Posted by John, October 29th, 2009 - under Interest rates, Strikes.

Tags: Banks, Fighting back, Finance sector

Remember when the Reserve Bank here in Australia was cutting official interest rates? The Bank cut deep to help stave off the impact of the Global Financial Crisis on Australia.

Australia’s banks claimed at the time that they couldn’t pass on all of the rate cuts because their cost of borrowing had gone up.

The RBA cut rates by 4.25 percent during the financial crisis. The banks passed on about 3.8 percent over that time.

They argued that the global financial crisis had increased the cost of borrowing and so they couldn’t give borrowers the full benefit of interest rate cuts.

Indeed for business borrowers they increased some rates.

It is true that borrowing costs went up. Banks around the world were petrified to lend to one another for fear that some of them would collapse overnight.

But the banks used this as an excuse to gouge more money out of borrowers.

They have used the global financial crisis to increase their share of the wealth we create.

Banks have what is called a net interest margin.

This is the difference between what they earn in interest from borrowers and what they pay in interest to lenders.

To understand what this is about let’s have a look at two banks who reported their profits this week.

National Australia Bank’s net profit dropped markedly because of bad loans and a one off item of over $500 million in a court rejected tax arrangement.

If we exclude these, NAB’s cash profit only went down a little under 2 percent.

The bank increased its net interest margin. In other words it slugged other businesses by actually increasing business rates and hit home owners by not passing on all of the RBA cuts.

The story is even better for ANZ shareholders. Its cash earnings increased 12 percent. Again bad debts dragged down its net profit.

Both ANZ and NAB increased their net interest margin to help recoup some of their bad debts and tax losses from other businesses and home owners. That margin is now at its highest since September 2002.

We pay for their bad loans and in the case of NAB their tax scheme debacle.

Finance capital is not productive. It creates no new value.

But it is an important lubricant for productive capital.

It depends for its existence on the creation of surplus value by workers in the productive sector, and then battles, along with the capitalists in the productive sector, the state and the like for a share of that surplus.

State support and a quasi monopoly of the big 4 banks put the banks in a strong position to grab an extra share of surplus.

So while the banks are particularly hated (since they impact directly on most working people) their gouging merely reflects the feeding frenzy of all the bourgeoisie on the profit we have created.

Every other boss is a ruthless as the banks in their pursuit of profit.

Rather than singling out banks and indulging in soul destroying hate, we should realise that every boss needs us to make profits. We don’t need them.

We can begin a fight back against higher interest rates and prices by striking for more wages and so winning back a little of the profit we make for bosses.

That way we can pay the banks and all the other capitalist bloodsuckers back with interest.