Strip the banks of their power and place them under government supervision! Occupy the banking industry!
1. The bailout of troubled banks has become Europe’s top priority. With one hand Europe provides banks with “fresh money“ – through various measures – and removes toxic papers from their books (through the establishment of “bad banks”), while the other signs off surety and guarantee arrangements to cover their residual risks. The funds required for these generosities are provided by national governments, mainly in those countries that still can (for the time being) borrow money from the financial markets at anything less than extortionate rates.
2. This means that it is ultimately the European citizens – through their hard work and the taxes they pay – who provide the funds that are required to rescue the banks. In countries such as Greece, citizens are not only made to pay ever higher taxes and duties, they are also forced to accept falling salaries and lower standards of social protection. No significant contribution, meanwhile, is expected from the banks themselves and their executives, nor are they called to account when it comes to consolidating the stricken banking sector. European governments have become repair workshops for the banking industry.
3. On top of that, the task of bailing out the banks has been made substantially more difficult by the power of the three American, commercially operated rating agencies (Fitch, Standard & Poor’s, Moody’s). Although none of these three agencies has been officially recognized following the new EU regulation on credit rating agencies and although their flaws have been openly demonstrated several times, for example by their roles in the Icelandic banking crisis, their assessments continue to determine the value not only of financial products but of entire “national economies”. When the agencies lower their country ratings, the governments of these countries will have to pay significantly higher interest rates for their new debt. This is how the rating agencies support risk-tolerant investors who reap the benefit in the form of higher interest payments. The same people who have made a profit from the economic and financial crisis are, during the current banking crisis, still well served by the rating agencies.
4. The current policies of rescuing the banks are confronting us with a major political dilemma. It is undoubtedly correct that nobody can be seriously interested in seeing all the major banks fail because such a collapse of the banking industry would have far-reaching consequences for everybody. This does not mean, however, that all banks must survive. It is more important to relieve the European governments from the risks they have unilaterally assumed and to share the burden more fairly. Compulsory loans to be levied on rich and wealthy subscribers appear to provide the right solution. Additionally, if governments are in essence assuming the commercial risks of the banking industry, they must also be given the appropriate powers of controlling their business operations – even if that included the temporary nationalization of the banks. Occupy the banking industry! Only then will the elected governments of Europe have the democratic legitimization to “invest“ the money provided to them by the tax payers into banking deals for which we all, the citizens of Europe, are being held financially liable.
Working Group on Financial Affairs, KAB Deutschland, November 2011