Who runs this place anyway?

‘The importance of the monopolies is immense, so great that it makes political power disappear in many of our republics. Some time ago I was reading an essay by Papini where his character, Gog, bought a republic and said that although the republic thought it had presidents, legislatures, armies, and that it was sovereign, he had actually bought it. The caricature is exact.’ Che Guevara, Political Sovereignty and Economic Independence, speech broadcast in 1960.

Che Guevara had in mind the dependence of South American and Caribbean countries on the likes of the United Fruit Company and Standard Oil. However, we might look a little closer to home. Much is made of the ‘independence’ of the Bank of England. As the Northern Rock crisis gathered the Governor of the Bank of England repeatedly stood his ground and declared that the Bank would not bail out the shareholders of companies engaged in irresponsible lending; giving them money would encourage ‘herd behaviour’ and penalise those who ‘sat out the dance’, he said. Such bailouts sow the seeds of future crises and should be organised only when there is a threat to the entire financial system. These remarks were seen as a criticism of the European Central Bank and US Federal Reserve that had recently made such interventions into the money markets. The Governor repeated the mantra on Tuesday morning 18 September while the queues still formed outside Northern Rock branches.

On Tuesday afternoon leading City executives from HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB, HBOS (which includes the Halifax) along with leading City merchant bankers met Financial Service Authority (FSA) chiefs at the FSA’s Canary Wharf headquarters. That evening a delegation of the bankers went to the Bank of England in Threadneedle Street. At 11am the next morning the Bank of England announced it would supply the first £10 billion against loans and mortgages that the banks could not sell.

Trevor Rayne

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