Cash injection for the banks

GORDON BROWN was on a divine mission when he launched the International Finance Facility for Immunisation (IFFIm), an investment bond which aims to pay for the vaccination of children in some of the world's poorest countries.

"Recognising the combination of strong moral purpose and the power to raise finance, His Holiness Pope Benedict XVI, the Archbishop of Canterbury, the Chief Rabbi, the Muslim Council of Britain, the Hindu Forum of Britain and the Network of Sikh Organisations have agreed to buy the first six IFFIm bonds," he declared. With representatives of all these in attendance, including the Archbish himself, nobody dared mention filthy lucre - but there's plenty of that in the deal.

IFFIm will issue bonds, repayable from future aid budgets, to pay for immediate immunisation programmes in the third world. With cast-iron government guarantees and a high rate of interest (a bit like PFI, it's more expensive than government borrowing but flatters the figures), the bonds were inevitably over-subscribed - giving the bankers the easiest day's work they'll ever have and plenty of reflected virtue.

"Deutsche Bank is honoured to support IFFIm in its campaign to [immunise] the world's less -advantaged children," boasted the bank. "The success of the facility's debut bond issue is an endorsement… of private sector capital in development issues." The World Bank (manager for the bonds) was equally keen to point out that Goldman Sachs had been "financial advisor, on a pro bono basis".

So, a rare act of charity from the bankers? Not exactly.

Private Eye discovered that they had received their standard fee of 0.1 percent for placing the bonds. On the first $1 bn batch that means they shared $lm for what in investment banking terms was a piece of cake. And there's another $3m to come when the rest of the bonds are issued. IFFIm chairman Alan Gillespie (also boss of Ulster Bank) maintained that the usual fee was required to hold the banks accountable and that "IFFIm operates as a commercial entity".

Along with Deutsche and Goldman, the even more commercial banks that are now $lm richer courtesy of Gordon's scheme are: Barclays, BNP Paribas, Citigroup, Dresdner, HSBC, JP Morgan, Morgan Stanley and UBS.

-- from Private Eye no. 1172
24 Nov 06 - p. 26