Pigs Return to the Trough

Its a sign the Financial Crisis is more or less over. The Pigs are returning to the trough. Rory Bremner in his new Series "Silly Money" See: Silly Money

illustrated how the Bankers, even after the catastrophe of their adventures into speculations that even John Law would have fought shy of, are, as we speak, devising even newer types of collateralised products that will result in the same kind of crisis some time in the future. But, worse than that.

Last week, there was a small snippet of news on CNBC, on US Squawk on the Street. It detailed that one of the US bankers, bailed out by the US taxpayer, had been asked what he was going to do with the $25 billion the Government had given them. Remember that the purpose of this recapitalisation was that the Banks should begin lending again, in particular, lending to each other, to reduce overnight lending rates, and thereby to end the Credit Crunch. So, what was his answer to this question? "NOTHING". In fact, that is not quite right, because it appears that the US Banks do intend to do something with all that taxpayers money. Its not to actually do what was intended and free up lending though. No. Apparently, they intend to use it as Capital to buy out other Banks!

Now, at the end of last week, we find that Barclays, in Britain, have shunned the offer of a State bailout in favour of 30% of the Company being bought by private Middle Eastern investors. The cost of this bailout is greater for Barclays than had they taken the offered State aid. So, why go down this route, which appears not to be in the Company's interest, and certainly not in the Share holders interest? The answer appears to be that it is in the interests of the Barclays executives! Banks, taking State aid, have some restrictions placed upon them, including some, informal at least, controls over the remuneration and bonuses paid to top Executives - you'd think given the mess they've created they should be paying back what they've had never mind not reciving huge bonuses in the future - but, by taking on Private Capital, Barclays avoids this problem, whilst its new backers benefit from getting a large share in the Company on the cheap.

In some ways, this is rather like what used to happen in the USSR. On the one hand, one class owns the means of production, but on a day to day basis it hands over control of them to a bureaucracy. In the USSR that class was the working class, in the US and Britain etc. its the Capitalist class. In both cases, the bureaucracy, as far as it is able to, acts to feather its own nest. In the USSR, with a very weak working class, and powerful class enemies inside and outside its borders, the bureaucracy was able to exercise huge political power, and feather its nest without the workers being able to exercise any control over it. In the US, in Britain and other Capitalist states, the capitalist class is a very powerful class with strong points of support inside and out of its borders. The bureaucrats, that it allows to act on its behalf, are closely tied into the class itself in a way that the bureaucracy in the USSR could never have been tied into the working class. The Capitalist bureaucracy's interests, as part of the capitalist class, are, as class interests, identical to those of the class as a whole, but as a bureaucracy it has its own group and individual interests. The Capitalist class are prepared to give it a great degree of freedom to pursue those interests, as an overhead cost of its rule, as a faux frais of production, but within limits.

The antics, the other year of the executives at Enron and elsewhere stepped over the boundary, and the Capitalists that own the means of production had to step in to pull back into line the bureaucracy they allow to manage them. Its likely that we might see similar actions against that bureaucracy within the Banks that caused the current crisis for capitalism. Its no doubt ahead of such challenges that the executives at Barclays have looked to shore up their positions.