There is a distinct difference between the US government response to the current economic crises and the European. European nations have a long history of experience with nationalized companies. Europeans have a significantly longer experience with trading and commodity markets, including currencies. Also, European nations still maintain strong checks and balances in their political, legislative and judicial systems.
On October 8, Gordon Brown partially nationalized seven of Britain’s largest banks: Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered. According to the Associated Press report on the same day, “Prime Minister Gordon Brown billed it as a “radical” plan to stabilize banks so that they could resume normal lending and other operations, rather than trying to buy up bad assets as the United States is doing.”
England’s Treasury Chief said, “The banks are going to be run as commercial operations, albeit with government help in restructuring.” He also noted, “The government will need to take into account dividend policies and executive compensation practices.” In other words, the government will exert direct influence at each institution to the extent necessary to correct the structural problems that allowed this crisis to occur and they will not allow payoff to the executives that contributed to this mess, unlike their US counterparts who continue to receive massive bonuses and payouts under the Bush bailout plan. Whether or not the European plan succeeds in solving the overall economic problem is not the point. After all, the current crisis is overshadowed by other larger economic weaknesses that may overwhelm any short term solution. The point is the English are taking a more direct role in banks’ affairs to ensure the public investment is well-guarded and that those culpable are not getting unjustly rewarded.
In contrast the US bailout package is exactly that. It bails out the firms and individuals who got us into this mess. It requires US citizens to cough up $850 billion to pay for bank losses without including any responsibility or accountability with the package. Banks can take the money, do whatever they want with it, including paying themselves back for their loan losses and continue giving massive payouts and bonuses to senior executives. Although the US has superficially adjusted to align with Britain and Europe’s solution, by considering the purchase of preferred bank stocks, there is no mention of restructuring the system or correcting the financial and legal structure that resulted in these losses. Nor is there serous action to reign in payoffs to senior executives and managers.
On October 16, representing the European Union, President Nicolas Sarkozy, called for a “revamping of the capitalist system”. These are strong words and represent a radical turnabout for a President who was elected on a platform of strict adherence to and strong support of the US and Bush’s economic policies. The French have followed the British model. According to the Telegraph of London, “Like the British model, the French guarantee will come with ‘obligations’ – namely that banks curb generous severance packages for heads of failing banks, and that they give credit priority to home owners and small businesses. Mr. Sarkozy re-iterated his aggressive promise to punish those in charge of failing banks, as well as speculators. ‘Those who have done wrong will be punished,’ he said…”
Moreover, Europeans recognize the larger dangers lurking in the financial shadows. European nations are united in their call for a world summit to re-define the capitalist system. Brown said, “The IMF has got to be rebuilt as fit for purpose in the modern world.” European nations are calling for an international board of supervisors that would serve to add transparency, regulate critical global and multinational banking transactions and similar oversight responsibilities. All European nations agreed that regulation must be re-introduced into the financial markets. Characteristically the US is resisting this solution although Bush has reluctantly agreed to participate in a summit to address the economic crisis. US Treasury spokesman, Robert Saliterman stated “…ultimately regulation is undertaken at a national level, though it must take the global context into account. In this respect, a global regulator is not a realistic approach.” On October 17, Bush declared, “…in the long run, one of the best ways to restore confidence in the global economy is by keeping markets open to trade and investment.” In other words, Bush is hell bent on maintaining the current hands-off, laisser-faire, deregulated approach to the free market that got us here in the first place.
To reiterate, this article does not endorse the European model as an overall solution to what ails the global economy. In this writer’s opinion the underlying global economic problems are far greater and deeper than the current subprime and credit crises.
Instead, this article attempts to illustrate a subtle but fundamental and far-reaching difference between the European solution and that imposed by the Bush administration and underlines why Bush cannot accept the European solution. The European model recognizes the failures of the banking system and deregulated financial markets. It also honors the role of private citizens and attempts to protect their rights and public funds. In the Bush model, as we have seen with other crises, the administration appears to be taking advantage of the situation to impose yet another wave of neoconservative (or neoliberal, whichever suits your taste) solutions that only further exacerbate the real problem, capitalizing on the misfortune of US citizens. This legerdemain is made possible by the general confusion about the true problem, the need to act rapidly, the constant media disinformation propaganda and the weakness of Congress.
The right wingers decry the bailout as Socialism. Some on the left wing have derided the program claiming (correctly) that we are privatizing profits and socializing losses. However, the danger is far deeper than either of these points of view reveals. In Europe they are nationalizing the banks to deal with the issue, wherein the government exerts control over the banks. In the US, where our politicians are nothing more than corporate proxies, it is the opposite. The banks have open access to and virtual control of the nation’s monetary coffers. Through the Bush plan they are allowed to dip directly into our public monies and take what they need and want without any accountability or guarantee that these funds will be properly managed or that the underlying problem is being addressed. This is blatant corporate fascism. Almost no attempt is made to even hide it. The corrupt bankers that got us here are able to reach deep into our pockets and simply steal OUR money. The bailout package is nothing less than outright theft. It ushers in yet a New US Order, i.e. that private corporations run our government and use our taxes as a piggy bank to suit their whims and self-perceived needs. It is difficult to imagine anything but the most evil intentions behind Bush’s opportunistic bailout plan that thinly veils yet another great rip-off of the US taxpayer. Add this to the $1.365 trillion corporate tax giveaway of 2001, the $800 billion corporate tax giveaway of 2005, the $1.1 trillion printed in April of 2008 and handed over to ailing banks, the bailout of AIG, and the $3 trillion Iraq War, and voila, it all adds up corporate run fascist government with no transparency, accountability or apparent concern for the well-being of Americans, US institutions, the Constitution and least of all, democracy. When will we take a stand to save our nation? What will that stand look like?