From the BBC:
The Post Office is to offer current accounts in the UK, following a regulator's claim that the market offers little choice for consumers. he new account, provided by Bank of Ireland, will be available in some areas in the coming weeks before a wider launch next year...
The Post Office, which has 11,500 branches, already offers a range of financial products in a link with Bank of Ireland. Some three million Post Office customers already use products such as savings accounts, mortgages and insurance policies.
Glossing over the fact that this just boils down to post offices acting as franchisees for the Bank of Ireland, this is just turning back the clock.
The Post Office used to run "Giro" accounts (which were pretty cool in the old days when you got freepost envelopes) but that was all sold to/taken over by the Alliance & Leicester Building Society, which became a listed plc in 1997, got into the same mess as all demutualised building societies in the credit/house price bubble, was then taken over by Santander plc, which is no doubt being merrily bailed out by the UK and Spanish governments.
This is another Achilles' Heel in the Positive Money proposition. In the purest and simplest case, what that boils down to is the government setting up its own bank (a bit like the TSB) and merging it with NS&I, which would be a handy way of financing government debt (to the extent that we have government debt, it makes sense to minimise the costs and maximise the benefits), and getting rid of the deposit guarantee for commercial banks.
If our new government bank is a reasonable success, some future UK government will just float the damn thing again and we are back to Square One. And if it is a reasonable failure, the UK government will use that as an excuse to privatise it anyway. Heads they win...
Muh, Far Right
2 hours ago
20 comments:
It's called the state "ensuring liquidity in the market for rent-seeking opportunities". Impressive that the NS&I still stands though.
It's just another sticking plaster over the whole rickety structure that is the state sanctioned specially priviliged cartelised supplier of a state monopoly product acting as agents for the home-owner-ists and their enetitlement seeking parasitical mates in the quangocracy.
(I am not in an good mood today...)
Kj, "ensuring liquidity in the market for rent-seeking opportunities". Brilliant.
L, yes, of course, but looking on the bright side... oh, there isn't one.
I don't understand the competition line. There's a problem with switching, but there's far more places you can get a current account than in the mid-80s.
My rough rule on this is that if you've got at least 7 competitors in a market, and as long as they aren't acting as a cartel, you've got healthy competition.
And the problem with banking is that they're really much of a muchness. The product is pretty much the same everywhere, the only difference being service (which as everyone is now mostly on DDs and internet makes little difference).
And the problem of switching is that the banking regulator never forced the banks to create the sort of infrastructure to do it like they did with electricity, ADSL or cellphones.
TS, I shift bank accounts every five or six years just for the heck of it and it gets easier every time. I've about seven or eight DD's and the only which f-cked up last time was the gas/electricity people and that was THEIR fault (the useless money grabbing shits), not the bank's. Total hours wasted on the operation maybe two or three?
If our new government bank is a reasonable success, some future UK government will just float the damn thing again and we are back to Square One."
That's the problem with owning a sweetshop, if the only staff you have to run it are kids.
B. Brilliant analogy!
Santander plc is basically Abbey National. You know, one of those demutualised building societies that "all got into a mess".
The rest got into a mess because they were badly run and had incompetent management. That is no surprise considering that as Building Societies they had had managers who were effectively completely unaccountable to anyone. The real surprise here is that Abbey had managed to be run almost as well as a real bank.
:P
AC: "those demutualised building societies... "all got into a mess"."
Agreed so far, the rest of your comment is sweeping and unfounded claims.
"as Building Societies they had had managers who were effectively completely unaccountable to anyone"
If building societies were so badly run, why did they have millions of depositors and borrowers? And it's not as if bank managers consider themselves accountable to anyone either. They are complete shits.
And I think you'll find that the non-demutualised building societies (Nationwide and a couple of others) did nowhere near as badly as the banks and the ex-building societies in the financial crisis.
MW/AC,
One thing is that the building have to, under BSA rules, have a strong connection between savers and borrowers. At most, 50% of Nationwide's money can come from money markets. This means that in a housing boom, they can't rapidly expand to meet the demand by using money market money.
It means that by the time fixed rates have expired, people have generally got a bit of equity or maybe some savings, and it's all rather safe.
