[OPE] Dutch SP comment on the bail-out of the ING bank

Ewout Irrgang, the Dutch Socialist Party financial spokesman, argues that instead of buying 23 billion euro worth of toxic mortgages from the ING, the whole Dutch operations of the bank could have been taken over by the Dutch state with a shareholding of 10 billion euro, in which case the taxpayer would get profit income as well as being saddled with losses (Tribune, Rotterdam, v 45 n 2 february 2009, p. 25). Last year, the ING as a going concern had a market valuation of circa 50 billion euro, ING Group ranking in the top ten largest corporations in the world, but now it has only a market value of about 9 billion euro; ING shares are now at their lowest value in years, at around 3.85 euro.

Interestingly, the bail-out package is actually financed by the ING itself, with the Dutch state effectively acting as insurer. ING also has a subsidiary in the US called ING Direct, with an office in Windsor, Connecticut, which previously bought about 35 billions euro of American Alt-A mortgages, which the Dutch state is now willing to insure up to 80% (taking the risk of profits or losses). The Dutch prime minister, social democrat Wouter Bos, claims however that most of the "toxic" mortgages purchased will be paid off anyway eventually, so the losses to the taxpayer will be slight. I assume that Mr Bos argues, that if the state had not bailed out the bank, then either "foreign predators" would have bought up the bank, or simply, no alternative insurer of the debt burden would have been available in time.

Part of the deal is, that ING will create about 25 billion euro of business and consumer credit, and curb the enormous salary packages for top managers. The irony, you might say, is that the bank considers that the state should take the responsibility for citizens and non-citizens who purchase or sell things without being able to pay them off.

This is where the whole market ideology goes totally mad, because after all it was argued that the reason for "more market" policies was that you would get better allocative decisions, with more personal responsibility and more private initiative. But now the substance of the argument is really that, well, some people are simply not creditworthy, and some people are; you invest in some people but not in others. The blame then goes to those who cannot tell the difference between creditworthy and not creditworthy individuals and companies.

ING is now scrapping 2,700 jobs in the Netherlands, on top of 4,000 job losses as a result of the Postbank fusion, and it is scrapping about 7,000 jobs worldwide so far. Worldwide, ING Group has about 85 million business and private clients, and previously employed about 130,000 people.

The ideological debate in academia is couched in terms of "state versus market" but what it all means in reality, is something else again.

Jurriaan

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Received on Sat Feb 21 13:41:41 2009