Another day, another bank collapse. This time it's the Bradford & Bingley that's hit the buffers. This last week the bank took a battering on the markets, seeing its share price plummet to an all-time low of 20 pence. No one could deny the writing was on the wall. In contrast to its dithering over nationalising Northern Rock, the government have decisively stepped in to take Bradford & Bingley into state ownership.
This development was always going to be a political football, especially in party conference season. Tomorrow the Tories are set to outline a package of financial proposals that would increase the powers of the Bank of England and set up an independent body for the monitoring of government spending. David Cameron went on Andrew Marr this morning to say nationalisation should not be the stock response to banking failure. Instead Cameron is for a Bank of England take over followed by a supervised reconstruction and sell off at no expense to the taxpayer. Cameron seems to forget the Bank continues to be state-owned, albeit with operational independence, and thereby any risks it takes on are underwritten by the tax payer. But I digress. Yvette Cooper's response on the government's behalf attacked the Tories for being incoherent, irresponsible and blasé with the financial system - a position not a million miles from the truth if a sample of the comments left on Iain Dale's post on Bradford & Bingley are anything to go by. For them adding two per cent to national debt is more outrageous than the toxic effects its collapse will have on the "real" economy. "Let it go to the wall" is their collective demand. In times like these, the only things trickling down for Bradford & Bingley staff are insecurity and unemployment, but for the Tories this is, at best, a marginal concern.
But it is far from my intention to praise Labour's latest nationalisation. Let's be clear about this. By saving the Bradford & Bingley, the government are going to destroy it. At the time of writing we are awaiting Alastair Darling's statement. But it looks as though it will be dismembered. The assets - the 200-strong branch infrastructure and savings portfolio - will be quickly sold off while the £50 billion mortgage and loans book will be assimilated into Northern Rock's holdings. Yvette Cooper on this lunch time's Politics Show said there was no other choice. The private solution found in Lloyds-TSB's takeover of HBOS was not available, despite government and FSA efforts.
It is instructive to see what has already befallen Northern Rock since it came under government auspices in February this year. To pay back a £25 billion loan it was forced to take out in September, 2007 from the Bank of England to prevent it from going under, its repayment plan wants 2,000 jobs to be shed over the next three years. Plus it will either sell half of its £100 billion mortgage portfolio. Already an "understanding" has been struck with Lloyds-TSB, allowing it to cherry-pick customers coming off Northern Rock's fixed rate mortgages by offering them new deals, minus the usual application fee. In return the Rock would receive a commission for those taken off their books. Upon nationalising the bank, Gordon Brown said "we want a successful company that we can pass on to another private sector owner in good time". It makes you wonder how successful it can be when the government are intent on letting its prime assets go, or not taking any action in bringing the £47 billion off-shore mortgage book under its immediate control.
Academics, armchair economists, libertarians and House Republicans are the only ones who take the "principles" of neoliberalism seriously. Governments here and across the Atlantic only stick with it in as far as it entrenches the rule of capital. And the way the government has handled the nationalisation of Northern Rock and Bradford & Bingley and waived competition rules regards Lloyds-TSB and HBOS are entirely consistent with this. The state absorbs the the bad debts and liabilities, while it facilitates a transfer of assets to the private sector. As Vince Cable, the LibDem deputy leader observed in February, "Northern Rock’s ‘assets’ include unsecured debts, such as portions of mortgages in excess of the value of the properties concerned. In other words, the rubbish."
While sections of finance capital goes under, the government has and will continue to maintain the strength of finance capital as a whole. Whatever Tories and their ilk may think, nationalisation of this character is nothing to do with socialism. It's asset-stripping by another name.