A lot of money to rescue the banks and a free bonus lesson on the craziness of capitalism
One is supposed to imagine it roughly the following way: the crisis drags on because business simply hasn’t got going again. That’s because the banks, “lifeline of our economy,” aren’t supplying business people with the loans they need. They don’t do this because they are sitting on “lots of toxic assets,” which is why there is simply ”no more trust” between them nor in their dealings with the rest of the business world. So it’s clear that the state absolutely has to help them trust again, thereby helping all of us out of the crisis. An “ultimate step to rescue the banks” under the slogan, ‘bad bank,’ is supposed to achieve this. There has never been such a thing here before, and the costs are alarmingly high, too. But first of all, it is absolutely essential — “time is pressing.” Secondly, the model is a compelling idea,” and thirdly, it is “not at all illogical” the way the crisis is being tackled by the state here: the purpose of relieving banks of their “bad assets” will be taken care of by a special purpose entity founded just for this purpose, and that’s very logical. A special bank is to enter securities without value in its books as assets and hand them back to the banks in the form of bonds whose value is guaranteed by the state, which is quite alluring: they will have “nice clean balance sheets again,” can “trust each other again” and “revive the credit business.” This will finally let us get the tiresome crisis over with.
This is not exactly a small matter that is somehow supposed to appear plausible but, at any rate, absolutely necessary.
One thing surely can’t be disputed in the fixed views about the quality of the items that banks are accustomed to do business with: at the moment, they are useless for the purpose they are supposed to function for. Except that, stupidly, they weren’t invented for the purpose of providing the business world with credit anytime, anywhere, but rather are not functioning for the purpose they were invented for. These fine “structured securities” of the banks are, as the experts credibly affirm, critical.” The stuff hiding behind the shorthand of technical jargon, which everybody has mastered by now, is hard to rate,” “barely saleable,” involves worthless toxic papers” that should be disposed of as quickly as possible.” The same experts, however, also report on an extremely strange problem showing up in the course of disposing of them: simply throw away junk securities” like junk? Good lord! That’s out of the question, this sort of “toxic” waste can't simply be burned, no, a very special disposal site is required. The difficulties in disposing of this waste already start with the interesting question of how much the assets of the banks are ridden with toxic papers. The reason this is so hard to determine is that one would have to know which papers are “toxic” and which are not, and one simply can’t tell that from these slips of paper, which are stored at the banks alongside the bonds that are — still — considered unblemished. What they are currently worth and whether they are worth anything at all, how much they could soon be worth again or whether they will remain worthless forever — none of that is marked on them. There may be ample evidence for speculating on this, like on anything, for the pros dealing in debts and risks. But the same goes for these clues for their calculations as for the stuff of their speculation: what it’s worth is decided by them in practice, that is, by their doing their business with it. Except they aren’t doing that right now; the otherwise usual competition between buyers and sellers that establishes the price of the ‘security’ commodity has been suspended by its agents themselves, and it’s no big secret why: banks, in their capacity as purchasers, aren't buying from each other because they fear landing a valueless piece of paper instead of an automatically expanding source of money; in their capacity as sellers, they don’t even start searching for customers for their ample offerings because they fear that the worthlessness of their merchandise will be confirmed once and for all in the form of lacking demand; and anyone who, nevertheless, has to sell to balance his accounts thereby lowers the price of the class of merchandise sold, further decimating his assets. That’s the absolutely crazy way of a free market economy, the best of all worlds: securities aren’t being traded because they aren’t worth anything, and they aren’t worth anything because they aren’t traded! This alone is absurd, even more absurd are the devastating consequences: because debts — in the form of papers with a securitized promise to soon be worth more than today — no longer find prospective customers who want to become richer by investing in them, then right away, nothing else in the rest of this fine economy runs like it’s supposed to anymore. Producers and traders of commodities with quite palpable use values, and, in the end, even the national budget, fall into crisis — because people who trade in pieces of paper without either use value or money value have lost the business base of their enrichment!