Fixed rate mortgages originated from bundles of money market money. Someone found a cheap bundle on a money market and grabbed it, and then split it into mortgages for that term. All very sensible. But it was also kept sustainable by the BSA rules - most mortgages were backed by savings.
What Crock did, as they no longer had limits, was to base their whole model on fixed rates backed by money markets. They didn't even link terms. They were borrowing on 30 day markets and lending over 2 years.
And no-one at the FSA was telling them that what they were doing was insane, because it was keeping the housing boom going. It's why the boom was so much bigger and is falling so much harder than the 80s boom - the cheap fixed rates allowed people to borrow more, where when Crock and Halifax were building societies, the saver/lender link put at least something of a brake on how fast it could rise.
Actually several building societies collapsed during the crisis and were quietly rescued by others.
Building societies succeed despite poor management because their business midel is so simple. Really almost all they do is take deposits and lend for house purchase. Basically they live off home-ownerism. So what if they lend a few people too much, or lend to people who are bad risks, if house prices rise all the time, ensuring the collateral is always more than the loan?
Once they demutualised and became banks, they started moving aggressively into other types of business, and that exposed the quality of their management.
TS, good summary.
Yes of course the old rules on building societies were very sensible (and even the 50% rule is relatively new and far too generous). Which led to the predictably "good" outcomes.
But from the Homeys' point of view, those were "bad" outcomes, so they made sure that the rules were diluted and members conned into voting for de-mutualisation because they got a few hundred quids' worth of "free" shares (Quick-Buck-Ism and Home-Owner-Ism are much the same thing).
No they were not free! If nothing else, people paid for them by the new bank having a larger lending/borrowing spread. That few hundred quid in shares was grabbed back by the new bank over the next couple of years, and from there on, the old members were worse off.
AC: "Basically they live off home-ownerism."
To a certain extent yes, but the real rocket fuelled Home-Owner-Ism only came in once the banks were allowed to muscle in and do what they liked.
Again, this is something which Thatcher started but Blair/Brown took to extremes.
Just to add - it's rare for a BS to get into trouble. Town and Country were the one I remember, and even then, they didn't go bust - they were just operating outside the BSA rules in terms of risk of failure due to their insurance against bad losses.
In recent years, Dunfermline went to the wall because they bought some subprime Lehman Brothers securities, which I'm surprised they could do.
MW,
Thatcher was a very big part of homeownership. While I have a great deal of respect for her and many of the things she did, more than anyone else, she pushed the economic lie of house prices rises being a good thing.
That said, more houses were completed per year when she was PM than under Brown and Blair, but far less than under 70s governments.
TS, close but no cigar.
a) From what I can reconstruct, Thatcher didn't invent pre-existing Home-Owner-Ist tendencies, she just exploited them to the hilt for naked politican gain. Deregulating banks was all part and parcel of this.
A lesson well learned by Blair-Brown and even more so by the Con-Dems!
b) New constructions per year collapsed during the 1970s, when HOism began to emerge as the central plank of UK politics.
chart here.
c) They'd fallen to about 200,000 a year by 1979 and were around that level until the Con-Dems got into government and managed to halve it to about 100,000 a year.
TS, both Cheshire and Derbyshire building societies got into trouble during the crunch and were taken over by "big daddy" Nationwide. Dunfermline was also taken over by Nationwide, but in this case its bad loans were taken over by the government. Britannia merged with the Co-op, although the reasons for that merger were never clear to me. Also Scarborough was rescued by Skipton, Barnsley was rescued by Yorkshire and the Catholic Building Society was rescued by Chelsea.
AC, yes, some of the smaller ones got into a bit of a muddle.
But the fact that they could be sorted out the good old-fashioned way (merger with a larger one) not the modern way (massive f-ing taxpayer bailouts) suggests that BS's, taken together, were nowhere near in the same mess as banks.
Oh and Chelsea was subsequently taken over by Yorkshire.
AC, yes, but don't get carried away.
We started off with hundreds and hundreds of little building societies in the 19th C (or whenever), many with one branch and a catchment area the size of a local council or smaller.
And they have been steadily merging into larger entities ever since.
Even in the pre-demutualisation era, it was quite normal for there to be a couple of building society mergers or takeovers every year, that's just normal.
So not all the ones you mention are to do with the "financial crisis", half of them would have happened anyway.
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