Collapse of Credit Suisse
Protests
by Swiss climate activists against government's bailing out of
Credit Suisse on March 20, 2023 (left) and April 4, 2023.
Credit Suisse is a supranational oligopoly and the second largest financial institution in Switzerland. Known colloquially as a holding company, the bank is headquartered in Zurich with assets and dealings in over 150 locations with around 70 per cent of its 50,000 workers spread out in 50 countries managing $1.75 trillion in assets as of the end of 2021.
The oligopoly spiraled downward into crisis this year following several years of large losses. In 2021, its U.S. investment fund Archegos Capital along with the now insolvent Greensill Capital in Britain triggered losses of billions of dollars. Meanwhile additional troubles were underway in its U.S. investment arm called First Boston. Subsequently, Credit Suisse's stock market share value plummeted by three-quarters. Lacking funds to service its debts, the bank announced plans early this year to borrow an additional $54 billion. The cumulative effect of these moves prompted account holders to pull out $119 billion from the bank.
Financial media say many of the bank's dealings involve derivative contracts using borrowed fictitious value that shuffles money from one hand to another without any connection to social production. This practice began in earnest with Credit Suisse's acquisition of First Boston in 1988, signalling the de facto elimination of any regulation that prohibited banks from doing so in the United States. With price inflation and the rise in interest rates in 2022, many of its derivative contracts and bond holdings lost much of their notional value forcing the bank to report a net loss of 7.3 billion francs (nearly $8 billion) in 2022 and a warning that 2023 would bring another "substantial" loss.
Faced with these losses and lacking funds, the bank sought help from its largest shareholders in the U.S., France and Saudi Arabia who all refused to invest more money. The ruling elite in Switzerland sounded the alarm. Under the rubric that Credit Suisse is too big to fail, the executives of the bank and government invoked an emergency order to force liquidation of some of the bank's assets while preserving the assets of its most powerful creditors and a takeover by UBS, the largest financial institution in Switzerland. The executive decree bypassed Credit Suisse shareholders, who would otherwise have had voting rights, and the non-executive members of the Swiss Federal Assembly, both its National Council and Council of States.
The executive order prompted Dominik Gross of the Swiss Alliance of Development Organisations to say, "The government's use of emergency powers to push this deal through goes beyond legal and democratic norms."
The Communist Party of Switzerland in a similar statement says, "The Communist Party also deplores yet another abuse of the right of necessity to bypass the democratic consultation process of the Swiss Parliament, which has already happened with the pandemic and the sanctions. The problems of Credit Suisse have been known for several months, but the Parliament has not been consulted on the instruments and strategies for a possible exit from the crisis."
Dominik Gross also denounced the bailout aspects of the deal, which at first glance appear to favour certain owners of the bank's assets and UBS, which itself is on the verge of crisis. In a Bloomberg News item called "Bank bailout could cost Swiss taxpayers billions," Gross says, "Swiss taxpayers too are on the hook for billions of francs of junk investments and yet the government, FINMA [Swiss Financial Market Supervisory Authority], and the central bank have given little explanation about the state's 9 billion loss guarantee to UBS."
Details
of the bailout are scarce apart from a government guarantee of $109
billion in "liquidity assistance" for UBS from Switzerland's central
bank and the 9 billion francs loss guarantee. The government decreed a
write-down of certain Credit Suisse bonds outside of any bankruptcy
process,
which has unleashed a flood of legal actions opposing the decree.
Credit Suisse shareholders will receive a percentage of $3.24 billion
in UBS stock market shares while UBS will take over the $1.75 trillion
in Credit Suisse's managed assets, greatly increasing the almost $4
trillion UBS already
manages. Even before this infusion of assets, UBS is said to manage the
largest amount of private wealth in the world, counting approximately
half the world's billionaires among its clients.
Following the takeover, UBS announced significant layoffs of workers. Citing a senior manager at UBS, the Swiss newspaper Sonntagszeitung says 36,000 employees globally from the combined companies will be fired. Of those workers to be dismissed, 11,000 are in Switzerland. The two global oligopolies together employed 125,000 people worldwide at the end of 2022, with about 30 per cent in Switzerland.
