Barclays
Bank will go bankrupt!
by Steve Wallis
[I am sending
this document far and wide, including to discussion forums where it is “off-topic”.
I will undoubtedly annoy some people, who will regard it as “spam”, but surely
savers with Barclays Bank, Citigroup (the biggest bank in the world which recently
rebranded itself Citi) or any of the other banks mentioned in this
message will want to know that they are likely to lose their savings unless
they withdraw it very soon, rather than waiting until their bank’s problems are
in the news or they spot massive queues outside branches. This document contains some very important leaked
information about Barclays Bank. It and my
previous document on financial meltdown are the most important I have ever
written, so if I get chucked off or put under moderation on the odd forum as a
consequence of sending either out then it’ll be worth it…]
In a document
I wrote on Friday the 2nd of November entitled “Financial meltdown soon –
prepare for revolution” (available at www.socialiststeve.me.uk/meltdown-revolution.htm), I pointed out that the world economy is heading
towards a severe crisis, mainly due to debt held by governments and individuals
(particularly those with “subprime” mortgages), and rich people and companies
exploiting tax loopholes and tax havens to pay little or no tax.
I urged
(left-wing and mainstream) political parties to demand the closure of those
loopholes and havens, and threaten to confiscate the assets (including money in
bank accounts, shares on stock markets, call centres, factories, warehouses,
oil rigs, stock, raw materials and equipment)
of those who use any remaining tax havens in the world or try to relocate
overseas to avoid paying tax. I predicted that the influence of left-wing
activists and masses of the population, if people follow my lead, would
ultimately lead to a financial meltdown that could only be stopped by closing
all the world’s stock markets.
When I wrote
and distributed that document, to individual contacts, mailing lists/discussion
groups with hundreds of thousands of members on, as well as putting it on other
forums on the web (Google Groups and the News forum at anarchist website www.libcom.org), I was unaware that a partial meltdown was already
taking place. I didn’t expect financial meltdown to take place until political
parties adopted such policies, with it perhaps being necessary for those
parties to come to power, although I did predict severe stock market
fluctuations as a result of sending out my message. Perhaps I was being
over-modest and wary of making too bold predictions that may not come true, but
it is now clear that events will take place much more rapidly than I expected.
I made the point that stock market investors will need somewhere to transfer
their assets to, and all of them could be under threat of taxation or
confiscation whatever they do, but it is now clear that the rational decision
of many has been and will continue to be to avoid banking shares because they
are particularly risky. Whereas a meltdown of entire stock markets is not on
the cards in the near future, a very severe meltdown of banking shares is under
way (with investors switching to shares in safer companies) and will soon lead
to many financial institutions around the world going bankrupt.
150 mortgage
lenders in the
The subprime
problem is not limited to the
There are two
reasons why UK subprimes will not cause problems as great for banks and
building societies selling them (but they will be very big for the borrowers
losing their homes), however. Many of them are for council houses purchased
under the Tories’ “right to buy” legislation at a big discount for those who
have lived in council houses for many years. Also, there is a shortage of homes
in the UK, which will probably prevent the UK housing market falling to the
same extent as in the USA where there are many more homes than people require –
although current prices are unsustainable due to mortgages being given at six
times people’s salaries (three times, or three and a half times at most, was
the limit 20 years ago) with interest rates likely to rise and pay increases
kept down (New Labour is trying to restrict public sector pay increases to 2%
which is likely to lead to considerable strike action). Some analysts,
including Alan Greenspan, former Chairman of the US Federal Reserve, have
nevertheless predicted a big collapse in UK housing prices, and prices have
already started falling in many parts of the UK in the last two or three
months. The council house factor and the housing market not falling as much
would mean that financial institutions get back more of the debt when homes are
repossessed than would otherwise be the case.
Shares in Barclays Bank
on the London stock exchange fell by 6.4% on Friday the 2nd of November due to
rumours it had been forced to approach the Bank of England for funding
following big losses in its investment banking arm Barclays Capital
(they had fallen by 8% earlier in the day but recovered a little). Some
commentators are underplaying Barclays’ problems, including Sylvia Pfeifer who
(in the 4th of November Sunday Telegraph)
said “Even the fact that Barclays happily continued its share buyback – in the
event of any real liquidity problems the bank would surely have stopped it –
failed to halt the slide.” Obviously if Barclays had halted the share buyback,
commentators and investors would have realised that their problems were much
greater than their bosses are trying to make out, and their shares would have
fallen far more.
Shares in the
Royal Bank of Scotland also fell considerably on the same day, by 4.7%.
Lloyds TSB shares also fell significantly. Maybe they will
go bust too…
Some
right-wing commentators blamed the BBC for revealing, as the main item on their
evening news TV programme, that Northern Rock needed funding from the Bank of England, saying that
they should have been leant billions of pounds without the public finding out.
The consequence was a run on the bank starting the following morning, with many
customers queuing outside branches desperately trying to withdraw all their
savings. Few people trust politicians, bankers or economists, so their claims
that savers’ money was safe understandably failed to allay their fears. Those
right-wing commentators would presumably hope that savers lose their money
without any warning!
