On the Financial Crisis

We are currently experiencing one of the most devastating financial crises of capitalism. A wave of business failures is smothering the USA and Europe, leaving gigantic damage in its wake. The source of it all have been US real-estate credits that were frivolously allocated, poorly secured, and then sold in inscrutable packages. The worth of these credit packages, which have been intensively traded among the banks, has drastically fallen as millions of Americans were unable to bear the climbing interest rates and simply stopped paying their credit bills. More and more houses go up for sale, and the real-estate prices in the USA are sinking accordingly. This triggered a chain reaction among banks and insurance companies. Massive entries in their balances, which are based on the US real-estate market, must be either corrected at the root or written off completely. Due to the fact that mass financial undertakings are met with certain depreciations, and are threatened by bankruptcy, the loaning market between the banks collapsed. In this situation the state is the last resort. It distributes money, confers liabilities, or takes the insolvent banks over altogether. However, by this method private losses are socialized. For this very reason the institution of financial capitalism now stands in the pillory world wide.

DIE LINKE is the only party, which seeks to get to the bottom of this erroneous trend. We criticize the division between poor and rich, which brings financial assets to few and heats up speculation. For years we have been speaking out against the completely failed liberalization of the financial markets. Flawed financial products, credit-securities, hedge funds, and voracious gangsters, were promoted as well in Germany. This took place through absurd tax exemptions and new statutes, which allowed the gamblers to play their cards. The supervision of banks has also not been strengthened but weakened these last years. The losses worth billions of Euros, German banks from the IKB to Hypo Real Estate made, are among the results of this failed policy. For this reason CDU and SPD are also responsible for the billion Euro invoice we all are to pay now.

DIE LINKE suggests the immediate implementation of the following measures in order to stabilize the financial market:

1. Protection of the central tasks of the financial system:

• Sufficient supply of low interest credits
• Guarantee of bank deposits by the state in unlimited amount
• Set up a security fund fed by the private financial institutions

2. Abolition of destabilizing practices:

• A drastic reduction and, where necessary, a ban on especially hazardous financial instruments
• Active containment of Hedge funds
• Obligation of banks to concentrate more own capital
• A ban on equity options for managers
• Minimum holding period for shareholding managers
• Intensified accountability of managers

3. Medium term measures for a reform of the financial system:

• International credit-registration
• Extensive limitation of banks on deposit and credit transactions
• Strict control of investment banking
• No speculative business with foreign currencies
• Stricter limitations for capital-covered retirement funds
• Strengthening of the public pension system
• Control of private rating agencies and creation of public ones
• Required authorization of existing and newly developed financial products through a special Control Board
• Transaction taxes on trade of bonds and currencies
• Closure of tax havens.