After a week of turmoil on financial markets, on Saturday 20 September President Bush said he was proposing to spend $700bn of taxpayers’ money to buy the rotten mortgage assets held by the banks on Wall Street. He said he was doing this to help the average American family with their homes and jobs.
At the same time Gordon Brown, at the annual Labour party conference in Blackpool, England, was telling delegates the same thing to explain why he intervened personally to ensure the Lloyds Bank bought the Britain’s biggest mortgage lender HBOS last week.
Both were lying. They were not taking these actions to help working people. They did it to save finance capital from disaster.
The Bush-Paulson plan to buy to rotten mortgages, along with the nationalisation of the two biggest mortgage lenders only ten days ago, will mean that the US government will soon own the vast majority of Americans’ mortgages. It will make the vast majority of American household debt held by the government. Overall, it is the biggest nationalisation in world history, equivalent to $6trn, or 45% of annual US output.
But, of course, the devil is in the detail of the terms. This is not expropriating the banks. On the contrary it is saving them - with nearly full compensation, so they can resume their operations and restore their profitability.
In turn, US government debt will rise 40% of GDP to nearly 100%! And what will the taxpayer get for this huge bailout? Just a load of defaulted and non-paying mortgages, along with higher taxes, cuts in public spending on health, education and social security.
And behind those bad debts lie a trail of misery for millions of Americans who will lose their homes and eventually their jobs. Nothing much will be done for them. It won’t stop the unfolding slump in world capitalism that we are entering with rising unemployment, falling real incomes and declining public services.
Instead most of the money will go to help the fat cats of Wall Street get out of their mess. You see, when it comes down to the impending collapse of capitalism, suddenly socialism is a good idea. It’s just this is socialism for the rich, while the rest of us have to continue to live under capitalism.
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- Capitalism beared by Michael Roberts (March 27, 2008)
- US slides into recession - who's next? by Mick Brooks (March 17, 2008)
- Financial meltdown: another day, another finance house bites the dust by Mick Brooks (March 17, 2008)
- 1929: Can it happen again? by Mick Brooks (March 17, 2008)