When, a few
years ago, the New Labour government announced a scheme to compensate the
savers of banks that go bust, giving all of their first £2,000 and 90% of the
next £33,000 (with nothing for any remaining savings), they were criticised for
allocating a very small amount of money to the scheme that would be
insufficient if a big bank went bust (never mind more than one at once). This
limit of the scheme has not been mentioned in any coverage I have seen in the
media of the subprime crisis; there would of course be enormous pressure on the
government to find the money from somewhere (presumably by increasing borrowing
beyond the £38 billion already projected by Chancellor Alistair Darling for
this financial year) to reimburse savers. Even if they did find the money, 10%
of thousands of pounds is a lot of money to lose and the promise to reimburse
the money within six months was hardly reassuring for Northern Rock savers! The
Northern Rock run prompted Darling to promise a new scheme, with the full
£35,000 (or even £100,000!) paid back “immediately”. This would supposedly be
funded by some sort of levy on banks, but he failed to explain how the banks
would contribute sufficient money to compensate for the bankruptcy of a big
company like Northern Rock, never mind Barclays (which is one of the biggest
banks in the world), in the near future by gradually paying some sort of levy.
Besides, no legislation on this has yet been passed, so it will be too late for
savers of banks that will go under soon (and it is looking very likely that at
least one will go bust in the coming week).
If the media
keep quiet about an important deal involving billions of pounds, there will
still be some people who know about it and they won’t be able to prevent the
truth coming out about it indefinitely. At lunchtime on the first day of the
Northern Rock run, Channel 4 News reported that four other banks had suffered
big falls in share values that morning – Alliance
& Leicester, Bradford & Bingley, Barclays and the Halifax
Bank of Scotland (HBOS). Many stock
market investors clearly knew that Barclays was in trouble as a result of the
credit crunch, possibly including the fact that Barclays
received two emergency loans from the Bank of
As I said
above, the truth comes out eventually. The fact about the loans to Barclays was
leaked in the Herald (a Scottish
broadsheet newspaper) on Saturday the 3rd of November. Ian McConnell, the
paper’s Business Editor, in the main back page article entitled “Banking fears
prompt further market jitters” said “the
Bank of
Herald articles normally appear on Google News, but
this one isn’t and I received an error when trying to read it on the Herald website (http://www.theherald.co.uk/mostpopular.var.1807184.mostviewed.banking_fears_prompt_further_market_jitters.php). Censorship? Surely not! You can however view the
article on-line at http://theherald.newspaperdirect.com if you want proof of the leak – you need to register
(you can have a three day trial subscription free of charge) and may need to
download viewing software; go to the main newspaper (select “The Herald” from a
pull-down menu), choose the 3rd of November and view page 28.
There is bound to
be an international run on Barclays, with queues outside their branches in many
countries of the world, as a result
of people finding out about the leak, including by reading this document. It is
not a question of whether this will happen but when. The liquidity problems
Barclays faces now will be nothing compared to those they get as a result of
the bank run. The Bank of
I must admit
to being rather pleased about the prospect of Barclays
Bank going bust, due to their record of propping up the apartheid
dictatorship in South Africa, while
feeling sorry about the plight of ordinary savers unaware of the bank’s
historic role who will lose money. Those
who have mortgages with Barclays will be delighted – they will no longer have
to pay them off and own their homes completely. Those with Barclays loans or
overdrafts will similarly be happy.
[I’m not sure whether Barclaycard owners will get their credit card debts
written off, or if Barclaycard is independent of Barclays.]
Some banks
would go bust whatever happens, and it would be more satisfying if it is
primarily the less ethical ones that go bust. It will serve the shareholders
right for investing in an unethical company. It is actually rational for
unethical financial institutions to suffer more than ethical ones from the
subprime crisis, since if they are less ethical in other ways they are likely
to have less qualms about ripping off poor mortgage holders.
The Royal Bank of
If you live
in the
Many ordinary
people will lose out as a result of the financial crisis, particularly those of
us who use pension funds. Whereas I do not
feel sorry for shareholders who have made massive sums of money at our expense
by gambling on the stock market over the years, we have no choice about where
the managers of the pension funds risk our future livelihoods. The Socialist Party of England and Wales
(formerly known as the Militant Tendency) and similar organisations elsewhere
in the world linked to it via the Committee for a Workers’ International (CWI)
call for nationalisation of the companies that dominate the economy with
compensation on the basis of proven need. If companies are taken over, either
as a result of a mass movement from below or nationalisation from above, I
would advocate that only pension funds are compensated. Nobody explained to me
how people would prove they need the money, or how it would be decided how much
of the money they lost they would get back, during my eight and a half years
membership of the Socialist Party/Militant, and the massive numbers of court
cases it would surely involve would be impractical.
There is a
big difference between how the Bank of
The pumping
in of funds by the Federal Reserve is not stopping banking shares in the
Most
capitalist commentators claim that the credit crunch, with the reluctance of
banks to lend to each other, is a temporary problem. In reality, the problem
won’t go away until there is some sort of revolution, with a complete
reorganisation of society! Whether a more ethical form of capitalism or a
(hopefully democratic and ethical) form of socialism will result from such
revolutions remains to be seen, and attempting to build an ethical form of
capitalism may lead to a further revolution resulting in socialism. The
solution may be different in different countries of the world, leading to a
(partially or completely) ethical world in which citizens can democratically
choose the sort of society they want – capitalist or socialist – without
interference from conspiratorial organisations like MI5/MI6, the FBI/CIA and
others outside the realm of the state that infiltrate different organisations
in society trying to preserve unethical capitalism (perhaps striving to make
society worse). There are good conspiratorial organisations too that are
striving for an ethical world, which will be able to be dissolved when/if it is
achieved.
For more of my economic analysis and ideas on what left-wing activists should do in the struggle for ethical capitalism or socialism, read my document entitled “Financial meltdown soon – prepare for revolution” (available at www.socialiststeve.me.uk/meltdown-revolution.htm).
For more recent discussion of the economic
crisis, visit my Banks & Building Societies page or the Economics
bulletin board on my Revolutionary
Platform Network forum.