No doubt when you read this article, at least two weeks after I write it, the banking crisis will still be in full swing. It took twenty years to bring Britain's banks to edge of destruction and it will take a long time to sort out the mess that bankers, regulators and governments have created.
Many people held banks in low esteem before the crisis; almost no one trusts them now. It is the destruction of trust that lies at the heart of the calamity. I'm not referring to trust between banks, or even trust of banks. I am talking of the destruction of the concept of mutuality, of holding money in mutual trust. Building societies were one model of this mutuality, using their deposits to help people buy homes. But some fuddle-headed thinking in the mid 1980s led to demutualisation and quick profits for carpetbaggers. Mutual values were cast aside in a get rich quick stampede to increase cash paid to shareholders and bump up executive bonuses. One of the most obscene was the Bradford and Bingley which abandoned the ideals of its nineteenth century founders and financed vast numbers of buy to let properties. A business created to help people buy a roof over their heads instead helped fuel spiralling house prices and helped price many first time buyers out of a home. The Bradford and Bingley is now owned by the taxpayer but it should never have been allowed to demutualise and ignore the pressing needs for affordable homes.
The government now owns much of the banking sector. Who knows, by the time you read this, it may own the whole sector. Soon we will witness the obscene spectacle of the government, which says that one of its main priorities is to house families, evicting homeowners that fall into mortgage arrears. No one should be evicted from their primary home. If the government's banks foreclose, the house should be transferred to a housing association and the householders given the chance to stay put. Buy to let has been a significant factor in driving up house prices. When these properties are repossessed, the same rules should apply. A housing association, or better still a community housing trust, should take on the property and rent it to the tenants.
This will of course lead to a large scale transfer of properties from the banks to government and community bodies. What better way to repay the unimaginably vast sums taxpayers are using to prop up a system that destroyed itself?
We should never go down this road again. As I write, Nobel Prize winning economist Paul Krugman is suggesting that Gordon Brown has saved the world's financial system. Maybe he has. But we don't need a return to a banking system that has systematically made houses less affordable. We need a return to mutuality and cooperatives as a way of managing our money. And we need to build up community ownership of affordable housing. The government created a fiscal environment that led the banks to leap like lemmings over a financial precipice. It now needs to develop the incentives for a return to mutuality. But our government worships at the altar of global capitalism, so I am not holding my breath.
Andy Boddington
Published in the Clun Chronicle, November 2008