So we really should nationalise the banks then, eh?

Or turn them into mutuals perhaps: have the local politicians on the boards to make sure that what gets lent to has social value mebbe?

After all, we all know that it\’s this horible shareholder desire for profit which leads to the iniquities of the system: and more than that, the risk taking in pursuit of profit which led to the system falling over.

In fact, why don\’t we go the whole hog? Let\’s have nice little regionally based banks, not owned by anyone? Stick hte politicians and the unions on the boards, just to make sure that the wider interests of society are taken care of.

Obviously, we do still need to be pricing the products properly: making a profit being the measure of that. But not too much profit and if one of these banks does actually make one then they\’ve got to give it back to the community they made it from.

Yes, that all sounds really lovely, doesn\’t it?

Good, so, we\’ve just imported the Spanish Caja system into England.

Traditionally the regional savings banks in Spain have always played an important role in their respective regions, and enjoy a high profile in local communities, subsidising diverse cultural, sporting and educational activities.

Unlike other banks in Spain, Spanish savings banks are not owned by anybody and do not have share-holders. They are \”semi-public\” and their legal status is similar to that of a foundation and is defined by the national confederation of savings banks which decides how the banks should be run. In this sense, the boards of directors of Spanish Savings banks are perceived to be much more representative of the people they serve, because they have to include members drawn from local political institutions, their own clients (drawn each four years at random), and business associations.

By law, all yearly profits of Spanish savings banks must be spent on cultural and educational activities. Each caja de ahorros has a big department called \”obra social\” (literally \”social work\”) which organizes all sorts of activities related to themes such as environmental protection, health, adult training, activities for ageing people, art, music, sporting events etc. Programmes can be obtained at any savings bank branch.

Isn\’t that just lovely, non capitalist and communal?

Yes, indeed it is:

The cajas have long had confusing ownership and governance structures and disclosed far less financial information than other banks. Their boards consisted of local politicians, union members, clients and, in some cases, Catholic priests, many of whom were reluctant to relinquish their influence over lending decisions.

Hmm.

Spain plans to pour billions more euros into its troubled savings banks……In a first step, Spain is preparing to issue €3 billion ($4 billion) in debt in coming days, the people familiar with the matter said. Government officials are putting plans in place to eventually raise as much as €30 billion,……Another part of last year\’s rescue attempt was an injection of €11 billion via the newly formed Fund for Orderly Bank Restructuring. At the time, Spain said it could put up to €99 billion into the fund, but until recently had said further injections wouldn\’t be necessary. Now, it\’s reversing course……..Many of the cajas, which account for €1.3 trillion in assets—or 42% of total bank assets in Spain—used liberal lending practices to fuel a decade-long housing boom that went bust and left many of the institutions holding billions in bad loans and facing heavy losses.

Oh. Maybe it\’s not such a good idea after all: this is exactly the system which looks like it might bankrupt Spain.

Back to the drawing board boys and girls, back to the drawing board.

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