The banks can do what they like and no one can stop them

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The banks can do what they like and no one can stop them

We asked Susan George what the banks have learned from the 2008 financial crisis. She said: ‘They can do anything. They can commit crimes and not suffer.’

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Robber banking boss, Ricardo Salgado, He was the chief executive of the failed Banco Espirito Santo. The poster in Lisbon, Portugal, says: ‘It’s hard to be a banker now.’ © Francisco Seco/AP/Press Association Images

I didn’t believe that the banks could be stronger after the 2007-08 crisis. Yes, some have paid very big fines to governments – a total of $178 billion for the US and European banks. But they now think that paying fines is the ‘cost of doing business’. None of the bankers has been in prison for one night or paid a personal fine.

We are still suffering from the 2007-08 crisis but the next crisis is already a possibility. The politicians and the bankers themselves are preparing the way. Mathematicians have shown how connected world banks are. If one fails, all of them can fail. This is worrying and we have good reasons to expect the worst:

o Governments and international institutions don’t seem to want to regulate the banks. This means we are in danger of another crisis. Banks and bankers are too big to fail. They are too big to put in prison. They have their own laws.

o There is no separation of commercial banking from investment banking. This would stop the banks from using people’s money to make more money. For more than 60 years the US New Deal’s Glass-Steagall Act separated them and protected the country’s financial system. It was changed in 1998 with President Bill Clinton and help from his Treasury Secretary, Robert Rubin. Robert Rubin worked for Goldman-Sachs. Then it was less than ten years before the fall of Lehman Brothers. Politicians only listen to the bankers. And capital needed for banks is still too low. There are no new financial transaction taxes. 11 European Union (EU) countries planned a tax but they are still thinking about it.

o Daily sales of currencies have grown by 25 to 30 per cent more than before the crisis and there are trillions every day. Yearly sales of derivatives are about 100 times Gross World Product. Automated, computer trading makes all of this grow. But machines and mathematicians can make dangerous mistakes.

o It is possible that there will be a lot of risky loans by investors. This time they wouldn’t be based on subprime mortgages but on other groups of debts, such as student or consumer loans.

o In 2008, so much speculation on the commodities markets made food prices go up a lot and there were 150 million more hungry people in the world. This won’t happen again this year or next year. Grain prices have gone right down and $150 billion of Wall Street money has been taken from these markets in the past two years. But other protective New Deal laws have also been stopped and there could be speculation again in these markets as soon as climate change and lower food stocks make them profitable.

o Tax havens have won. They help individuals from the richest one per cent pay less tax and help companies pay less tax. Our largest companies have stopped paying their fair share of tax. In France, every year there is $60-80 billion less than needed in corporate tax. Corporations have public services such as police and fire brigade, energy, water, sanitation, transport, healthcare, education, and training for their workers, and the law. But they don’t pay for them, so they get worse. Everyone and everything loses. The Luxleaks scandal showed more than 300 corporations avoided tax. It showed that an EU country used the big four accounting corporations to help them and used companies to avoid the countries where they sell and make profits and used Luxembourg’s tax avoidance services instead. The British island paradises are involved, too. Probably 25 per cent or more of the business of the largest EU banks takes place in offshore tax havens. No-one knows for sure.

o Surveys by the European Central Bank of the 130 largest EU banks show that they do not support the real economy, where people actually live, work, produce, and buy. Small and medium EU businesses provide 80 to 90 per cent of all jobs but they still have lots of problems getting loans. Since 2008, banks have made loans more difficult. Finance Watch is a progressive Brussels research group. It says that only 28 per cent of all banking goes to the real economy. The rest goes to financial products that make money from money.

o There is growth and there are more jobs in the US. But more than 90 per cent of the value of that growth has gone to the top one per cent. European unemployment is getting worse and the EU is going into deflation.

