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Why are the banks that failed us so catastrophically still coddled?

The BanksIt is almost unbelievable that the banks which (i) cost the taxpayer £68bn in immediate bailout costs, (ii) have pushed  up Britain’s national debt to its current level of £1.16 trillion, (iii) have inflated the budget deficit to service this debt to its current £120bn, and (iv) have thus given Osborne the excuse to launch his scorched earth policy of austerity for the whole decade 2008-18, should now be about to receive (if the Bank of England gets its way) another £25bn handout – ostensibly to boost lending and kickstart the economy, but (since all such previous attempts to do this by these methods have got nowhere) actually to shore up the banks with another colossal dollop of funding because the previous £375bn wasn’t enough.

We must be mad to let this happen – a bedroom tax which will drive tens of thousands of disabled people out of their homes at the same time as we award another £25bn to the banks who have destroyed our livelihood and nearly crashed the world economy.

A very different policy is now needed towards the banks.   The colossal Brown bailout of the banks in 2008 was an enormous error, saddling Britain with a huge increase in national debt, a stubbornly large budget deficit, and a decade of semi-permanent stagnation. What should have happened was a public takeover of the doomed banks for a token sum (since they were broke), separating off bad loans, protecting depositors, and then restructuring the financial sector in the national interest to implement a big increase in lending to industry and rebalance the economy towards a much stronger manufacturing base which is the only real long-term foundation for economic success. The only reason this was not done was because the banks represent the fulcrum of the current model of neoliberal capitalism, and preserving that – at whatever cost to the ordinary people of Britain – was always the unquestioned central objective of the financial-political-industrial leaderswho rule this country. Public ownership of the banks was utterly anathema to them, and remains so until this dogmatic resistance to the obvious is swept away.

This is not utopian. Iceland has already acted broadly along these lines when its own economy was brought down by its stricken banks. A similar policy was deployed in the last fortnight in dealing with the collapsed Cypriot banks, and the Eurozone finance ministers have made clear that investors will not be protected in future banking collapses – nota bene Italy and Spain. Only in Britain, a citadel of the doomed free market capitalist model, does this fetish of private banking inviolability hang on. Yet in the UK the need for reform is paramount, greater almost than anywhere. The Big Five banks control more than 80% of the current account market, their overall debt liabilities total 5 times Britain’s entire GDP, their lending to industry has been a monumental failure, they have focused on overseas speculation and industrial-scale tax avoidance, and they have crashed the UK economy. What alone is lacking is a leader to carry through this reform.

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