this pretend “revolutionary” branding suggests that the corporate marketing gurus have caught onto a serious revolt against the Bad Banks brewing at the grassroots. So of course, their goal is to harmlessly divert this resentment into making consumer choices which benefit their clients. And our goal has to be to reverse this process.

Even the mainstream parliamentary parties realise that the four Australian-owned trading banks are out of control – gouging the public with fees and exorbitant interest rates, and the whole nation with their tax-dodging schemes. Hence the recent “parliamentary enquiry” into the banks by the Opposition parties. Of course, all these parties – including, sadly, the Greens – have bought into the neo-liberal myth that There Is No Alternative to free-market capitalism. Given that, their enquiry was good for pointing out a few problems, but could come up with no real alternatives – except a forlorn hope that the slavering dogs of banking profit can be brought under control with a verbal ticking off.

Grant Morgan’s piece in this issue of UNITY on the “four legitimacies” should be read in the light of the corporate shenanigans detailed above. Grant says: "On a global scale both leaders and led are losing faith in capi-talism’s destiny, eroding the broad social consensus that the world system needs for survival beyond the short term."

The essence of the Bad Banks strategy, therefore, has to be to accelerate this disintegration of the legitimacy of capitalism. And the weak point of capitalism’s economic legitimacy in the world today, after the economic shocks and convulsions of the last couple of years, has to be the multinational financial institutions, which we call by the short-hand of Bad Banks. Vaughan Gunson's article in this issue sets out this strategy in further detail.

So this issue of UNITY canvasses the spectrum of alternatives to the current financial system. At the basis of all of these has to be a thorough rejection of the global system of human and ecological exploitation that is capitalism. The late Chris Harman put it very clearly, in his article reproduced in this issue: "[I]t is necessary to take control of those corporations and coordinate their investment decisions, subordinating them to the fulfilment of democratically decided priorities.

But this risks being abstract, divorced from the here-and-now. So, in New Zealand of the early 21st century, what does Socialist Worker suggest for concrete steps that could begin to create an alternative to Bad Banks? Here are just a few:

• A Financial Transactions Tax (also known as a “Tobin Tax”).
A tax on “hot money” zipping across national frontiers, wreaking untold social damage as it goes, would not only put more of the economic levers back in our own hands, but earn revenue that could help replace anti-worker taxes like GST. Vaughan Gunson's article mentions this, and Dean Barker from Britain's Centre for Economic Policy and Research develops the argument.

• Bail out bank workers, not bank bosses. 
As it stands, we have the worst of both worlds – taxpayers pay through the nose to keep the banks afloat, but without any say in what they do next. FinSec, the union for bank workers in New Zealand, thinks this has to change. If we are paying to keep the banks in business, they argue, this means that “loan guarantees” for the corporates need to be matched with “job guarantees” for the workers. This just makes sense – a business which has dug itself such a huge hole should not be in a position to dictate its own terms as to how, or even whether, it gets bailed out.

We reproduce two position papers from FinSec, the main union for bank workers, and an interview with union secretary Andrew Campbell. What is particularly heartening about FinSec’s contribution is that the scope goes beyond the immediate interests of their members, to touch on what is good for NewZealand as a whole. Perhaps this is a sign of the new mood which Grant Brookes speaks of at the Council of Trade Unions conference – a growing willingness for unions to debate radical politcal and economic alternatives.

• Promote alternatives to corporate finance. 
The “green dollar” system – where local communities create their own means of exchange – became very popular in New Zealand during the 1990s as a way to hold local economies together during the darkest times of “Ruthenasia” economic scorched-earth policies. Sue Bradford, in her speech to the Socialist Worker forum, promoted this idea, and we include an article from local currency advocate Deirdre Kent. However, since the Bad Banks are an international phenomenon, a patchwork of local solutions in peripheral areas can't be a total solution. So that's why we must...

• Create a “public option” against the Bad Banks. 
In the US healthcare debate, this means creating state-owned health insurance to keep the private sector honest. Sadly, the Obama administration seems to have compromised away even this extremely minimal reform to predatory capitalism. But the principle of creating a socially-oriented corporation to compete with an unaccountable private sector is a good one.

In Venezuela, where an elected socialist government is entering its second decade in power, President Chávez is not letting the “banksters” rip his nation off. The Venezuelan government has over the last month closed down several banks which have been playing fast-and-loose with public funds. While the New Zealand government continues to bank with the tax dodgers at Westpac, the Bank of Venezuela has been nationalised, and financial power has been devolved to the “Community Financial Administrative Units” which have been set up in the neighbourhoods and villages of this Latin American nation. Venezuela shows that, even short of a complete overthrow of capitalism, a movement based on popular power can create reforms which not only make ordinary people's lives bette, but point the way forward to what a new and better world might look like.

But in all this, socialists must keep our heads, and keep things concrete. We print several arguments in this issue debunking assertions which often charge around as soon as the banks are criticised – ideas that fractional reserve banking or even paper currency itself is some kind of “scam” or “conspiracy”. This enables capitalism as a whole to wriggle off the hook, diverting public anger to some kind of imaginary elite.