o By 2011, profits at US banks were back to high levels again. By 2009, the nine largest US banks gave bonuses of $1 million or more to 5,000 traders and bankers. They used the public money given to save then. So at least $5 billion of US taxpayer money went to people in the banks. The British banks got $20-billion of bonuses in 2010-11 and French bankers got nearly the same.

o Very big bonuses make more inequality. Look at the very big differences between the billionaires and the rest of the world. Look at Oxfam’s figures, or the World Wealth Reports that talk about not the one per cent but the one in ten million richest.

o The 2014 Forbes billionaire list has the names of 1,542 people with a total of $6.5 trillion. Inequality isn’t just about money. In The Spirit Level, Richard Wilkinson and Kate Pickett show that inequality is linked with illness, violence, obesity, and prison. And when you are a billionaire, it is very difficult to lose a billion.

Rewards, rewards

Bankers have also learned how to organize international institutions so that they are rewarded in good times and bad times, for brilliant or stupid financial investments. So Eurozone governments such as Germany and France give money to the European Financial Stability Mechanism so it can give money to the Greek, Irish, and Spanish governments so that the governments can give the money to the Greek, Irish, and Spanish banks so that they can repay the loans from French and German banks. Most people don’t understand that the very big ‘loans’ from the Troika (the European Commission, European Central Bank and International Monetary Fund) to Greece from 2010-12 were not to ‘help the Greeks’, but to send the money to banks that bought Greek bonds. Why buy those? Good question: because they were in euros, but paid slightly higher interest than, say, German bonds, also in euros.

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Graffiti in Syntagma Square, Athens, during demonstrations against austerity. Jess Hurd/reportdigital.co.uk

So the Troika’s job is to make sure the banks get their money. The banks may still lose a little on their investments in southern or small European countries. But they lose a lot less with the Troika. The people, who had nothing to do with creating the crisis, must suffer. We can measure more hunger, more hospital and school closures, more violence, and more migration of young people. But we cannot measure the real consequences for many innocent people. When I said the banks have learned they can do anything, that is right, they can…

And then we say, ‘Yes, but what can we do?’ Most of the answers are known and many of them are about doing the opposite of what I have described. Separate the banks, tax financial transactions, stop corporations avoiding tax, tell Luxembourg to stop its Corporate Protectorate, don’t sign the Transatlantic Trade and Investment Partnership (TTIP).

Change the rules of the European Central Bank (ECB), which does not lend to countries, only to private banks. The private banks borrow from the ECB at less than one per cent and they can lend to countries at the highest interest rate possible, often more than six per cent. This is another gift to the banks. The ECB should lend directly to countries at one per cent or less. We should have joint euro-bonds. Austerity policies must be stopped because they don’t work, for people or for economics. Northern Europeans don’t understand this. The German word for debt is 'Schuld', which also means doing something wrong. But we need better economics. A German economist in the Financial Times wrote: ‘There are two kinds of German economists. Those who haven’t read Keynes and those who haven’t understood Keynes.’

Remember that a national debt isn’t like a family debt. Throughout history, in fact, most national debt has been forgiven. But if countries continue to pay the interest, they can stay in debt forever. Nations do not disappear. Greece, for example, shows a profit if interest payments are taken away and interest at one per cent is paid. Greece should also cut its military budget. It should tax the Church, which is the largest land and property owner. And, as the governing Syriza Party says, ‘Go after the oligarchy, the few people who rule the country.’

If there is another crisis, it will be very big and very dangerous for ordinary people They could lose their savings, insurance, pensions, and more. It would be a good idea for us to develop stronger social systems and more independence. People are good at working together. And they work together quite naturally or because it is necessary when there is an economic crisis, like the Argentinians 15 years ago or the Greeks today. They organize soup kitchens, community gardens, volunteer health clinics, childcare, alternative currency systems, housing, and more.

Most of all, we need to fight the terrible neoliberal thinking that has badly influenced everything and allowed the banks to do what they want.

NOW READ THE ORIGINAL: http://newint.org/features/2015/05/01/debt-crisis-banks/ (This article has been simplified so the words, text structure and quotes may have been changed).