‘Loveable’ banking?
3:30 pm - October 12th 2008
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We don’t yet know what the effect of this week’s financial crisis on living standards will be. At the moment, the worst hit are those who want or need to sell their home to buy a smaller one, but it is hardly likely to stop there. It seems that our “progressive” politicians don’t have any depth of ideas on which to draw to put Humpty Dumpty back together again. They desperately want to put Humpty back on his wall, but this time he’ll need a rather broader platform if he isn’t going to fall off again.
Those of us who equate our happiness to the prospect of increased material wealth are going to be disappointed, and politicians who set out their stall on that basis – as they all have for as long as any of us can remember – are going to find it tough going, too. Ironically, it seems that Cameron has a better understanding of this than most. Brown is probably relieved that he’s being called on to deal with the financial sector again – his Presbyterian inheritance is of little help to him in developing creative responses to the social responsibility of government – to find a way to interlace community with individual freedom.
Yet the financial crisis does provides an unique opportunity to do just that. We need banks, and since we need them, we need loveable banks. And the first banker to realise this is going to do very well, assuming – as I suppose we must – that the banking system is going to get through this.
What would a loveable bank look like? Its products would be simple, and easy to understand. It would, for example, express risk not in terms of adjectives or mumbo-jumbo letters and arithmetical symbols, but as the simple likelihood of a product going belly-up. It would provide tools so that its customers could get into the habit of financial planning and control every bit as comprehensive as its own. It would provide periodic face-to-face financial health-checks for its customers. It would be driven not by greed but by professional pride. It would not be particularly entrepreneurial, instead seeing its role as that of enabling entrepreneurship in others.
Such a bank would probably not be listed on the Stock Exchange, although it would undoubtedly use the money markets, particularly for short-term dealing, as banks do now.
If all this sounds much like the old mutual Building Society – or even Credit Union – brought up to date, it’s intended to. We need a major mutual player to keep the others, if not exactly loveable themselves, at least honest. And of course, the government – by buying all those bank shares – now has a wonderful opportunity to make it happen. It should encourage one of the clearers – whichever is the weakest – to re-organise itself as a ‘loveable’ bank, specialising in the personal and small business sectors. Its shareholders could be compensated, over time, from the proceeds of the sale of the government’s interest in the others. And if they can’t wait for their money, that’s what markets are for: to buy debt (don’t we just know it…).
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Mike is a regular contributor to Liberal Conspiracy. He does not yet blog anywhere.
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Reader comments
I bank with the Co-op bank. I think they fit your bill, and they also do extra-lovable ethical investment.
Indeed, and there’s news that they are in talks with the Britannia Building Society about a merger.
I’ve heard mixed opinions about their customer service, though: I think they could do more to differentiate their product. They’ll certainly never have a better opportunity.
Well, I use their smile internet arm and have nothing but praise for the customer service at that end. Haven’t been to a branch in years, though.
I don’t think I can really say too much right now, but I am working with someone in Oxfordshire hatching just such a plan, using a Limited Liability Partnership structure to enable all participants in the business to be partners. Bigger than a Credit Union but more flexible than say, a Building Society. Something which could also play a central role in local complementary currencies and similar ideas.
There’s the Co-Op, but there are also places like Unity or the Ecology Building Society to invest in as well.
One might suggest that investing in a bank that bankrolls the existing regime is far from “loveable”…:)
I agree that we need banks (in so far as I accept the premise that materialism is a good thing) But we need banks under their pre Thatcher, pre fractional reserve model. For the left this creates some unpalatable truths;
We will have to go back to a position where only the “middle classes” (salaried and relatively secure careers) and the financially prudent can aspire to home ownership. Everyone else will rent or hope to be left property in a will. The upside of this is that in real terms houses will get cheaper and people on average salaries will again be able to afford an average house.
Ditto credit. Until the 1980s most people did not have credit cards. Getting a bank loan was quite a big deal. People will have to save up to buy things again, a habit which died out with my grandparents generation.
All of this would mean the entire economy contracts. Probably permanently. With a much tighter money supply consumers will no longer be able to binge on credit, the service sector in particular, which is 70% of the UK economy, will be hit hard.
The upside could be – a partial rebirth of manufacturing indutry in the UK. With demand for services down, credit tigh, a weak currency and low inflation, making stuff as opposed to buying it from China becomes more economically attractive.
I remember the veteran socialist Tony Benn saying in the 1980s “We can’t build an economy by selling each other hamburgers and life insurance” he was dismissed as a loony at the time, but it looks like he was right after all…..
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