This right-wing narrative has become hegemonic in the United States, and in the English-speaking internet, precisely because the USA is so desperately lacking a realistic socialist or even social-democratic voice. Bad Banks must put the concrete alternatives here and now to the pressing issues of “bankster” exploitation. But we must also make it clear that the whole system of corporate capitalism is the problem, not just the money side of things. We need a new economy from top to bottom, without corporate bosses or wage slavery, where wealth comes from the people and is spent by and for the people.

To purchase a copy of the 'Bad Banks: what are the alternatives?' contact Len, email organiser@sworker.pl.net, or phone (09)634 3984. Price is $5 plus postage.

To subscribe to UNITY Journal ($25 for four issues a year) contact Grant, grantmorgan@paradise.net.nz. Send a cheque made out to 'UNITY' to Box 13-685, Auckland, NZ, along with your postal details.

Wednesday, 23 December 2009

Latest UNITY Journal - Bad Banks: What are the alternatives?

CONTENTS 5 A "public option" against the banks DAPHNE LAWLESS, editor of UNITY 11 Targeting capitalism's exploitation of labour and nature GRANT MORGAN, Socialist Worker (NZ) 15 The "collapse" of global capitalism GRANT MORGAN 18 Target Bad Banks and you target neo-liberalism VAUGHAN GUNSON, Socialist Worker (NZ) 22 Market volatility and profitability crisis GRANT MORGAN 25 An end to private banks SUE BRADFORD, former Green Party MP 32 Bank and tax systems due for overhaul RUSSEL NORMAN MP, Green Party leader 33 Inquiry shows need for govt to act FINSEC 34 Aussie tax-dodging robber banks MURRAY HORTON, Campaign against Foreign Control of Aotearoa 35 Protecting New Zealand jobs through bank guarantee schemes FINSEC 39 Is it "Kiwi" to be anti-union? VAUGHAN GUNSON interviews Andrew Campbell 41 CTU conference 2009: can unions build an alternative? GRANT BROOKES, Socialist Worker (NZ) 45 What's a "fractional reserve"? DAPHNE LAWLESS 47 Banks, money and thin air ADAM BUICK, Socialist Party of Great Britain 50 Socialist Worker Appeal 55 Ron Paul: a right-wing alternative? PETER De WAAL, Socialist Worker (NZ) 60 Why community currencies? DEIDRE KENT, Living Economies 63 Financial Transactions Tax: making Wall Street pay DEAN BAKER, Center for Economic and Policy Research 65 Our alternative to market madness CHRIS HARMAN, Socialist Workers Party (Britain) 70 Is nationalization socialism? YEN CHU, No-one Is Illegal (Canada) 74 Venezuela closes banks BRONWEN BEECHEY, Socialist Worker (NZ) 78 Latin America's economic rebels MARK WEISBROT, Center for Economic and Policy Research 81 Feedback: letters from David Frazer, Peter de Waal, Pat O'Dea and David Colyer To purchase a copy of this issue ($5 plus postage) contact Len, email organiser@sworker.pl.net, or phone (09)634 3984. To subscribe to UNITY Journal ($25 for four issues a year) contact Grant, grantmorgan@paradise.net.nz. Send a cheque made out to 'UNITY' to Box 13-685, Auckland, NZ, along with your postal details.

Sunday, 13 December 2009

Naughty banks need more than a slap on the wrist

by Matt McCarten from NZ Herald 13 December 2009 The Australian banks last week had their Prime Minister scolding them to take a hard look at themselves. That's because they snuck through an interest rate rise after their Reserve Bank raised its rates. Westpac was the worst with a 45-point hike, even though the Reserve Bank raised the rate by only 25 points. Westpac rubbed salt into its customers' wounds by sending them an email comparing the bank's profit-gouging decision to a situation when a tropical storm hits a banana plantation. Apparently, such an occurrence would increase the price of a banana smoothie. Of course, the comparison was dishonest and patronising. A bank's unethical profiteering that puts people in a situation of not being able to pay their mortgage is outrageous enough. But comparing it with paying more for a banana smoothie has caused a furore in Australia. Westpac won't want that public relations disaster following it over here, given it has announced it is making over its New Zealand brand to show how much it cares about us. The other Australian banks (ANZ, ASB, BNZ and National) have followed with a charm offensive, too. There are lots of soothing words about how they want to get closer to New Zealanders by opening more branch offices and offering more intimate services. It's a bit hard to understand their strategy, given they recently sacked hundreds of Kiwi bank tellers and shipped their work offshore to call-centre factories. It seems only yesterday we were being told local bank branch closures would save us money. Despite those rather inconvenient truths, the public relations campaign to win our goodwill is well under way. Recently, BNZ proudly promoted its public spirit credentials by closing its doors for a day and paying its employees to do community work for the day. I'm not trying to piss on the parade, but the day after, I was in a BNZ bank and the staff were running ragged. One of them dryly noted that BNZ got good publicity, but it also meant the workers had to fit five days' work into four days that week. One of the BNZ's main competitors, the ASB Bank, is now rebranded as the "caring bank". It also claims to have been a "Kiwi bank since 1847". I doubt the Commonwealth Bank of Australia is aware of the new change of ownership. It seems that the new initiatives to win our favour are twofold. Despite the widespread political opposition and scepticism to setting up a publicly owned community, Kiwibank has gone from strength to strength as many New Zealanders have swapped their bank accounts over. Nationalism and sovereignty are strong emotions. The second reason is the public mood is going dog on them. There's been too much news about interest fixing, exorbitant fees and the outrageous tax evasion cases now before the courts. That's on top of the increasing numbers of ordinary New Zealanders losing their homes as the banks start foreclosing on them. Vaughan Gunson from the Bad Bank campaign claims the Australian bank owners are terrified that the public sentiments will lead to politicians on both sides of the Tasman following their American colleagues and regulating the industry to curb its excessive profiteering. Gunson blames the banks for causing the financial crisis that almost collapsed the global economy. The Bad Bank supporters picketed a bank in downtown Auckland on Friday as part of their campaign to force the Government to hold a formal inquiry into the role of banks in this country. Westpac ran a stupid banana campaign, says Gunson, but the whole world banking system has gone bananas. One slip on a skin and we're all gone. The Government's siding with the Australian bank owners in not holding an inquiry makes me nervous.

