Deliciously wrong on so many levels

From the City AM:

THE Prime Minister will today announce plans to fund charitable projects using hundreds of millions of pounds that is lying dormant in unclaimed bank accounts (1)... A new wholesale bank (2) will be responsible for doling out the money – thought to total up to £400m – to charities and other voluntary organisations that apply for grants...

"I can announce today that a [Big Society Bank] will be established using every penny of dormant bank and building society account money allocated to England (3)," the Prime Minister will say, "These unclaimed assets, alongside the private sector investment that we will leverage (4), will mean that the Big Society Bank will – over time – make available hundreds of millions of pounds of new finance to some of our most dynamic social organisations (5)."

The government is using legislation passed by its Labour predecessor, which allows it to tap cash that has been lying in bank accounts that have been dormant for 15 years or more. Labour was planning to hand the cash out alongside National Lottery funding (6).

1) Does he seriously imagine that banks are holding £400 million in coins and notes just in case people drop in again to withdraw it? As a simple matter of fact, those coins and notes were lent out again to somebody else long ago - all the banks are left over with is a latent liability to those depositors to repay it if they ever show up.

So presumably the government will help itself to £400 million's worth of bank assets (and hopefully allow the banks to cancel the latent liability - perhaps the holder of such an account would be able to reclaim from the government?).

So the government is not actually stealing this money from the depositors (unless they introduce a law that says that the right to withdraw from a bank account is lost after fifteen years, which you may or may not think is unreasonable in itself), they are taking it from the banks, while simultaneously merrily bailing them out to the tune of hundreds of billions of pounds in a desperate attempt to try and keep the land price bubble inflated - if the government really wanted to rustle up £400 million in a hurry it could ask for one per cent of the bail out money to be repaid.

2) Excellent. Another state-owned bank giving money to Tory-approved fakecharities. What can possibly go wrong?

3) Why just England?

4) "we will leverage" is presumably code for "we will bung in another few hundred million pounds of taxpayers' finest". Remember that a bank only has three sources of "new finance":
a) ordinary depositors or investors in new shares and bonds;
b) taxpayers; and
c) a land price bubble; whereby the purchaser takes out a mortgage for an eye-watering sum (i.e. the purchaser gives the bank an IOU) and the bank in turn credits the vendor with an eye-watering sum in his deposit account (i.e. the bank gives the vendor an equal and opposite IOU). In the short term, the bank benefits from this practice because it can earn an interest margin on a far larger sum of money, but the long-run cash flow is from purchaser to vendor (as you would expect). So this isn't really "new finance" and isn't available for anything else.

So perhaps he means that the Big Society Bank will take deposits from or issue shares to people with a bit of spare cash. Now, if they are giving that spare cash to the BSB rather than to another bank or investing it somewhere else, how much extra money is there? Answer - none.

5) If they were that "dynamic" they wouldn't need a government bail out, would they? These 'organisations' would be able to raise money from the people in 4)a) above if they were that "dynamic".

6) New boss, old boss.