Banks bailouts by Frédéric Lordon

, par Les Dessous de Bruxelles

Transcription and translation of the speech of Frédéric Lordon on banks bailouts, 11th October 2011, France 3 channel.

I would like to start by addressing the banks bailouts of 2008-9. Without fear of contradiction, we can say two things. Firstly, that they were absolutely necessary, vital. Second, that they were scandalous beyond words. Why a scandal ? Well, people know it and are more than angry, I can assure you.

Because the banks and finance were saved without seeing in exchange even the slightest initiative towards the regulation of financial activity or the tiniest change in banking structures. And yet at the same time this was absolutely necessary, for a very simple reason. People must try to understand the sheer degree of economic and social devastation that follows from a state of systemic risk.

Given such hypothetical circumstances, with the complete collapse of all the banks, even the most basic transactions become impossible. Someone who wants to buy bread at the bakers’ – that can’t happen any more. That’s because you can’t take money from an ATM, you can’t use a cheque or a credit card. You have the change in your pockets... and after four or five days are surviving on potatoes. It is the ultimate catastrophe – if the banks go down, we all go down together.

It would lead to such social chaos that it would be inconceivable for governments not to get a handle on the matter. They are forced to save the banks, whether they want to or not. And it is precisely within this relation between absolute necessity and scandal that society itself is forced to adapt, as the public authorities come to the rescue of the banks : since if the banks break up, then the social fabric will break up the following week. The material interests of the population are so intimately linked to the banking structure, that it is impossible to let it collapse.

This is a very particular part of the capitalist social structure, that the banks are the de facto depositories of vital public interests, vital to any market economy. Firstly in terms of the populations’ transations, their deposits and savings, evaporate in an instant : no need to warble on about guaranteed fund levels, if a bank or two fall, the whole lot fall and it’s all gone. Secondly in terms of the integrity of the system of payments. They do not just guarantee them but control credits, debits, the most basic transactions. Because the banks have captured control of these public needs, they can force states and society to come to their aid.

As such economies are taken hostage : this is of colossal importance. Every time there is a strike by transport workers or dustmen, it is said that we are being taken hostage by the unions. But this is an enormous, cosmic hostage-taking, which is never discussed. The question of principle is this : behind the question of saving the banks is the question of banks as such. Society must ask itself the question as to whether it will continue to tolerate such vital public interests being wrapped up with private interests, particularly private interests as murky as those of finance. Even to ask the question is to answer it. If not, the obligation to rescue the banks will return time and again. As such the conclusion can only be the total de-privatisation of the banking sector.

Nationalisation is primary and easiest means of de-privatisation, which is a real virtue in times of urgency. It is not the only one. However, for me it is clear. We must envisage nationalisation, not a wretched nationalisation like what we saw in 2008-9 and again today – partial, temporary, without any intention to exert control – but a total and definitive nationalisation of the banking sector.

The opportunity has been and gone before. I am waiting for the fateful moment : we face a moment of massive risk. If the risk is realised then the banks will all be in a technical state of bankruptcy, their financial valuation will fall to zero and the state could pick up and take over the banking system for zero euros. And not only then to give them the financial means etc. such that they again reach a perilous state.

There are three objections to this. First, that we have already seen bank nationalisation : with Credit Lyonnais the public status of the bank did not avert sinister goings-on. Second, the shareholders’ sacred right to their property, which if the value falls to zero no longer exists. Third, the problem that, in the last analysis, the state becomes the only guarantor of credit. As such we have two problems of importance, neither of which I consider insurmountable.

All these attempts at regulation have proven worthless, as we have seen with the previous two Basel Accords, the separation of retail and investment banking – left to the discretion of private banks themselves to implement and thus left on the scrapheap – or the attempts at regulation in the United States, eviscerated almost before it saw the light of day, and to be implemented between now and 2019... we could see the banks collapse four times over before then.

I can see no solution other than nationalisation. I will add that nationalisation, even if the first word in the de-privatisation of the banks, is in no sense the last word on the matter. I agree to a certain extent that there is a problem with having a gigantic bank absorbed into the state. As such the banking system itself must in turn rapidly mutate into something I call a socialised system of credit, resting on the two axes of localisation and the autonomy of decision-making.

Institutions which will neither be limited companies nor public bodies, but a third sui generis status, in which a spirit co-operativism and mutualism is expressed as much as possible (not like Credit Mutuel or Credit Agricole, which do not do so to the slightest degree). All participants will take part in decision-making on credit – bosses, workers, unions, consumers’ associations, environmentist groups – obviously assisted by credit-risk professionals and representatives of the monetary and state bodies, etc. As such it would for the first time place control of finance in the hands of those who it immediately concerns.

So the de-privatisation of which I speak first means nationalisation, then something which might be called the communisation of credit. This because the general conditions of credit in the economy are of common concern and as such must be handed over to common control.