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THE GREAT BANK ROBBERY
They lose billions... but it’s us that have to pay?
by Raphie de Santos
AS
the poor South starves, even running out of essential food
stuffs such as rice and wheat, because of demand from the
increasingly enriched Chinese population, capitalism is calling
on the workers of the West and East to bail them out of their
latest global financial crisis.
Capitalist
banks are asking their shareholders for billions of US dollars
to cover the losses they have made against the sub-prime products
that they have on their balance sheets.
But
also, to protect themselves against potential further losses
from other derivative contracts that they acting as guarantor
for.
These
derivative contracts are with the increasingly shaky hedge
funds (offshore unregulated leveraged investment companies); pension funds,
insurance companies, fund management companies and other investment
banks.
In
addition as the recession starts to bite banks that have exposure
to consumer debt through credit cards, loans and mortgages
and will increasingly have to write off part of these debts
as consumers start to fail to make payments.
The
Royal Bank of Scotland (RBS) is the latest victim of the sub-prime
crisis and so far the losses declared by the major global
banks amount to over (US)$300billion.
Many
analysts, now including the International Monetary Fund are
predicting that this could reach (US)$1000billion.
The
remarkable fact is the total public debt that the poor South
countries owe to the international banks in 2006 was (US)$182billion.
This
is almost half the of the losses that these banks have suffered
with the subprime crisis and less than the (US)$220 billion of our money
the
So
when we demand that the debt to the poor South be written
off it is not such an unreasonable request!
The
global banks basically went on an orgy of greed and failed
to properly access and recognise the risks of the subprime crisis.
But who is going to pay for it?
We
find that it is the ordinary people in the West.
Citicorp
the second biggest sub-prime loser has cut 13,000 jobs so
far and plans to cut a further 9000 after it recently announced
a further (US)$12billion of losses last week.
Our
own Royal Bank of
One,
by regulation they must have a certain amount of money (called tier
one capital) as safeguard against the products that they are
guaranteeing.
Two,
they must have a cushion against further losses from sub-prime
products, loans and other derivative products.
The
most worrying exposure is to something called credit insurance,
which they have sold in the financial markets as a guarantee against
companies going bankrupt. It is estimated that there is (US)$26,000billion (26trillion)
of this insurance outstanding.
In
a recession, companies go bankrupt at a rate of between 5
and 10 per cent.
If
we enter a deep recession, this could reach 10 per cent, and
50 per cent of value of the company is recoverable, meaning
that the banks would have to pay out about (US)$1,300billion
in insurance payments.
How
do they find the money they need. One way is by a so called
rights issue.
RBS
needs (US)$24billion to fill its black hole!
That
is just over 14 per cent of the total debt that the poor South
owes the global banks!
Who
is going to pay for this rights issue? The shareholders who
the majority happen to be you and me.
Through
our pensions funds, insurance policies, endowment policies
and ISAs we own RBS.
But
the people who manage it on our behalf will decide if they
should give our money to bail out a bank that through its
speculative greed has lost billions of dollars and will likely
make thousands of it workers redundant in
A
bank that cannot find the heart to find a few hundred million
US dollars to relive the debt of the poorest people on the
planet.
That
is the insanity a global financial and economic system that
haggles over a few dollars here and there for the poorest
citizens of the planet.
But
at the same time can lose multiples of the amounts, on a reckless
gamble, that could forever lift the burden of debt of the
most desperate people in the world.
It’s
time this system was replaced with a rational one that puts
people before profits and speculation.
Major Sub-Prime losses so far declared
UBS:
$38billion
Citigroup:
$36billion
Merrill
Lynch: $31billion
Morgan
Stanley $12billion
Deutsche
Bank: $7billion
Credit
Suisse: $6billion
HSBC:
$3billion
Bank
of
JP
Morgan Chase: $3billion
RBS:
$3billion
Goldman
Sachs $3billion
Freddie
Mac: $2billion
IKB:
$2.6billion
HBOS
$450million