Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page: https://secure.socialistparty.org.uk/issue/655/11037

From The Socialist newspaper, 26 January 2011

TV Review

Britain's Banks: Too Big to Save?

BBC programme: Britian's banks: too big to fail

BBC programme: Britian's banks: too big to fail

Journalist Robert Peston's BBC documentary, Britain's Banks: Too Big to Save?, gave a useful explanation of how Britain's banks have operated over the last two decades, leading to the banking crash of 2008.

Sean Figg

Today Barclays, HSBC and Royal Bank of Scotland have a portfolio of loans and investments valued at over £1.5 trillion, greater than the value of the entire British economy. Peston warns that since 2008 "nothing has substantially changed" in the way the banks are run and that now, with public finances in ruins after £1.2 trillion of bailouts and underwriting, Britain's banks would be "too big to save" should another crisis develop.

In the 1980s the Basel Accords on bank regulation were introduced in response to a banking crisis precipitated by Latin American governments defaulting on international loans. The period saw the explosion of a "shadow banking sector" as deregulation made the accords, in comparison, look like a huge inconvenience for profit-hungry bankers. Companies, that were financed by the banks but outside the scrutiny of the regulators, were set up. The use of complex financial instruments became ever more widespread.

Peston illustrates the new banking practices rather aptly, with a trip to the races. He describes derivatives as nothing more than "a bet that something will be a certain price at a certain time" and that bankers were using expected returns that had not yet materialised as up-front capital. This is no different to spending your winnings before the horse has even come in! This speculation meant that by 2008 the combined "value" of just one type of derivative was over $600 trillion worldwide, some ten times global GDP!

Fractional reserves

Peston describes the contradiction that lies right at the heart of capitalist banking, a system called "fractional reserve banking". If everyone with deposits in a particular bank wanted to withdraw them at the same time the bank would not be able to pay out because most of the money has been loaned or invested. Today the banks retain less than 1% of deposits.

When put like this, the seemingly intangible idea of "confidence" clearly has a strong material basis! One expert comments that "confidence is the financial system" which is nothing more than a 'complex pyramid of claims'. Peston shows a clip from Mary Poppins to illustrate the fragility of this system. The character Michael, being pressured by his thrifty father to invest his tuppence pocket money, precipitates a bank run by shouting "the bank won't give my money back!", thus creating a panic.

Socialists would agree that banking along capitalist lines is very unstable. But we would point to a more fundamental contradiction of the banking system than Peston. For ordinary people banks are about having somewhere safe to put your money or somewhere to get a mortgage or loan. However, the raison d'etre of banks is the pursuit of profit. Providing a basic service to society is incidental. For the super-rich the banking system is a means of lining their own pockets.

Regulation

There was a chorus of calls for greater regulation of the banking sector after the bank collapses - locking the stable door after the horse had bolted. But why would a new raft of regulation work any better than the Basel Accords or other international agreements to regulate banking? The super-rich found ways around those regulations and they would be able to do so again. As long as the motivation of all banking activity is profit, the incentive to take risks with our money and charge us excessive interest and costs is permanently there.

Another interviewee argued that the only other choice was to break up big banks so that they are no longer "too big to fail", but he also added that modern capitalism needs big banks. Where else would multinational companies and international speculators with trillions put their money? And how else would they move it?

The most important issue isn't the size of the banks but that the Con-Dems, and New Labour before them, refuse to use the government's majority stake that they have in some banks to exert any real control, as shown by the bonus debacle. They are completely committed to allowing them to run along failed capitalist lines. Also, they do not want to take control of all of the main banks.

The socialist solution lies in taking the banking sector into public ownership, and using that ownership to exert democratic workers' control so that the banks are run in the interests of the majority. That is the only way to cut short the super-rich's 'day at the races' and prevent another banking crisis in the future.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.


In The Socialist 26 January 2011:


Socialist Party youth and students

Fight for jobs and education

Where next for the student movement?

Education Maintenance Allowance days of action 18 and 19 January

No to sky-high youth unemployment!


Socialist Party news and analysis

Warning: Government health 'reforms' can seriously damage your health

Phone hacking and media spin - the murky world of Andy Coulson

Food price hikes fuelling unrest

Fight the Con-Dem 'bosses' charter'

RMT leader slams anti-union laws

Marching against council cuts


Socialist Party workplace news

Hampshire: Battling to defend jobs

Second show of strength by Medirest workers

BA workers vote to fight on

DWP contact centre strike


National Shop Stewards Network

NSSN anti-cuts campaign launched

Trade Unionist and Socialist Coalition (TUSC) conference


International socialist news and analysis

Irish government collapses: United Left Alliance offers real alternative

Tunisia: Protesters demand real democracy and social change

50 years ago: Congo's independence leader assassinated


Socialist Party schools features

Tidemill school - victory for parents

Save Our Schools

Bankers' "Free school" excludes poorer pupils


Socialist Party review

Britain's Banks: Too Big to Save?


Comment

Three decades of 'reform' and 'flexibility'

Stop the mental health service cuts


 

Home   |   The Socialist 26 January 2011   |   Join the Socialist Party

Subscribe   |   Donate  




Related links:

Banks:

triangleThem & Us

trianglePrince Andrew outrage exposes establishment

triangleKarro Foods victory Hull

triangleWhat lies behind the US-China trade war?

Britain:

triangleWindrush deportations: end the hostile environment

triangleLeicester Socialist Party: Britain after Brexit

triangleHackney Socialist Party: Scottish independence - Will it happen?

triangleNationalise the railways: For an integrated public transport system

International:

triangleAustria: Success In Defending Women's Right To Abortion

triangleOrganise the fightback - from Tahrir Square to Wisconsin

Capitalist:

triangleTrump's trashing of the environment - Dump the capitalist profit system!

triangleNo 'blank cheque' for Labour leadership candidates

Reviews and comments

Reviews and comments

12/2/20

BBC

New BBC series - Insight or whitewash?

5/2/20

Liverpool

Liverpool council: "No more cuts" - Is Joe Anderson serious?

5/2/20

Socialist

Socialist Inbox

29/1/20

Socialist

The Socialist Inbox

29/1/20

Review

TV review: The Trial of Christine Keeler

22/1/20

Revolution

Robert Burns: of the people, for the people

22/1/20

Letters

The Socialist inbox

15/1/20

Letters

The Socialist Inbox

15/1/20

George Monbiot

TV Review: Apocalypse Cow

15/1/20

Food

Sustainable food production and the need for socialism

8/1/20

Letters

The Socialist Inbox

4/12/19

Socialist Party

The Great Big Socialist Party Quiz 2019

27/11/19

Plymouth

Plymouth Blairites side with anti-tenant landlords

27/11/19

Minimum wage

Minimum wage debate

27/11/19

BT

The private sector will never provide broadband to every home, nationalisation will

triangleMore Reviews and comments articles...


Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party
Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

LATEST POSTS

CONTACT US

Phone our national office on 020 8988 8777

Email: info@socialistparty.org.uk

Locate your nearest Socialist Party branch Text your name and postcode to 07761 818 206

Regional Socialist Party organisers:

Eastern: 079 8202 1969

East Mids: 077 3797 8057

London: 020 8988 8786

North East: 078 4114 4890

North West 079 5437 6096

South West: 077 5979 6478

Southern: 078 3368 1910

Wales: 079 3539 1947

West Mids: 024 7655 5620

Yorkshire: 077 0671 0041

ABOUT US

ARCHIVE

Alphabetical listing


February 2020

January 2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999