This market-economy madness is exactly what is being kept alive by the ‘bad bank,’ whatever the cost. A gigantic effort is lavished specifically for the purpose of not writing off, as worthless, preferably any of the banks’ fictitious capital that has turned out to be worthless. Instead, a legal fiction of intrinsic value, constructed using every trick in the forgery book, has been plopped onto the bank assets that have become valueless — in the form of a bank that officially begins its business activity with bankruptcy, but exactly this way is supposed to rescue all the other banks from the same, and endow them with the basis for further business capacity. So that they can show a profit again, they are allowed to unload their balance sheet losses onto a company that has the brilliant business purpose of storing away devalued assets in its vault as sources of wealth-in-waiting for twenty years — when the state sees to the matter, the capitalist accumulation of money can be had to an astonishing extent simply by federal law! In return for a scrapping premium (which they have to pay themselves in this case) amounting to ten percent of the book value of these worthless slips of paper, the banks then obtain again plenty of the stuff with which they ran themselves and the rest of the economy up shit creek: new debts, whose quality is, this time around, not guaranteed by the imaginativeness of their structuring skills, but by state power — and which, for that reason, the banks can again put to good use, following all the so excellently time-tested rules of their trade, as a source of money accumulation in their hands! This is the trivial matter at hand that is so perfectly buried beneath the stupid image of a “lifeline” on which we all depend. This is the purpose that the state will spend any amount on to “rescue”, and anyone who throws up his hands and asks what kind of a world he is living in is definitely right. Except he shouldn’t stop asking, for what, after all, is the founding of a bad bank in comparison with the insanity of the business principle it is supposed to keep in existence?!
At any rate, the final point of the popular if-then relations that market-economy experts use to recast all the idiocies of their system into functionally interrelated objective laws of growth, and from which they then deduce why the restoration of the banking system is an absolute must for the state, does yield one truth: when they, along with everybody who is anybody in politics and business in this country, time after time declare that there will be no growth without a restored banking system, one can actually take this at face value — and ask oneself what kind of wealth it is that flourishes with a thriving banking business in such exemplary market economies as ours. It will evidently be precisely the wealth that blossoms in this very line of business. Trading debts as commodities, transforming borrowed money into titles to property with built-in promises of growth and selling them at a profit — that is the source of the wealth that has to function for any other wealth to exist! Fanatics of growth in GDP and export figures put on record themselves what the very first principle is that governs business life in the system they worship. Making other people’s money act as a source of money for oneself, putting this money as a source of more money into however many duplicated forms and selling and buying them — no, this not only enriches the traders of this commodity: it is at the same time the elixir of life of the entire economy, including the debtors themselves! And it clarifies for the whole rest of this splendid market economy that it has to prove its worth as an accomplice to this sort of accumulation of wealth. It is the lesson that the equations executed in the financial system — money is more money, and giving away money for the right to more money in one’s hands is the method of all methods for increasing wealth — are in charge of everything that is generated as money’s power of command in the so-called ‘real economy.’ After all, they even say so themselves: if these equations no longer work out, there will be no purchasing of means of production and labor-power at many points, and that this means there will be no procuring of quite a bit when it comes to the means of subsistence of every ordinary breadwinner, goes without saying.
The suspicion that ‘money rules the world’ accompanies the market economy now and then, even when it is not in a crisis. When it is, this suspicion occasionally also assumes a moral form, becoming an accusation. That is not good. One shouldn't make accusations against this world that teaches such clear lessons, by its invention of bad banks, about what matters in it. Better to note, soberly and objectively, what the lesson says — and then one will automatically discover that money, or, more precisely, money being predestined to become more, exists for no other reason than to rule the world. All the absurdities of the bad bank — this construction for rescuing the banking system — and the huge effort and expense put into creating it and then maintaining it for twenty years, all this makes clear how absolutely and unrelentingly the regime of money, the inherent necessity of its accumulating, commands the life of the market economy. And if one has gotten this, one simply no longer feels like accompanying this life with the stupid judgment that it isn’t fair because it’s actually supposed to be about something else.
© GegenStandpunkt 2009