Is the myth of ethical banking finally being exposed?

Of course there can be no such thing as nice capitalism or an ethical capitalism it just doesn’t appear in the capitalist mindset. So it comes as no surprise to me that the Co-Op bank is finally selling out to the market not that there were against the market before hand just the way it works. It was even reported a few years back the Co-op had funded and invested in arms companies and other such dodge outfits. Ethical I think not.... "American hedge funds have forced the Co-operative Group to relinquish control of its banking arm in a deal that raises concerns about its ethical approach to business for 4.7 million customers. After months of intense talks with two US hedge funds, the UK's largest mutual – and owner of pharmacies, grocers and funeral homes – was forced to cede majority control in the bank as it battles to plug a £1.5bn capital shortfall. The latest twist in the attempts by the Co-op to stave off nationalisation of the bank means that the group, formed by the Rochdale Pioneers in 1844, will be left with a 30% stake when the bank is floated on the stock market rather than the 75% it had originally hoped for when the rescue deal was first announced in June. The Unite union's national officer, Dominic Hook, said the inability of the mutual to keep control of the bank was "a tragic day for the UK". He added: "This is dreadful for the staff, customers and the wider banking industry. This may mean customers will have even less choice on the high street and means we will have yet another finance company seeking shareholder returns over better banking." The loss-making bank was forced to admit it had incurred another £105m of losses caused by mis-selling products including payment protection insurance. Euan Sutherland, the former boss of the retailer B&Q who became chief executive of the Co-op in May, said the renegotiated deal was a good one for the group and its bondholders even though it had forced the group to redraw its original plan. "This is the first bank to be rescued and to survive as a standalone entity without taxpayer money," Sutherland said. But the dramatic change in the ownership of the bank, which is likely to take place later this year, led to concerns about cultural change in the bank, its future approach to its ethical stance and the job prospects of its 10,000 staff. It is also a blow to the government, which had been hoping mutuals would create vast new challenger banks on the high street. Co-op Bank had spent a year negotiating to buy 631 branches from Lloyds Banking Group before abandoning the ambitious scheme in April when its problems began to emerge. Sutherland's predecessor, the Co-op veteran Peter Marks, who led the proposed takeover of the Lloyds branches, will face questions from the Treasury select committee of MPs about when he knew about the losses in the bank. Many disgruntled customers of the bank took to Twitter, one saying: "Closing my account tonight after 23 years run by members for members you have let us down." Another said: "I think I'd rather you'd have taken taxpayers money than to sell out to Corporate Vultures!" The hedge funds that have scuppered the Co-op's original plans are known for their activism at troubled companies. Aurelius Capital Management, best known for forcing Argentina to pay out on its debts, and Silver Point Capital, linked to distressed groups such as Lehman, are thought to have amassed their stakes in the bank's bonds after it was downgraded to junk in May. They had been fighting for a bigger a stake in the bank and in convincing the Co-op to reduce the group's stake to 30% they are also taking bigger losses on their bonds. The bondholders are now expected to put £1bn into the bank – compared with £500m previously – while the Co-op will now inject less than the £1bn it had originally been stumping up to prop up the bank. Led by Mark Brodsky, Aurelius has been involved in debt restructurings as diverse as port owner Dubai World and the US publisher Tribune, owner of the Los Angeles Times. Silver Point Capital is run by two former Goldman Sachs employees, Edward Mulé and Robert O'Shea, and has a wide range of investments covering broadcasting – it bought two US TV stations out of bankruptcy – as well as car-makers and financial services and was involved in the bankruptcy of Hostess, the US food company best known for its Twinkies cakes. The Co-op Group is thought to be ready to make a concession to 15,000 private investors – who were "very elderly and vulnerable", it had been warned. It is expected to swap their bonds for new ones that continue to pay them regular income streams rather than handing those shares. Trading in bonds has been temporarily suspended. The precise details, which are still being hammered out, are likely to be revealed in the coming days. Sutherland said customers should not be concerned about the changing structure of ownership. The Co-op Bank has been a plc for some time but it is fully-owned by the mutual group which is now relinquishing total control." Article in today’s guardian http://www.theguardian.com/business/2013/oct/21/coop-group-bank-us-hedge-funds

Cyprus bailout, poor suffer while bond holders are protected

As another EU country goes for another financial bailout affecting millions and potentially having a larger knock on affect the crisis in the Euro zone goes from bad to worse. The emerging details of the so-called bailout agreement with Cyprus indicate that there is no change in the recipe book of Troika bailouts – senior bondholders will be protected while working people will be crucified. Small deposit holders in Cypriot banks will lose 6.75% of their savings overnight, while international speculators and bondholders are protected. The hawks of global capitalism are using the crisis to impose their neo-liberal model of capitalism to increase their profits. A €1.4bn privatisation programme will see Cypriot public services run down and sold off at rock bottom prices. This seems to be the worst of a bad lot of so-called bailouts. People in Cyprus now face a future of vicious austerity and devastation of society that point towards a Greek situation of societal collapse. Austerity policies have devastated economies across Europe. The eurozone has returned to recession and the EU as a whole saw a collapse of GDP of 0.6% in the last quarter of last year alone. Why are these policies still being pursued despite the clear evidence that they don’t work from the point of view of the economy as a whole? Because austerity is working – it’s working for the bondholders and speculators whose debts are being repaid and for a section of big business who have increased profits off the back of attack on wages and conditions. It underlines the need for common struggle and resistance across Europe and for a programme for radical socialist change – repudiating the debts to the bondholders, public investment to create jobs, and democratic planning of our economies to redevelop our economies in an environmentally and economically sustainable manner.” With extracts from Paul Murphy MEP of the socialist party http://www.paulmurphymep.eu/cyprus-bailout-ordinary-householders-paying-for-senior-bondholders?utm_source=twitterfeed&utm_medium=twitter