Friday, 11 December 2009

"It's the whole banking system which is bananas", say Bad Banks campaigners

Bad Banks media release 10 December 2009 http://www.badbanks.co.nz/ Australian prime minister Kevin Rudd has given a very public serve to Westpac for an email the bank sent to mortgage customers featuring a cartoon video about selling bananas to justify a hike in its mortgage rates. (See Westpac goes bananas - http://www.news.com.au/couriermail/story/0,,26462786-3122,00.html) "This is just another example of the silly tricks that the Big Four Australian-owned banks (ANZ National, BNZ, Westpac and ASB) are pulling to try and "win over" the public", says Vaughan Gunson, Bad Banks campaign spokesperson. In New Zealand, BNZ closed the doors of its branches and instructed staff to do community work for a day. And ASB Bank has been pushing an advertising campaign which tries to paint a picture of a "caring bank" that serves us. "ASB have made the ridiculous claim that they've been a "Kiwi bank since 1847", when in fact they're fully owned by Commonwealth Bank of Australia", says Gunson. "The banks are trying to "suck up" because they know there's a bad public mood against them, as a result of their interest gouging, fee charging, and tax dodging", says Gunson. "Many New Zealand homeowners are experiencing mortgage stress, thanks to the banks." "What the Aussie banks are worried about is that the public mood against them will put pressure on governments on both sides of the Tasman to put in place tough regulations that curb their power and rein in their profits", says Gunson. The Bad Banks campaign is doing its bit to keep the pressure on the banks. Tomorrow (Friday) at 12noon we're going to be outside ASB's Queen Street branch (cnr Wellesley St) with placards and a new leaflet exposing ASB. "Our aim is to promote a nationwide and popular debate on the banks and their role in the economy", says Gunson. "It goes way beyond a few bad banks, we think the whole banking system is bananas." "The financial implosion that almost brought down the global economy last year, and which is continuing to wreck havoc on the lives of grassroots people, shows that we need to urgently bring the banks under control", says Gunson. There is momentum building even amongst the global financial elite for more regulation and control to be imposed on the banks. (See Ex-Fed chief Paul Volcker's 'telling' words on derivatives industry - http://www.telegraph.co.uk/finance/economics/6764177/Ex-Fed-chief-Paul-Volckers-telling-words-on-derivatives-industry.html.) To contribute to the national debate that we must have in New Zealand about the banking system, Bad Banks offers these suggestions for transforming the power relationship between banks and the people: 1. Immediate government intervention to stop banks turfing "mum and dad" homeowners out of their homes because of a job loss or income cut. 2. The establishment of a government regulatory body to oversee the renegotiation of mortgages based on realistic market values and the ability of the homeowner to pay. 3. Turn Kiwibank into a proper "public service" bank offering first-home buyers a 3% interest state loan. 4. Zero-fee banking offered to people on modest incomes. Facilitated by expanding the role of Kiwibank and forced regulation of all banks operating in New Zealand. 5. Introduction of a Financial Transaction Tax (FTT) that would net the banks and other financial speculators. A decisive step in shifting the tax burden off low and middle income people and onto the mega-rich. 6. All bank loans to big business over a fixed amount to be approved by a government regulatory body that acts to protect the environment and communities. Such a measure is essential to preventing powerful global banking interests from sabotaging the necessary emergency mobilisation against climate change. 7. A full public inquiry which looks at every aspect of banking operations in New Zealand, with public meetings held throughout the country, so that grassroots people can tell their stories. Contact: Vaughan Gunson Bad Banks media spokesperson (09)433 8897 021-0415 082 svpl@xtra.co.nz