In an earlier twist in this saga, during the 2008 economic crisis the Swiss National Bank (central bank) bailed out UBS by purchasing $60 billion of its toxic assets and $5.3 billion in shares of stock as an infusion of value to calm nervous creditors who were threatening to pull out their money.
Behaviour and Social Conditions
It is not the consciousness of humans that determines their
being, but, on the contrary,
their social being that determines their
consciousness.
It is often suggested that bad or irresponsible policies are giving rise to the recurring financial crises and economic crises. Government bailouts using public money to save the institutions is also called bad policy because there is no compensation for the public, either financial (to be reinvested for the benefit of the society), or in terms of employment in guarantee of employment positions.
The cartel parties are particularly adept at reducing the entire thing to bad policies despite the fact that no matter which government is in power, the pay-the-rich practices prevail. The political economy of the imperialist system itself is not analyzed to find its internal contradictions that lead to recurring crises. Nor is the state structure examined and exposed as blocking the working class from imposing its control over what belongs to it by right, upholding the rights of all and bringing the outmoded relations of production into conformity with the socialized productive forces.
The fact is that anarchy has been raised to authority with devastating consequences. The prerogative powers of the executive of the Swiss state have been used to favour narrow private interests as is being done in the U.S., France, Canada, Germany, Britain and other countries. At the core of the neo-liberal restructuring of the state is the politicization of narrow private interests. In other words, the state is now not just in the service of narrow private interests but is actually run by these interests directly. It reveals the need to have the producers control the direction of the economy because the ruling elites are amassing great wealth at the expense of bringing the world to the brink of disaster.
The anti-social offensive, in particular the pay-the-rich schemes, destruction of social programs and use of police powers accelerated following the 2008 economic crisis with ever-darkening clouds of greater wars and economic and political collapse threatening the existence of humankind and Mother Earth. The behaviour and aim of the ruling elite reflect the material conditions in which they exercise their rule and expropriate the value the working people produce.
The modern working class is unlike any previous oppressed class. To gain relief from its oppression under imperialism it must create new economic, political and social forms that do not depend on or seek to exploit other human beings. These forms will provide the material basis to guarantee the rights of all.
In the Preface to a Contribution to the Critique of Political Economy, Karl Marx pointed out:
"In the social production of their life, humans enter into definite relations that are indispensable and independent of their will, relations of production which correspond to a definite stage of development of their material productive forces. The sum total of these relations of production constitutes the economic structure of society, the real foundation, on which rises a legal and political superstructure and to which correspond definite forms of social consciousness.
"The mode of production of material life conditions the social, political and intellectual life process in general. It is not the consciousness of humans that determines their being, but, on the contrary, their social being that determines their consciousness.
"At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or -- what is but a legal expression for the same thing -- with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters.
"Then
begins an epoch of social revolution. With the change of the economic
foundation the entire immense superstructure is more or less rapidly
transformed. In considering such transformations a distinction should
always be made between the material transformation of the economic
conditions of
production, which can be determined with the precision of natural
science, and the legal, political, religious, aesthetic or philosophic
-- in short, ideological forms in which humans become conscious of this
conflict and fight it out. Just as our opinion of individuals is not
based on what
they think of themselves, so can we not judge of such a period of
transformation by its own consciousness; on the contrary, this
consciousness must be explained rather from the contradictions of
material life, from the existing conflict between the social productive
forces and the relations of
production."
The working class must provide a new direction for the economy and empower itself so as to deprive the oligopolies, which operate as cartels and coalitions, of the decision-making power and their ability to act with impunity. This is what the struggles of the working people in the moribund capitalist societies are striving to achieve.
This article was published in
Volume 53 Number 5 - May 2023
Article Link:
https://cpcml.ca/Tmlm2023/Articles/M530053.HTM
Website: www.cpcml.ca Email: editor@cpcml.ca