Passing the hat round

Government intervention to prevent the collapse of Bradford and Bingley brings to an end the sorry tale of former building societies that so ill advisedly threw away their trusted mutual status. If only we could be sure that the corrosive impact on the real economy would end too. And if only it would also bring to an end the intemperate attitudes and worthless values that riddle so much of the financial sector today. Alas, short of sustained and creative public involvement - or intervention from much higher, celestial quarters, it will not.
We hear much - far too much - these days about the creation of value - usually for institutional owners and bonus besotted boards of directors. We don’t hear half enough about the destruction of values that is the core reason for the whole financial crisis in my view. This latest particular tale of woe is symptomatic of finance and banking as value free zones.
While many were surprised to learn of the extent of the unprincipled dangling of tantalising and falsely cheap mortgages in the United States to those who could not afford them, not dissimilar things were going on here. For example the practice of so called ‘self certification’ (cutting out precautionary checks cuts short run costs too) where people seeking a home of their own were offered the tempting chance to lie about their incomes was almost equally devilish.
In the United States the resulting financial ‘assets’ were mixed up with others in deliberately overcomplicated and obscure packages which, with rank duplicity, were hawked to lazy and incompetent bankers abroad who had no idea of their true nature and didn’t trouble themselves to find out on their way to collecting their latest bonuses.
How could our national leaders and supposed regulators have let this happen? And how could we as a nation have allowed our various leaders over recent decades to permit - indeed to encourage - the loss of ownership and the evisceration of the real economy that make us so dependent on these kinds of ‘services’? We have to rebuild our prosperity on more than money lending and the economics of the casino.
Here in England it was in 1986 that the government of Mrs Thatcher allowed building societies to cast caution to the winds, throw away their mutual status and cave in to the carpetbaggers looking for a quick killing. This invited and rewarded behaviour that utterly contradicted the principles of thrift on which so many ordinary people had been brought up. But one hopeful fact is, I believe, that a majority of people still hold fast to these good traditional values both here at home and in the United States. What is needed are secure opportunities for people to put their principles into practice.
To help encourage this is one of the reasons why I have been arguing for the re-establishment of the trusted and trustworthy Municipal Banks. I am convinced that there is a major role for the public as well as the voluntary sector in the realm of savings and loans. There is more on this in other articles posted in this blog. Public sector involvement should not in my view be confined to clearing up private sector messes, picking up liabilities and organising fire sales.
While those not currently responsible will assert that it could have been better done, the Government was right to intervene. However I do think that Building Societies should not have to bear part of the burden - the diminishment of this sector’s role through demutualisation has been part of the problem. I wish that there was a prospect of continuing public involvement in good times as well as bad.
One reason for my thinking here, apart from a belief in co-operation as well as competition, is that I also believe that it will take far longer to infuse values rather than value into the financial sector. And please don’t tell me you can’t change ‘human nature’, whatever you might mean by that. If you do take this view, get out more and speak to ordinary decent people who would never dream of acting like feckless financiers. It is their nature that is inspiringly human and whose example should be followed.
We also need to ensure that remaining Building Societies stay mutual and return fully to their traditional approaches. There have been more than a few signs of contagion of practices from the banking sector, particularly taking advantage of, instead of respecting the loyalty of their savers. There would be substantial obstacles to be overcome (many put there by governments) but it could be done - if the will was there.
Founded (separately as the Bradford Equitable Benefit and the Bingley Permanent societies) in 1851, merged in 1964 and steadily and prudently built up over 150 years, they were destroyed by recklessness in a decade. Bradford and Bingley’s advertising for many years created an air of solidity and trustworthiness in the days when the bowler hats associated with city gents were a symbol of respect. The flash Bradford & Bingley directors along with the similar ill-begotten brood at Northern Rock have severely damaged the wealth of many people and have wrecked the reputation of the North of England as a place where traditional values still hold sway. That is why in my view the country needs far fewer flyboys and many more Mannerings!
About five years before throwing away their respected status as a Building Society, the would-be big shots at Bradford & Bingley bought Stan Laurel’s bowler hat. Would that the joke was now on them, but there’s little chance that they will be out of the door with only cap, or rather bowler, in hand. Laughing all the way to some other commercial bank no doubt.