Bad Banks exposure of ASB's "Kiwi bank" claim - 12noon, Friday 11 December

Bad Banks media release 7 December 2009 http://www.badbanks.co.nz/ Bad Banks campaigners will be outside ASB Bank on Queen Street (cnr Wellesley St), Auckland, this Friday to expose ASB's claim that it's a "Kiwi bank". "ASB ain't no Kiwi bank," says Vaughan Gunson, Bad Banks media spokesperson. "They're 100% owned by the Commonwealth Bank of Australia, one of the bigger banks in the world. They're misleading the New Zealand public, to say the least." "We find their recent advertising campaign hard to stomach, and I'm sure many people feel the same," says Gunson, "because ASB and the other Aussie-owned banks (ANZ National, BNZ, and Westpac) aren't serving our interests at all. Their only goal is to make as much money as possible for bank bosses and corporate shareholders." "The Aussie-owned banks have been making exorbitant profits for years from high interest rates on mortgages and credit cards, as well as imposing high fees and late penalties. They've been hurting grassroots New Zealanders," says Gunson. "And now with the recession and people struggling to pay the bills, the banks are out to protect their own equity position by forcing mortgagee sales in record numbers," says Gunson. On top of these injustices, ASB is refusing to pay an unpaid tax bill of $285 million. "Rather than big-budget advertising campaigns designed to mislead us, ASB bosses should just pay up the tax they owe," says Gunson. "It's obvious that ASB and the other big banks are trying to suck up to us. Why? Because they're worried that the bad public mood against them will result in the government being forced to curb banking power and rein in their profits. Which is exactly what the Bad Banks campaign wants to see, " says Gunson. "We've started a long term campaign to build pressure on the banks, which we hope will result in tougher regulations being placed on the banking and finance industries. Most people would say it can't happen too soon," says Gunson. Bad Banks campaigners recently nominated ASB Bank for the 2009 Roger Award, given annually to the "Worst Transnational Corporation Operating in Aotearoa/New Zealand" (see Backgrounder #2 below). "It was difficult to choose which bank to nominate for The Roger Award, because in the eyes of most New Zealanders all banks are bad," says Gunson. "But what tipped the balance in favour of ASB, was the fact that ASB bosses have been very hostile to the bank workers union, Finsec." "Today, ASB is the only big bank which is not unionised. Which begs the question: is it "Kiwi" to be anti-union?" asks Gunson. Bad Banks campaigners will be carrying placards, making some noise, and handing out leaflets to the public outside the Queen Street branch of ASB Bank at 12noon, this Friday, 11 December. Media are invited to attend to get more comment, plus photos/footage. The cartoon image attached to this media release is by ex-NZ Herald cartoonist, KLARC. It is freely available for reproduction on websites or in print publications. For more comment, contact: Vaughan Gunson Bad Banks media spokesperson (09)433 8897 021-0415 082 svpl@xtra.co.nz ________________________________________ Backgrounder #1 The Bad Banks campaign has been initiated by Socialist Worker-New Zealand. We believe the banks in New Zealand and globally have grown to exercise enormous and dangerous power over the economy. The big banks and their government backers are driving forward economic policies that threaten people and planet. There are a range of measures needed to stop the banks, from tough government regulations to establishing proper public banks which provide credit as a service rather than to make a profit. The Bad Banks campaign also advocates measures like a Financial Transaction Tax (FTT) to net the banks and other financial speculators whose profits from wheeling and dealing goes largely untaxed. Such a tax would allow New Zealand to move towards a fairer tax system which shifts the tax burden off low and middle income people and onto the big wealthy corporates. For more information on the Bad Banks campaign go to http://www.badbanks.co.nz/ Backgrounder #2 These were the 10 reasons given by Bad Banks campaigners for why ASB deserved to receive the 2009 Roger Award: 1. Interest gouging grassroots Kiwi homeowners. Mortgage holders know it. Even the Reserve Bank in 2009 came out and said that the banks, including ASB, were keeping their interest rates too high. High interest rates on large mortgages put modest income earners under considerable financial stress in 2009, as many were affected by job losses, income cuts, and general financial insecurity. (See http://www.nzherald.co.nz/interest-rates/news/article.cfm?c_id=235&objectid=10582846) 2. Foreclosing on people's homes. 2009 saw record numbers of mortgagee sales, as banks moved to protect their own equity position by turfing increasing numbers of "mum and dad" mortgage holders out of their homes. Hundreds of homeowners were foreclosed in Auckland, ASB's home turf. (See http://business.scoop.co.nz/2009/09/28/record-high-for-mortgagee-sales-despite-recovery) 3. Continuing to make massive profits at the expense of grassroots people. The recession of 2008/09 did not prevent ASB making a big profit, $238 million for the first six months of the financial year. Such a high profit in a recession points to the power the bank has to shift the burden of economic hard times on to ordinary New Zealanders. (See http://tvnz.co.nz/business-news/asb-tax-operating-profit-down-2477075) 4. Mega-scale tax dodging. It came to public attention in 2009 the full extent of tax dodging by the Big Four Aussie-owned banks, over $2 billion. The IRD is after $285 million from ASB for unpaid tax between 2001 and 2004. Having been caught, ASB bosses are still refusing to pay up, and will likely use teams of expensive lawyers to drag the process through the courts, costing the IRD and the Crown millions. (See http://www.nbr.co.nz/article/asb-estimates-285-million-exposure-nz-tax-case-113373) 5. Failing to face up to public scrutiny. Nobody from ASB Bank fronted up to the parliamentary inquiry into the operations of the banks organised by the Green, Labour and Progressive parties in 2009. While this inquiry had no teeth, because it was not supported by the National government, this disregard for the New Zealand public showed how arrogant and conceited is the position of the Aussie-owned banks. (See http://www.scoop.co.nz/stories/PA0909/S00049.htm) 6. Union busting. The ASB Bank has determinedly used anti-union practices to stop Finsec Union from organising bank workers. To inquire more about ASB's union busting you could contact Finsec Union directly, phone 04 385 7723, email union@finsec.org.nz. 7. Imposing a wage freeze on workers. All ASB Bank employees earning over $50,000 have been informed this year that they will be subject to a wage freeze. This will affect 3,500 of the bank's 4,700 staff nationwide. The low bar compares unfavourably with that being used by ASB's parent company in Australia, Commonwealth Bank, where the wage freeze is for staff earning over $100,000. (See http://finsec.wordpress.com/2009/04/24/asb-bank-freeze-staff-wages-%E2%80%93-no-union-members-to-stop-it/) 8. Deceiving New Zealanders by claiming to be a "Kiwi Bank". ASB advertisements in October 2009 used the phrase "we've been a KIWI BANK since 1847", when in fact ASB is almost entirely Aussie owned. The phrase cynically seeks to convey the impression that the ASB Bank operates in the interests of New Zealanders, when its corporate practices plainly tell another story. (See http://www.nzherald.co.nz/sideswipe/news/article.cfm?c_id=702&objectid=10604600) 9. Cutting funding to community groups. Just when many community organisations needed it most, to deal with the human fallout of the recession, ASB Bank, through its ASB Charitable Trust, froze grants for six months in 2009. This is despite continuing to make big profits. (See http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10603631) 10. Using the media to frame public debate in a way that's advantageous to banks. Any search of news websites like NZ Herald or Stuff for "ASB" reveals just how often spokespeople for the bank are in the media. The bank produced a constant stream of statements and commentary on economic indicators, which are clearly designed to frame media debate on economic issues in a way that's favorable to banking operations. For more information on CAFCA (Campaign Against Foreign Control of Aotearoa) and The Roger Award go to http://canterbury.cyberplace.co.nz/community/CAFCA/ (Note that ASB was not one of The Roger Award finalists recently announced by CAFCA).

