The announcement of Northern Rock's so-called "nationalisation", last Sunday, triggered a storm of protest. The tabloids immediately lined up behind the Tories to defend the bank's shareholders and accuse the government of robbing them of their "savings".
Ironically, of course, the same politicians and tabloids would be just as furious had Darling announced a tax increase for the wealthy in order to finance the bail out of Northern Rock! These people just want to have their cake and eat it!
But then, of course, they have nothing to fear in this respect: because Brown will never dare to dent the capitalists' wealth, not even to clean up the mess they and their system have created!
No compensation for the speculators!
How much compensation the bank's shareholders will get has yet to be announced. But whatever it is, it will still be more than these shares are really worth. If it had not been for the tax-funded life-line on which Northern Rock survived over the past 5 months, the bank would have gone bust long ago and its shares would not even be worth the paper on which they are printed!
The question one should ask, rather, is: why should there be any compensation at all for the bank's big shareholders?
Buying Northern Rock shares was making a bet on the bank's future profits. If the bank made profits, share prices would go up and they would pay dividends. If not, their price would go down and they would pay nothing.
For years, this bet was a winner. The bank was writing more and more mortgages by borrowing more and more money. Since there was lots of cheap money available, it seemed that there was no limit to the profits it could make. So the price of its shares went through the roof and its shareholders got very substantial dividends.
Last year, however, this bet turned into a loser. It became more and more difficult for the bank to borrow cheap money. Since it had to meet its debt obligations, it kept borrowing money, but at a higher interest rate. This was the starting point of its troubles, leading to the 92.5% fall in its share price and to the government's bail-out.
Today, the shareholders stand to lose almost the entire value of their shares compared to their peak of £12, less than a year ago. This may be tough, but this is what gambling is about.
So, why should they be compensated at all, especially the two speculative funds which own almost 20% of the bank's shares? After all, when ordinary punters bet on West Ham and the club loses the game, do they go to the government to demand a refund?
A crutch for big business
Both Darling and Brown insisted heavily on the fact that Northern Rock was taken into public ownership as a "temporary" measure until the bank is profitable enough to return to the private sector.
With the exception of a few hysterical politicians and journalists, no-one thinks seriously that Brown is embarking on a programme of nationalisation similar in any way to what Harold Wilson did in the 1970s, let alone Attlee, in the 1940s.
Even in those days, nationalisation was just a means for the government to make the investment that the capitalists refused to make, in certain industries. But this was not for the benefit of society as a whole, it was for the benefit of the capitalist class. And the same is true today.
The Bank of England extended a helping hand to Northern Rock because its bankruptcy could have put the banking system and the housing market at risk. No-one knew how much Northern Rock had borrowed and from whom, nor the real losses incurred by the other banks, due to the increased cost of credit. This bail-out was not designed to defend the interests of savers, as Darling claimed, but to defend those of the bankers.
By "nationalising" Northern Rock, Brown will be able to use much more freely the resources of the state to rebuild the bank's profits. Who will gain and who will lose out of this is not hard to guess.
The banks which have advised the government stand to net £100m. As to the man appointed by Brown to head Northern Rock, he is a banker, a former director at Lloyd's and Natwest, who will have to survive on a "miserly" £1.08m/yr. At the same time, the bank's employees are told that up to 3,000 jobs could be cut (50%).
The rich and the bankers might have to wait till the government has cleaned up their mess. But it is the rest of us, workers, who will be supposed to foot the bill with our taxes and our jobs!