3-27-08, 10:24 am

What about the staff?

Newcastle Labour MP Jim Cousins is correct in his assessment of the Financial Services Authority admission that it failed to regulate Northern Rock.

The abject FSA apology is designed to put an end to criticism of itself and other authorities and to draw a line under the entire episode.

But how can a smooth-tongued apology terminate debate of what has taken place, what lay behind it and, more importantly, what those responsible intend to do in the future.

It wasn't just the FSA that was at fault. So was the Bank of England and so was Gordon Brown who, as Chancellor, weakened regulatory mechanisms, parroting neoliberal dogma that market forces were the best forms of regulation.

If he had really believed that, he would have allowed Northern Rock to go down the pan, but this would have eroded confidence in the rest of Britain's financial sector, which the government could not allow to happen.

But banks are not the only stakeholders in Britain's financial services sector.

Tens of thousands of banking staff work within it, including 7,000 at Northern Rock, 2,000 of whom face the chop through no fault of their own.

Neither the government nor the FSA has anything for these people bar crocodile tears and soft words of sympathy.

Northern Rock directors and major shareholders filled their pockets when the going was good, when the profits came rolling in as a result of its irresponsible but, in the short term, highly lucrative gambling on interest rates.

But, whereas they are allowed to waltz away from Northern Rock with their ill-gotten gains, those who have invested their working lives are left stranded.

The government disregards the interests of working people, putting in new boss Ron Sandler to get the business back on its feet by trimming its size and staff numbers, with a view to handing it back to the private sector.

Where is the sense in that? Demutualization - in essence, a form of privatization - lay at the heart of Northern Rock's problems.

If it had continued as a building society, it could never have overstretched itself in the way that it did as a private bank.

The motivation was greed, the guiding force of the private sector, rather than public service and co-operation, which underpin publicly owned companies.

When the crisis rocking Northern Rock came to light, the government ought to have nationalized the bank, creating a people's bank to offer basic, trustworthy banking services rather than a rapacious organization with profit maximization as its sole goal.

That approach has destroyed the banking industry that once offered a service to customers rather than seeing them as sources of ever higher sales of credit, insurance and other financial services.

The government and other advocates of neoliberalism regard the ideas of service and co-operation as outdated, seeing economic competition as people's only reason for existence.

There are 2,000 Northern Rock staff members who would take issue with this benighted view of humanity, having been sacrificed on the altar of profitability.

There should indeed be greater regulation of financial services, but regulation is not in itself enough. Another approach, another society is both possible and necessary.

From Morning Star