Saturday, 28 November 2009

Bad Banks: everything leads back to financial capital

The following are Daphne Lawless’s notes from the talk she gave the Socialist Worker forum on “Bad Banks” on October 1.

Thank you all for coming. Thanks especially to Sue [Bradford, who was also on the panel], taking her first step out of that unpleasant bear-pit in Wellington and towards real-people politics again. Kia kaha, e hoa.

So, this is the first major meeting for the Bad Banks campaign. So it’s probably best to explain why Socialist Worker chose to initiate this campaign, and where we see it going.

Socialist Worker for the last few years has consistently followed a strategy of broad-party Marxism. What we need in this country, above all else, is a real mass party which unites radical leftists, traditional social democrats, trade unionists, Maori, feminist, queer, ecological and other social movements, which rejects neo-liberalism and commits to remaining politically independent of the Labour Party. The 57 varieties of leftist splinter groups which currently exist have no purchase on a real mass mood, and we must move past this kind of clique politics.

We have worked within RAM, the Residents Action Movement, as a demonstration of how this kind of broad-party politics might work in practice - although we are far from suggesting that RAM *is* the broad party. We have always been very clear that all groups and tendencies have to get over their small-group chauvinism, and be prepared to compromise to work together. We have had successes and failures, but it still seems clear that the broad-party strategy is the only strategy with any hope of success in the current climate.

How do we build this real political alternative? The alternative can’t be built by mechanical means - putting together the existing fragments like Lego blocks. No, the alternative has to be a political alternative. Which means it needs to be based on not only clear ideas pointing away from the current system, but on real social forces of real masses of people backing up those ideas.

The “transitional method”, which has been followed by radicals since Marx’s time, insists that you can’t get there by just jumping along any popular or populist bandwagon that happens by. But neither can you get there by drawing up a programme in some smoke-free room and then going out and preaching it on a soapbox. The essence of a transitional approach is to start with common sense – what everyone already knows from their personal experience – and follow a trail of logic that points towards a fundamental problem in the whole current set-up.

Rosa Luxemburg, the great German socialist, talked about the fusion of “workers and science”. That’s the essence of transitional politics – the combination of real grassroots anger at the system, with an analysis showing clearly how we can move beyond that system. We believe that Bad Banks has a good chance of having real success in those terms.

When we’ve been out on the streets on our Bad Banks stalls, we have confirmed what we suspected before – that ordinary people know clearly that “banks are a problem”. People turned down our first leaflet, not because they disagreed with it, but because they agreed totally and therefore there was no point reading it. When characters on Shortland Street are facing foreclosure issues, then you know it’s really a factor in mass consciousness.

Everyone knows that banks rip us off through fees. The media tells us all that the government keeps cutting the official cash rate, but the banks keep their mortgage rates high.

This is a crucial point that all radicals must understand. Since the mid 70s, the real world economy has pretty much stagnated. The income of ordinary people has not raised very much – in some countries like the USA, workers are actually paid less than they were in Richard Nixon’s day. The only reason that any major Western economy has grown is that the gap has been filled by cheap credit. Working people have been deliberately encouraged to take out mortgages, credit cards, hire purchase and in all other ways go into hock up to their eyeballs to make ends meet.

