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As banks scramble for cash, more layoffs hit workers

Published Jan 20, 2008 9:40 PM

The economic news pointing toward a serious capitalist crisis keeps piling up.

On Jan. 15, Citigroup, the largest U.S. bank, disclosed that it had lost nearly $10 billion over the last three months on mortgage-backed securities, and that it planned to cut more than 4,000 jobs.

The announcement, coupled with retail data that showed falling sales across the country, sparked a stock market freefall. The Dow fell more than 277 points that day. Stock markets in Europe and Asia also fell.

The next day, JPMorgan Chase announced its fourth-quarter profits had fallen by 34 percent, mainly because of its involvement with subprime loans. Banks around the world are reporting problems collecting debt—not just mortgage loans, but credit cards and auto loans, too. (New York Times, Jan. 16)

Bank of America had earlier announced it would buy up Countrywide Financial, the mortgage company that was going belly up, for $4 billion. And it is cutting a further 650 jobs in its investment banking division.

The answer of the big banks and corporations to the crisis is to lay off more workers—adding to the growing unemployment and ensuring that even more debts will go bad.

The stock market drop was the latest plunge in what has been a series of steep sell-offs in recent weeks as the growing economic crisis continues to destabilize the global capitalist system.

The large commercial banks and financial institutions on Wall Street are currently scrambling to find sources of cash to shore up their balance sheets. Massive liquidity infusions by the Federal Reserve and other central banks around the globe over the past few months have proven unsuccessful. The banks are now increasingly turning to sovereign wealth funds in search of emergency cash.

These sovereign wealth funds are the investment arms of governments ranging from Kuwait to Singapore—governments that are an integral part of the world imperialist system. The banks and financial institutions on Wall Street are attempting every quick fix plan they can think of in frantic attempts to avert further catastrophe.

As the Wall Street robber barons attempt to save their profits and stave off a global financial collapse, the ruling-class politicians in the U.S. have been announcing various economic plans and initiatives. Many of the candidates in the 2008 presidential race have unveiled so-called “economic stimulus” plans.

The Congressional Budget Office has also announced its intention to create its own version of an economic stimulus plan. Speaker of the House Nancy Pelosi released a statement after a Jan. 14 meeting with Federal Reserve Chair Ben Bernanke saying, “We know that people are hurting, so I hope that we can work together, recognizing the independence of the Fed, and coordinate monetary and fiscal policy that will soften the blow for hard-working families.” (New York Times, Jan. 15)

Despite the empty “I feel your pain” rhetoric, the hollow relief plans offer little respite for the millions of workers and their families whose lives continue to be devastated by the growing economic meltdown.

According to a Jan. 16 post on Bloomberg.com, House Financial Services Committee Chair Barney Frank “said Democratic leaders will meet with Bush at the White House on Jan. 22 and are prepared to reach a compromise on legislation that includes a tax rebate, new spending and other tax cuts.

“Frank and other Democrats said they are willing to at least postpone for several years plans to offset any new expenditures or tax cuts with spending reductions or tax increases to prevent increasing the deficit.” In such a compromise, the tax cuts will surely be written to benefit the corporations, all in the name of “economic stimulus.” In other words, there’s no plan to directly help unemployed workers or those who face being homeless because of the mortgage crisis.

Millionaire politicians like Pelosi, a Democrat, and Mitt Romney, a Republican, can never truly comprehend the pain felt by a worker when he or she is laid off from a job where they had worked for decades. They cannot comprehend the pain felt by working parents forced to tell their children that the bank is kicking them out of their home. Much like the attempts by the central banks to stabilize the markets with liquidity infusions, the “economic stimulus” plans of the ruling class politicians are too little, too late.

There is no quick fix reform or stimulus plan that will eliminate the economic forces at the roots of this deepening crisis. The causes of this crisis are inherent to the capitalist mode of production. For any solutions to really help the working class, which has produced everything yet has so little to show for it, they must challenge the existing property relations that have placed so much wealth and power in such few hands.

It is the capitalist class’s insatiable quest for profit that leads to overproduction and the accumulation of enormous debt. It was the insatiable quest for profits that led to the creation of the predatory mortgage lending companies. They ensnared millions of workers, a disproportionate number of them Black and Latin@, in the subprime loans that ended up sparking this current meltdown.

It was the insatiable quest for profits that led the Wall Street institutions and banks to underwrite and package these predatory loans into the now infamous CDOs and SIVs that are wreaking havoc on the global financial system. The elimination of the root causes of this economic crisis requires the elimination of capitalist property relations.

Above all is the intense contradiction between the growth of a global, socialized economy—in which the labor of hundreds of millions of workers is organized into a giant web where all the parts are interrelated, from the extraction or growth of the raw materials to the production and distribution of the final products—and the private ownership of this vast productive machine to further enrich a small class of super-wealthy individuals.

As the crisis deepens, it is imperative for the more militant and class-conscious elements of the working class to intensify their own planning and organizing in preparation for future upheaval.