Northern Rock - Gordon Brown's black hole

19 November 2007

According to experts, the total dished out to Northern Rock by the Bank of England could reach £40bn in tax payers' money by the end of the year! A large part is meant to be repaid to the Treasury by February, (but this looks very unlikely) and the rest to be repaid by 2012.

Officially this was to keep Northern Rock afloat. But these sums did not "rescue" embattled depositors and mortgagees. They were used to pay back the bank's creditors - i.e. banks and other big players, which lend money on a very large scale, in order to make profits out of the interest they charge.

Of course, by lending such large sums, these operators take the risk of not getting the money back - and this is the pretext they use to demand such high interest, which in turn leads to huge profits. This is why the so-called "money market" - where the big loans are made - has been the City's biggest game for decades, because it allowed speculators to make so much money on behalf of the super-rich.

Today, the only beneficiaries of Darling's "rescue" are these super-rich. He is determined to protect them against any loss and the £40bn estimated cost of this bail-out shows how far he and Brown will go. To put it into perspective, £40bn is more or less equivalent to all the money spent by the state in a year on housing, transport and the environment! Or looking at it from the point of view of taxation, this is almost twice the total of what we pay in council tax!

True, for the City big players, such enormous sums may not seem so big. Barclays, for instance, has written off nearly £3bn of "unrecoverable loans". HSBC just wrote off £4bn. All the City's financial operators had been playing heavily on the "money market" and many incurred proportionate losses as a result.

And so what? Why shouldn't these profit sharks be made to pay - for once! - for the gambling they do all the time, in order to line their pockets. Why should it be up to tax payers, that is the mass of ordinary working people, to clean up their mess each time their greed causes mayhem?

By now, some politicians and experts have become so embarrassed by the way Darling is paying openly for Northern Rock's debts, that they are calling for the bank's "nationalisation". But all they really want is to put a veil of decency over Labour's open ingratiation of the City. Whereas what would be needed instead, would be to get the profit sharks to pay for their greed and moreover, to put their system out of operation, for good!