So this means that ordinary people are really screwed over when interest rates go up. And that means people’s attention is concentrated on the banks, as a visible sign that they’re being ripped off. That’s one of the problems with capitalism - the wage labour relationship *looks* fair, but it’s really exploitation. So workers find it much easier to see that the bank is ripping them off than the boss ripping them off. But it’s also a reason why in the absence of left-wing forces, workers can be distracted into how the government is ripping them off, and falling prey to right-wing tax-cut methodology. What Bad Banks is doing is attempting to find a “path of least resistance” in workers’ consciousness that leads in the right direction.

But on the other side of the equation, what this means is that finance capital – banks, insurance companies, private equity funds, all the other institutions which create pretend money – is now the political driver of the whole global system. What banks want, banks get. Huge bailouts, for one thing, paid for by cuts in public services. Wholesale dismantling of regulations back in the mid 90’s, and now resistance to putting any further regulations on them. Other forms of capital are subordinated to the needs of finance. Industry gets shut down by the truckload all over the advanced western states, smashing traditional working-class self-organisation and political consciousness.

Banks fund the kind of resource stripping which leads to ecological and social vandalism on a worldwide basis. Banks even brought down an entire country’s economic. Iceland was rich 18 months ago. Now it’s a basket case reduced to begging for the EU to let them in the door, because the banks sucked the whole country dry and then ran for it when the money-go-round stopped.

This eco-socio-economic vandalism creates a new form of proletariat in the Western countries - the French call it a “precariat”, from their “precarious” casualised lifestyle. Old-school capitalism was summed up by Henry Ford’s dictum that workers in his factory should be paid enough that they could afford one of the cars they make. A stable, suburban lifestyle for workers was encouraged, which also encouraged unions and other forms of worker self-confidence and self-organisation.

But increasingly in the Western countries, workers are roped into service industries - tourism, retail, call centres – or in making luxury goods for the rich. And most importantly – wages are so low that every worker simply must, at some stage, take out a loan or get a credit card just to survive. The industrial proletariat is not gone – it’s just moved to China, the Pacific Rim, the Mexican border and similar places where trade unions are illegal and the opposition is in jail. The brilliance of the current global system is that the industrial proletariat is now concentrated in countries where they don’t have basic democratic rights – while workers in the West have democratic rights, but are atomised and have no social power. The dominance of finance capital means creating a working class with no job security or historical memory, dependent on welfare and credit just to survive. That’s what they call “flexibility”.

While it was possible not to think about all of this during the bubble years, the economic crisis has just brought the central role of banks in a modern capitalist economy into sharp focus. And don’t be fooled by all this nonsense about “recovery” and “green shoots”. The media pundits talking like that have no historical memory and no vision of the future past the day after tomorrow. All that has happened is that the stimulus packages have worked – shovelling truckloads of free money the bankers’ way has opened up the doors of credit again. But the central problem is the same – that only continually increasing “helicopter drops” of free money can keep the system going. It’s just going to seize up again – and worse. Five cups of coffee might keep you awake all night, but you can’t drink thirty-five and hope to be able to stay up all week.

In modern capitalism, everything leads back to financial capital – which we can call by the shorthand of “banks”. This is why concentrating workers’ minds on the fact that banks are a threat is opening a small door to seeing the problem with the whole global system.

This is what some critics of Bad Banks don’t get. They seem to think that “Bad banks” must suggest that there are “Good banks”. Well, obviously some banks are worse than others. We’ve been asked whether Kiwibank or credit unions are as big a problem as the Aussie trading banks. Well, that’s a debate that we’re going to have to explore in the campaign.

But the message we have to get across is that the whole banking system is a parasitic growth on human society - but it’s not the fundamental problem. As long as we have capitalism, a system where production is devoted to private greed not public need, the banking system is a necessity - the system of economic and environmental exploitation just couldn’t work without it.

Lenin said that socialists should strike at the weak link. Socialist Worker believes that Bad Banks are the weak link - the weak link in the current global system, but also the weak link in ordinary people’s acceptance of that system. Masses of people can already see that banks are a problem. But if Bad Banks becomes a popular “meme”, it opens a door to an attack on neoliberalism or even capitalism as an entity – just like GST off food opens the door to a questioning of the whole edifice of sales tax, and why workers should even be paying tax in the first place.

SW does not want this campaign to be a “front”. We want this to be a properly broad campaign. Just about everyone on the further-left realises that banks are a problem. What we hope is that, in these early stages on the campaign, we will prove that “Bad Banks” has the ability to spread like wildfire through public consciousness. At that stage, it will become a self-sustaining phenomenon. We saw something like this in 2003 with the ARC rates revolt, and we took the initiative to found RAM to intersect with this public mood. Our analysis is that Bad Banks might get much, much bigger. But we do need an initial core of activists outside Socialist Worker – entire other organisations or groups, if possible – to help us with the campaign, to make it grow much faster.

