The Quest for a Neoliberal Agenda August, 30 2008 By Veerendra Kumar Source: The Hindu (India)
After the trust vote of July, the United Progressive Alliance government envisioned the prospect of unleashing the stalled juggernaut of liberalisation, since the recalcitrant Left and its allies had been jettisoned. This trumpeted reform process that is gaining momentum in vital sectors demonstrates collusion between corporate interests and the current dispensation.
Topping the agenda is the opening up of the banking sector. The second phase of the process is to commence in April 2009. The move to reduce government equity holding in public sector banks to below 50 per cent is disturbing. Foreign banks will be allowed to own up to 74 per cent of private sector banks and 20 per cent of government owned banks Credit Suisse, the Rabo group and ANZ are awaiting entry, and UBS, Dresdner Bank and United Overseas Bank have secured licences. The result will be the collapse of social banking, loss of jobs and the poor getting pushed out of the banking net.
The Finance Ministry on August 14, 2008 passed an order for the State Bank of India (SBI) to acquire State Bank of Saurashtra, as a prelude to the amalgamation of six associate banks. The SBI Subsidiary Bank Amendment Bill, 2008, is yet to be moved in Parliament. The inspiration for this merger paradigm stands discredited in its very homeland, as percipiently observed in an editorial in The Hindu on August 20: "Indian policy makers ought not to miss the point that the world's largest banks in the United States have been guilty of regulatory transgressions and have piled up unprecedented losses."
Switzerland's largest bank, UBS, a union of Swiss Bank and Union Bank of Switzerland, has decided to break up. Behemoths such as Citigroup, JP-Morgan Chase and HSBC Holdings have proved vulnerable, as the majors have taken a hit of more than a $300-billion (Rs.130,000 crore) in asset write-downs because of the sub-prime crisis. The International Monetary Fund estimates the final damages at $1 trillion (Rs. 43.5 lakh crore).
Additionally, Merrill Lynch, Wachovia, Bank of America, Royal Bank of Scotland, Washington Mutual and Morgan Stanley have, through losses and write-downs, joined the Hall of Shame, according to The Economist. If only the Finance Minister were to heed the advice of Arthur Burns, former Chairperson of the U.S. Federal Reserve, who admonished Walter Wriston, then Citibank chairperson, thus: "Walter, you are absolutely wrong to have an earnings target for a bank. It is not seemly." Banking then, as for us in the Indira Gandhi era, was conceived of as a quasi-public utility and not a "business" aimed at maximising dividend payouts.
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