More bank bailouts coming: “what are we fucking stupid?!”

by Jerome Roos on October 9, 2011

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Next week, they will start throwing hundreds of billions of dollars at the banks again. But there is one difference from 2008: this time, we’re awake.

Get ready. It starts this weekend. Dexia, the Franco-Belgian bank, got sucked down the rabbit hole last week. With investors now accepting the inevitability of a Greek default, the cross-hairs of global speculators have finally turned on those ultimately responsible for the crisis: the irresponsible lenders, the casino capitalists who thought they could make a quick profit by betting on subprime mortgages and government bonds during the boom years.

From here, things will move in rapid succession. Angela Merkel has said that Europe will only have until October 17 (the day after a crucial G20 finance minister meeting in France) to fix its banking problem. In reality, things could spin out of control much sooner than that. Here’s why: our Zombie Banks are on the loose again. And they are looking for blood. Lots of it. In fact, hundreds of billions of dollars worth of it. And the worst part is, they will get it, too.

All of this is highly reminiscent of a legendary George Carlin sketch about the extremely serious self-inflicted condition of ‘ice cream throat’: “you know when you eat it too fast and you get that little numb spot in the back your throat? But you can’t do anything about it because you can’t reach it to rub it? So you just have to wait for it to go away? And then it does? Then what do we do? Eat more ice cream! What are we fucking stupid?!

That was the fun part. Replace the ‘ice cream throat’ with ‘bank bailouts’ and there is nothing left to laugh about. You know when you give the banks too much money and you get that little numb spot in the back of your public sector? But you can’t do anything about it because you can’t reach it to fix it? So you just have to wait for it to go away? And then it does? Then what do we do? Give the banks more money! What are we fucking stupid?!

Socializing the Losses of the Capitalists

Capitalism never solves its own crises — it merely moves them around in time and space. European banks are still sitting on hundreds of billions of euros in peripheral bonds. Now that investors are convinced that Greece is about to default, these banks are falling down like London Bridge. No jokes here: Europe’s entire capitalist system is at risk of collapse. So in order to save it, our “democratic” representatives will socialize the capitalists’ losses once more.

But it’s not just European capitalism that is at stake here. As Robert Reich just pointed out in an excellent article, Wall Street is exposed to the euro zone to the incredible amount of $2.7 trillion, with French and German banks making up almost half of that. Since a Greek default would send German and French banks into tailspin, the crisis will not just ripple to the US: it will bring down America’s Zombie Banks as well, shaking the very foundations of global capitalism.

Make no mistake. The United States wants Europe to bail out its deeply indebted nations so they can repay what they owe big European banks. Otherwise, those banks could implode — taking Wall Street with them … In other words, Greece isn’t the real problem. Nor is Ireland, Italy, Portugal, or Spain. The real problem is the financial system — centered on Wall Street. And we still haven’t solved it.

France’s biggest banks, BNP Paribas and Société Générale, have lost over half their value in the past 3 months. On Friday, twelve UK banks were downgraded, along with Italy and Spain. And now there is a canary in the financial coal mine: Dexia. Shares of the Franco-Belgian bank plummeted last week as investors pulled out en masse. The bank will have to be bailed out or nationalized over the weekend. If it is not, expect a classic bank run on Monday morning.

A Permanent Economic Emergency

Here’s why Dexia matters: it was already bailed out once in 2008 at the expense of recession-stricken taxpayers. Apparently it did not help much: Dexia is still sitting on a lousy 21 billion euros in worthless peripheral bonds. Amazingly, however, the bank still made it through the European stress test in June. First of all, this shows just how blind our regulators are. But, more importantly, it raises the question how many other banks might be similarly screwed.

The answer is tons of ‘em. Many, like Deutsche Bank and BNP Parisbas, are considered “too big too fail”. That’s why Nicolas Sarkozy and Angela Merkel are freaking out right now. And that’s why, on Sunday, they will have yet another one of those fancy emergency meetings. Given the frequency at which these meetings now occur, they can hardly be designated as emergencies anymore. This is what Žižek meant when he spoke of a permanent economic emergency.

Larry Elliot, the Guardian‘s economics editor, recently summarized it as follows: the “financial crisis has the world teetering on the brink — welcome to the new normal.” The Governor of the Bank of England may just have realized that we are possibly facing the worst financial crisis in world history, but this is no real news either. We’ve been in the worst financial crisis in world history for the past three years already. We just didn’t know it. Or didn’t want to know.

Back in 2008, most of us — citizens and political elites alike — were still sleeping. Things moved too fast, and we didn’t quite understand the intricacies of global finance yet. This time, things are different. Greece is on the verge of revolution. The Spanish indignados have given rise to a  pan-European network of activists who are ready to mobilize at a whim. Wall Street has been occupied for 3 weeks and the movement is spreading through the US like a wildfire.

Mobilizing for Global Change

On October 15, we will mobilize hundreds of thousands — if not millions — of people around the globe, from Melbourne to Santiago de Chile, from Washington, D.C. to Brussels, from Tokyo to Rio de Janeiro, as part of a global day of action against casino capitalism and for real democracy. We are waking up. But we have to wake up faster. Our leaders are about to get fucking stupid again and eat more ice cream, throwing hundreds of billions of euros at the banks without any hope of solving the underlying causes of this crisis.

We need to do something radically different. Instead of bailing out the banks, we should seize them — institute immediate capital controls to stem the outflow of hot money; nationalize struggling financial institutions through expropriation; throw out their management and start a series of criminal investigations into their fraudulent behavior; break up the banks so they are no longer “too big to fail”; and restructure them into cooperatively-owned credit unions.

This solution would be the only one to safeguard our democracy. Yet it is simply impossible to execute within the confines of our present political arrangement, where the banks simply dictate financial policy to our governments. That’s why we need a revolution. This may sound stupidly naive and ridiculous — and it is. But few people realize how serious this crisis is about to get. And even fewer people realize how deep-seated and widespread the public anger really is.

We are about to see a reversal of fate. To the skeptics: just wait for Italy to get sucked into the maelstrom and then come back again after France, Germany and the US bailed out their banks for a second time, cranking up their public debt to the level of the so-called PIGS. Austerity will come to the core with a vengeance, and it is going to hurt. Recession, too, will come to the core, and it will hurt. Eventually, the popular backlash, too, will come to the core. And it will hurt.

So get ready. It starts this weekend.

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