So I urge everyone who’s not a SW member in this room to take away a truckload of Bad Banks pamphlets and sign-up sheets. You might also consider buying a few copies of UNITY, the magazine which I edit and is bloody good, which gives a few good articles on the problem with the current financial system. We urge you to write your own Bad Banks leaflets! We urge you to set up Bad Banks committees in every area, to spread the idea among your workmates, comrades, sports teams, knitting circles, whatever. And we urge you to keep in contact with Vaughan, our national organiser – send him your experiences on the stalls or wherever, so we can spread the word nationwide. Maybe a Bad Banks convention sometime next year might be a goer, who knows.

Practical politics is based on experiment. Bad Banks is an experiment to see whether we are right that the grassroots are turning away from neoliberal capitalism in their hearts – all they need is access to ideas and analysis which can offer a way forward. We encourage you to be part of the experiment.

“It is easier to rob by setting up a bank than by holding up a bank clerk.”

Friday, 27 November 2009

Are New Zealand's major banks sound?

by Grant Morgan International credit rating agency Standard & Poor says that all Australian banks have "insufficient funds to cover their lending exposures", reports the Sydney Morning Herald on 25 November 2009. No Australian banks were included in the handful that Standard & Poor believe meet the minimum threshold to be considered safe for depositors. Given that Australian banks own all major New Zealand banks, this news is hugely significant for the Bad Banks campaign in Aotearoa. The Standard & Poor analysis points towards the financial unsoundness of Australian-owned banks in New Zealand. See Australian banks fail new capital test.
Australian banks fail new capital test by Eric Johnston Sydney Morning Herald 25 November 2009 RATINGS agency Standard & Poor's has warned that nearly all the world's big banks - including Australia's major lenders - have insufficient funds to cover their lending exposures and risk a ratings downgrade unless they move to bolster their balance sheets over the next 18 months. The warning follows the release of a tougher global measure of bank capital by Standard & Poor's, which has found that most large banks do not meet the minimum 8 per cent threshold under the credit ratings agency's new risk-adjusted capital ratio. The findings appear to be out of step with claims by Australian banks that they are among the strongest in the world under the traditional measure of bank capital known as the tier 1 ratio. Over the past year, Australian banks have raised more than $20 billion in new capital to strengthen their balance sheets. This has resulted in an increase in the average tier 1 ratio of the big four banks to 8.9 per cent from 7.8 per cent a year ago. But critics warn that these measures of tier 1 can be misleading because they fail to distinguish between higher-risk and lower-risk forms of lending. As well, the tier 1 measure is not consistently calculated on an international level. Australian banks argue that their capital ratios would increase by about 2 per cent on average if they were calculated under existing British rules. Under the new measure, S&P gives a lower rating to hybrid capital because it behaves more like debt than equity. For Australian banks, hybrid securities can make up to a quarter of their total capital. Specific exposures including trading desks and private equity would require banks to significantly increase the level of capital. S&P reviewed 45 banks around the world under its new risk-adjusted measure. No Australian banks were included in the handful that hit the minimum threshold to be considered safe. Of three local lenders included in the review, ANZ scored the highest rating with 7.1 per cent. National Australia Bank was at 6.9 per cent and Commonwealth Bank at 6.3 per cent. While Australian banks benefited from having a large exposure to low-risk residential mortgages, S&P said a narrow geographic and business base counted as a negative. It also noted that the capital raisings by the local banks had been used mainly to fund acquisitions or balance sheet growth. Among the global banks considered most vulnerable are Mizuho Financial (2 per cent), Citigroup (2.1), UBS (2.2) and Sumitomo Mitsui (3.5). The global average came in at 6.7 per cent. ''The results to date appear to confirm our view that capital is a rating weakness for a majority of banks in our sample,'' S&P said. The ratings agency said it expected banks to continue strengthening their capital ratios over the next 18 months to comply with tougher regulatory standards. ''Failure to achieve this could put renewed pressure on ratings,'' it said. The top-rated global bank is HSBC on 9.2 per cent, followed by Dexia on 9 per cent and ING on 8.9 per cent. The review of capital strength comes as Australian banks face a crackdown on rules related to liquidity.

Saturday, 21 November 2009

Target Bad Banks and you target neo-liberalism starting to crack

by Vaughan Gunson

The Big Four Australian owned banks (ANZ National, BNZ, Westpac and ASB) are hated for their tax dodging, interest gouging, fee charging and profit taking. The Bad Banks campaign initiated by Socialist Worker-New Zealand aims to connect with this popular “bank hatred” and begin to expose one of the main drivers of late capitalism.

The leaflets that we’ve put out so far have mixed exposure of the banks, analysis of the global economic crisis, and pointed towards possible campaign demands. The reception to these leaflets by a cross-section of people has been largely positive. The following comments are representative of the feedback we’ve heard on the streets:
  • “Yes, I know the banks are bad.”
  • “The banks are ripping us off big time.”
  • “The banks don’t care about people like us.”
  • “The banks want to turn us all into debt slaves.”
  • “The politicians should be on our side, but they’re not.”
We've been stressing that the Bad Banks campaign is not just about reforming the banks through regulations that curb their power (though we’ll certainly be agitating for this), it’s also about raising political ideas for a mass audience at a time when capitalism’s unsolvable contradictions are becoming increasingly apparent.

