Re: Does Rudd inspire confidence?
I quote:
Last week a Freedom of Information request by the Australian revealed that the federal government’s $64 billion Future Fund, set up in 2006 from accumulated budget surpluses and the privatisation of Telstra, secretly lent unknown amounts to three of the big four banks””Westpac, the ANZ and NAB””shortly after the global crisis intensified with the collapse of the US investment bank Bear Sterns on March 16.
While the total amount of these loans is unknown, they potentially expose the Future Fund to further losses. According to calculations by the Australian, the fund, which the previous Howard government claimed would “future-proof” the Australian economy, has already lost $2 billion through investments on stock exchanges and other money markets.
In effect, behind the backs of ordinary people, the Future Fund has been bailing out the banks, together with the Rudd government and the Reserve Bank, which has been pumping billions of dollars into financial markets for months. For his part, Prime Minister Kevin Rudd has repeatedly boosted the four major banks’ standing, declaring that they have AA credit ratings. These assurances are highly dubious, given that the same ratings agencies gave AAA status to the US sub-prime loans whose disintegration sparked the financial meltdown last year.
Rudd and Treasurer Wayne Swan have also insisted that the banks are subjected to the most rigorous regulation in the world. Yet, the RBA last month reported that the banks had “off-balance sheet business” of $13.8 trillion at the end of June, compared to $5.8 trillion in June 2003. While financial analysts say most of this is not risky, if just 1 percent defaulted, it would
wipe out Australia’s banking system. According to the Australian’s Adele Ferguson: “A big concern is the exposure of Australian banks to collateralised debt obligations, a fancy term for structured products based on bonds backed by mortgages and other consumer debt. Because they are off the balance sheet they lack transparency.”
Prime Minister Rudd immediately welcomed the RBA’s rate cut and declared that his government would also take “tough action, tough decisions” that “may not be popular” in order to ensure the stability of the banking system, which he described as the “cornerstone” of the government’s policy.
In part, his comments sought to justify his open support for the banks not passing on the full rate reduction to borrowers. More broadly, they are another warning that the Labor government will implement harsh austerity measures to impose the burden of the economic crisis on the working class in order to protect the banks and other major corporations.
Ordinary people are already bearing the brunt of the collapse of the mountain of debt that has fed the massive profits and executive salaries of the financial and corporate elite. Some 15 percent has been wiped off superannuation and other retirement funds, forcing people to postpone their retirements or try to go back to work. Tens of thousands of working class people have lost their homes, unable to pay their mortgages.
In a speech last week, Rudd blamed “greed” and “extreme capitalism” for the economic crisis. But the unrestrained accumulation of wealth in the hands of a tiny layer at the expense of the working class simply expresses the inexorable logic of the market and the profit system itself, which has compelled competing corporate giants to seek ever-greater rates of return in order to survive. Labor has fully embraced these processes. In fact, the last Labor government in the 1980s and 1990s, in concert with the US and British governments, led the way in implementing the increasing de-regulation demanded by the markets.
...the Labor government is determined to bail out and prop up those responsible for the breakdown.
http://www.wsws.org/articles/2008/oct2008/econ-o08.shtml