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Mutualising the Crock

I\’m sure there are arguments on both sides of this, the idea that instead of flogging off the good part of Northern Rock for the benefit of us taxpayers that it should be mutualised and owned by its account holders.

There must be an argument or two in favour of it for our rulers wouldn\’t be proposing such a thing if there weren\’t, would they?

A source said: \”The issue here is whether we want some short-term financial gain to the taxpayer or [we] restructure the banking system over the long term for the better. We think we want to do the latter. The key point is … for the bank to be owned by account holders not shareholders. This kind of bank would be less prone to instability and financial risk. It would reflect the ethos of traditional building societies.\”

But, umm, that\’s not actually one of them:

Scotland\’s largest building society is to be put up for sale by the government after it effectively collapsed with a massive loss.

It had been hoped the Dunfermline could continue with a government bailout of between £60m and £100m.

But the regulators have decided it is no longer viable, with a £26m loss expected to be announced next week.


He said: \”The Dunfermline has suffered partly because of the crisis in the international economic situation.

\”But also by some reckless decisions by previous management because of over-exposure to commercial loans, involvement in the subprime mortgage market in the US and really bad decisions on their technology.

Mutual ownership doesn\’t protect one from the Gadarene rushes of the markets.

Further, this is entirely nonsense.

Should Northern Rock become a mutual, ministers would want one of the building society\’s founding principles to involve delivering services across the community with direction towards the least well-off. This might include the bank being encouraged to offer high-quality low-interest loans to low earners who find it difficult to secure capital.

\”High-quality low-interest loans to low earners who find it difficult to secure capital\”. Look, this is a language, you\’re not allowed to simply throw words together in the hope that it will push someone\’s buttons. If loans are to be made to those who do not have capital then they\’re not high quality, are they? And if you\’re charging a low rate of interest then you\’re not pricing risk properly are you? And if you\’re lending to low earners then you\’ve got to lend at a high multiple of earnings, don\’t you, meaning again that it\’s not high quality.

So what they\’re really saying is that they want the new mutual to offer low deposit high multiple of earnings mortgages at special, not taking account of the risk, interest rates and they\’ve the fucking gall to try and say these would be \”high-quality\”?

Now where did I put that rope and ladder….anyone seen a lamp post around here?

6 thoughts on “Mutualising the Crock”

  1. “High-quality low-interest loans to low earners who find it difficult to secure capital”

    Don’t like the language used? OK, let’s use technical language, and call them sub-prime loans.

  2. As a former employee of the “largest Building Society in Scotland” I well recall its conviction that it was a great idea to get involved with “High-quality low-interest loans to low earners who find it difficult to secure capital” and the subsequent purchase of several tranches of them from a company which specialised in such lending. Soon, of course, the tranches were worth just a fraction of their several-hundreds-of-millions face value.

    Never mind, though, eh? In the spirit of mutuality the CEO and his principal right-hand brown-nosed rat got to retire nice and early and comfy with the blessing of the Board. Shame about the Marketing mannie – shredded 🙂

  3. When the bank of England were in charge of regulating the banks and building societies how many needed rescuing? And how many afterwards?
    When will we go back to the system that worked?

  4. Brian, follower of Deornoth

    “The issue here is whether we want some short-term financial gain to the taxpayer”

    Yes. We do.

  5. Ah, so their plan for avoiding another banking crisis like this is to form pseudo-state owned bank that offer sub-prime loans. Freddie Mac, Fannie Mae… third time lucky?

    Thank God that these wise Philosopher-Kings have taken it upon themselves to manage our econmy in lieu of the City cowboys, fat cats &c.

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