In connecting with people’s anger towards the banks we can begin to raise political solutions to the various crises that are impacting on people’s lives, from their own personal financial worries to the pressures coming on the NZ capitalist state following the Great Implosion of 2008.

One of the big issues facing the NZ government, which has right-wing Treasury officials all heat up, is the rapid decrease in government revenue from taxation as a result of economic recession. This is forcing the government to borrow huge amounts from overseas banks to maintain current levels of government spending. According to a recent statement by Finance Minister Bill English the government is borrowing $250 million a week.

This ballooning debt is placing increasing pressure on the government to cut spending, while at the same time increase taxes. A tax working group (which includes Treasury officials and corporate bosses) is recommending increasing GST, which is a flat tax on the price of all goods and services. Increasing GST would shift the tax burden further on to low and middle income earners.

The Bad Banks campaign can intervene in this site of political struggle. So we’re promoting a Financial Transaction Tax (FTT) that targets the big banks and other “fat cat” financial speculators. And instead of raising GST, we support removing GST from food, a demand which has already proved very popular with people.

Because the banks are a dynamic and powerful force within late capitalism their hand is in everything. Banking interests are at the heart of neo-liberalism, the free market ideology that has driven government policy in NZ and around the world for three decades. For instance, their “invisible hand” is at work in the design of emissions trading schemes, or “pollution markets” as they should be called. The Bad Banks campaign has put out a leaflet that links the banking class with this neo-liberal “non-solution” to climate change.

So a campaign against the banks has the seeds within it of other struggles, which are about resisting the attempts of the ruling elite to force the cost of the economic meltdown onto the rest of us.

If we can lift the Bad Banks campaign to the level of mass consciousness in NZ, which will require sustained on-the-ground campaigning by broad forces and a media profile, then the more political influence the promoters of the campaign can have around a range of issues.

Given the seriousness of the crises besetting global capitalism, which Grant Morgan has referred to as capitalism’s quartet of contradictions (the profitability crisis, the resource crisis, the ecological crisis, and legitimacy crisis), the rulers of the world economy will be unable to stabilise the system for any length of time. The systemic contradictions of capitalism will continue to burst through.

It’s clear, however, that a powerful section of the ruling elite in NZ will continue with the neo-liberal agenda, which will be given weight by the global banking and financier class. Hence NZ governments will face immense pressure to slash public spending; shift the tax burden further off big business and onto low and middle income people; privatise public services; maintain deregulated financial markets; and so on. (See NZ Herald article on Treasury's proposed new round of neo-liberalism, Tax reform needed to jump-start economy.)

The National government has not yet moved decisively to launch a renewed neo-liberal offensive, which would be politically polarising. They’ve sustained their “honeymoon period” not because of John Key’s likeability but because of their willingness to dramatically increase government borrowing.

But the pressure is building and a number of neo-liberal policy settings around tax, ACC, government spending, public service cuts, wage levels, privatisation, trade and investment, are on the agenda. The logic for business, as it always is, will be to extract more wealth and toil from working class New Zealanders and other people of modest means. The National Party, being a party that represents corporate interests, will have to facilitate this, at the risk of their current popularity levels.

The contradiction inherent to neo-liberalism, is that it’s precisely the constant drive towards more wealth extraction from the grassroots (to make up for the general decline in capitalism’s profitability since the 1970s) that has produced a global economic meltdown of such magnitude in the first place. A renewed neo-liberal offensive, including attempts to pump up the economy through the further expansion of credit, will only lead to the intensification of the global crisis in the near future. Unable to restore capitalist profitability the last gasps of neo-liberalism will continue to polarise and impoverish, eroding further capitalism's legitimacy.

The certain scenario of unpopular government attacks on grassroots people combined with a floundering economy, of which one important measure will be high unemployment, will create political instability in NZ, as it will in other countries. A popular Bad Banks campaign, if we can achieve it, would enable leftists with a public voice and profile to give leadership that can move people towards an alternative political vision.

This can be done by advocating “common sense” demands like a Financial Transaction Tax, or other policy solutions which eco-leftists in NZ have collectively generated over many years, and will continue to do so. An exciting initiative in this regard, and one which has the potential to be popularised, is the New Zealand Council of Trade Union’s Alternative Economic Strategy. The CTU’s Alternative Economic Strategy has lots in common with The RAM Plan written in 2008. A broad political challenge to neo-liberalism, which these documents represent, is both desperately needed and possible.

The challenge is to achieve the campaigning profile that enables a community of eco-leftists to connect with masses of people. In recognising the public mood and targeting the Bad Banks we may be able to reach a position where we can seriously target neo-liberalism starting to crack. By waging a successful war on one front, against the banks, we can open up other fronts in the mass struggle for a humane, equitable and ecologically sustainable future. We start that collective political journey that we all know is so necessary.

The Bad Banks campaign was initiated by Socialist Worker-New Zealand. We invite contributions to campaign material produced by us, and we encourage others to generate their own material and strategies to target the banks. We’d love to hear people’s ideas about how the campaign can broaden its appeal and participation by individuals and organisations in NZ. Contact Vaughan Gunson svpl@xtra.co.nz or 021-0415 082.