Wednesday, March 23, 2011

The Banks are Made of Marble

I've traveled round this country
From shore to shining shore
It really made me wonder
The things I heard and saw.

I saw the weary farmer
Plowing sod and loam
l heard the auction hammer
A knocking down his home

But the banks are made of marble
With a guard at every door
And the vaults are stuffed with silver
That the farmer sweated for

l saw the seaman standing
Idly by the shore
l heard the bosses saying
Got no work for you no more

But the banks are made of marble
With a guard at every door
And the vaults are stuffed with silver
That the seaman sweated for

I saw the weary miner
Scrubbing coal dust from his back
I heard his children cryin
Got no coal to heat the shack

But the banks are made of marble
With a guard at every door
And the vaults are stuffed with silver
That the miner sweated for

I've seen my brothers working
Throughout this mighty land
l prayed we'd get together
And together make a stand

Final Chorus
Then we'd own those banks of marble
With a guard at every door
And we'd share those vaults of silver
That we have sweated for

This song is taken from the Union Songs website. Banks of Marble sounds like a “depression song” from the 1930s but was composed around 1948-1949 by Les Rice, “a New York State apple farmer and one-time president of the Ulster County chapter of the Farmers Union. His songs have made him well-known to farmers throughout the northeast. … his most well-known composition … achieved great popularity among union members throughout the country and even in Canada”.

The website adds the comment “The song has gained new resonance since the 2008-2009 financial meltdown!”. What a terrible misunderstanding; the song today has lost whatever resonance may have had before 2008. For while banks are still of marble, with a guard at every door, their vaults are stuffed with toxic assets, not silver. Their depositors - when they have not been swindled by the banks themselves or other financial intermediaries - often have had to queue in the street to recover their own money, which they got back only to the extent that governments took on banks liabilities, including those towards bank bondholders and perhaps even shareholders. Over the last three years government rescue of banks and financial institutions has added to government debt and lowered bond prices raising their yield and the cost of rolling over debt. Ireland, for instance, spent about 20% of GDP in the rescue of a single bank, Anglo-Irish. The fall in value of the government bonds in their vaults, in turn, added to the problems of banks. The entire banking system of some countries, like Ireland, is regarded as largely insolvent.

In Europe, in 2010 banks' balance sheets were white-washed by perfunctory “stress tests” that gave a clean bill of health even to Anglo-Irish and the Bank of Ireland, that a few months later required €113bn public money for their rescue. The newly-born EBA European Banking Authority (1 January 2011, London) is about to subject European banks to another round of stress tests; their severity is still partly unknown but the danger of another white-washing exercise is not negligible. The discussion of tests is made opaque by technicalities involving capitalisation requirements dictated by Basel 2 versus Basel 3 (Bank of International Settlements, applicable from 2013), tier 1 versus core tier 1 primary assets, RWA (risk-weighted-assets), differential treatment for troubled government bonds marked to market or held to maturity in banking books at their face value. The bottom line is that the re-capitalisation needed by European banks, estimated to be of the order of €7.5bn in the 2010 round of stress tests, has now reached the order of magnitude of €100bn (on top of the re-capitalisation occurred in the meantime, like the €113bn mentioned above). The provision of this additional capital may well slow down economic recovery.

The chances of working brothers making a stand - and taking over those banks that are still worth owing thus making them their own - are zero, as they are made completely powerless by worldwide competition in the global labour market – through de-localisation, globalization of trade and investment, migrations – and the resulting mass unemployment. Their brotherhood is in question, and they have to contend with the overwhelming, almost complete dominance of conservative governments in Europe.
Sad, and bad enough, but to pretend otherwise is outright tragic.


Jacob Richter said...

Greetings again. Since you write of the new precariat (perhaps you've already read Guy Standing's cursory Precariat book that's a poor man's take on Engels' The Conditions of the Working Class in England), I'd like to do a paraphrase perhaps to start a discussion:

To paraphrase Marx:

Considering, that against this combined power of the elite classes the primary producers or precariat cannot unite and act for itself except by constituting itself into a mass party-movement, distinct from, and opposed to, all old parties and movements, that this constitution of the precariat into a mass party-movement is indispensable in order to ensure the emancipation of its labour power,

That such labour power can be emancipated only when, at minimum, the precariat is in collective possession of all means of societal production, all commons, etc., that there are only two forms under which all means of societal production, all commons, etc. can belong to them or return to community:

1) The individual form which has never existed in a general state and which is increasingly eliminated by industrial progress;
2) The collective form the material and intellectual elements of which are constituted by the very development of capitalist society;


That again this collective re-appropriation, or political and economic expropriation of the elite classes, can arise only from the direct action of the primary producers or precariat, organized in a distinct mass party-movement;

Such permanent organization must be pursued by all the means the precariat has at its disposal.

And since you write of "worldwide competition in the global labour market – through de-localisation, globalization of trade and investment, migrations – and the resulting mass unemployment," I wrote this in response to a sociologist's brief response (to my paraphrase) about the need for political labour to go global:

No doubt about it. Matching the [global] mobility of labour with the establishment of a [globally] entrenched bill of workers’ political and economic rights, and with the realization of a globalized and upward equal standard of living for equal work based on real purchasing power parity, thus allowing real freedom of movement through instant legalization and open borders, and thereby precluding the extreme exploitation of immigrants, is a global task that transcends both petit-bourgeois “freedom of movement” advocacy and populist calls for immigration controls.

In mainstream bourgeois circles, it could be interpreted as a call for a pro-labour equivalent to the World Trade Organization in terms of enforcement power.

D. Mario Nuti said...

I know and value Guy Standing, but you are no Guy, Jacob. I find your conceptualisation and arguments totally useless - at best. But the web is a free country, so I will not delete your comment (this time).

Worried said...

Yesterday it was reported that European nuclear stations are to be subjected to "stress tests". Should we panic, then?

D. Mario Nuti said...

Don't panic yet, when it comes to banks it only makes it worse. But you are right to be worried. Barry Eichengreen puts the recapitalisation requirements of French and German banks at 3% of the joint GDP of the two countries - i.e. about €180bn,1518,druck-748239,00.html. He writes "... there is only one solution: Europe needs to strengthen its banks! Greece lived beyond its means, but in Ireland and Spain it is the banks that are the problem. The euro crisis is first and foremost a banking crisis". "Europe's banks are in far greater danger than people realize. Most people now understand that last year's stress tests didn't tell us much. The tests were a token gesture and lacked realistic scenarios. They completely ignored the liquidity risks that banks could face."

Jacob Richter said...

I know I'm no Guy Standing. I have, to put things mildly, reservations about his collaborative bargaining scheme. Why do you object to a pro-labour equivalent of the World Trade Organization?

More on the bank subject, I think the only bank worth strengthening is the European Central Bank.

Magda said...

In the circumstances you describe, are bank managers still attracting over-generous bonuses?

D. Mario Nuti said...

Yes. See Reuters, 03/25/2011: Post-Crisis, Rich Paydays Return for Big Bank CEOs.

WASHINGTON — It is raining money again on many top U.S. and EU bank executives, less than three years after taxpayers worldwide rescued the banking industry from the worst financial crisis in decades.