Monday, June 11, 2012

Banking on Stability

Stuckey is an important name in Wessex history. Douglas Stuckey, long the Chairman of Common Wealth, is a valued member of the WR Party Council. Outside politics, he is better known as the author of books and articles on Wessex history. Among these is Wessex Rising!, which charts the Monmouth Rebellion and the coming of William of Orange, the king in whose reign the Bank of England was established.

In the 19th century, Stuckeys’ was a household word across much of central Wessex. Stuckeys’ Bank, founded in about 1770 with its headquarters in Langport, was the second largest issuer of English banknotes after the Bank of England. Farmers offered one of the latter’s notes as payment were known to eye it disparagingly and then insist, “Gi’e oi Stuckeys’”. In 1796, because of the threat of French invasion, there was a run on the banks in Somerset. Except for Stuckeys’. The saying among the farmers was that they trusted Stuckeys’ Bank as much as their old sock for keeping their money in. While the Bank of England is popularly 'the Old Lady of Threadneedle Street', Stuckeys' Bank became 'the old lady from the west with a long stocking'.  Stuckeys’ disappeared from the Wessex scene after 1909 when it merged with a Lancashire bank that eventually became part of NatWest (and so today is 83% State-owned via the RBS Group). The name survives only in the Bath Stuckeys branch of NatWest.

That was not the last attempt by Wessex to develop its own financial institutions. There was the Wessex Trustee Savings Bank, founded in 1930, merged away in 1975 and now part of the 41% State-owned Lloyds Banking Group.

Then there was the Bournemouth-based Wessex Building Society, launched in 1949, which merged in 1989 with London’s Portman Building Society to form the Portman Wessex. When this passed to the Regency & West of England Building Society the following year, the combined group adopted the Portman name. ‘Wessex’ had disappeared but the distribution of branches continued to be heavily concentrated in the far south of England and the head office continued to be located in Bournemouth. The Portman in turn merged with the Nationwide in 2007. And the Nationwide, as the name suggests, is anything but regional (though physically based in Swindon). It was a messy takeover that still rankles: members vote; they all get their windfalls; but there can be no second thoughts. What’s been done can never then be undone.

It’s a continuing struggle. Wessex doesn’t have the distinctive financial institutions of Scotland, with its own banknotes and historic names. Even Northumbria, with the Co-operative Bank, the Yorkshire Bank and many of the surviving building societies, can claim much more. We seem to be easy prey for London institutions, a place to send the back office functions while the decision-making is kept well out of our hands.

There is another way, still. In the wake of widespread disgust with the banks and building societies, credit unions are becoming a popular place to deposit savings and take out loans. Credit unions are self-limiting in that members must have some connection in common. This is usually a locality but it can be membership of an organisation. Plaid Cymru has a credit union for its members; perhaps we can look forward eventually to a Wessex Regionalist credit union? LETS schemes, and local currencies like the ‘Totnes Pound’, are easy to dismiss as a hippy gimmick but they surely also have their place in a more sustainable financial ecology.

We’d like to see more innovation from the centre too. Instead of the London regime being obsessed with preserving at any price the financial value of the zombie banks it owns, why not be bold and redefine them in terms of value to the customer? Break them up into regional banks. Mutualise or re-mutualise them. Tell the investment bankers to clear off, that they won’t be allowed to buy into them. Ever. We’re not holding our breath, because the regime has been backed into a corner where its interest as regulator and its interest as investor are diametrically opposed. One day, one of the two will have to give. The long-term public interest lies in destroying our money, not what passes for our democracy, because it’s far easier to replace. But who cares about the public interest?

What can we do? Look for opportunities locally (but in a joined-up, regional way). The antidote to the mass consumer society is the local producer society, meeting our own needs from our own resources. As the saying goes, if you want to see change, keep it in your pocket. Our money needs to go into our communities. We need to drain it from the banks and watch them die like fish out of water. It can be done. But it requires discipline and a firm ideological commitment to what will deliver sustainable long-term prosperity. We must never again give in to the blind temptations of short-term sell-out, as happened over and over again with banks, building societies, buses, trains, electricity and water. No-one must own Wessex but those who live here. No-one must benefit unfairly from using our land, our money, our politics, our society, or our lives.  What it comes down to is that good business decisions have to consider the consequences for all those they affect.  If our economic system as constituted can't or won't do that, then we need a new one.

That kind of thing doesn’t go down well. It gets called ‘financial terrorism’ and the like. And that’s not surprising. The stage is being set for the arrival of full-blown totalitarian liberalism. Maggie’s mate Pinochet did it with guns. Our current leaders will be doing it with laws. Greece and Italy already have their non-elected rulers in place. The idea is that freedom doesn’t mean doing what you like. It means living out your life in accordance with a rather crazy economics textbook. Individuals, governments, and even private businesses have all to abide by ‘the rules’. So bank customers must act ‘responsibly’ and not bring down the financial system in anger. Governments must submit to international laws of contract and not abrogate odious debts imposed upon their taxpayers under duress. We all have to take seriously the idea that banks create value in the form of financial ‘products’, which is a fancy name for fairy dust.

The clearest example of the new thinking came last month from Andrew Bailey, formerly Chief Cashier of the Bank of England and soon to be Deputy Chief Executive at the new bank regulator, the Prudential Regulation Authority. He proposes that free personal banking be banned on the grounds that it ‘distorts the market’. A market used to be the coming together of a willing buyer and a willing seller on mutually advantageous terms. Not any more. What buyer and seller think is now irrelevant. What matters is what the textbook says. And according to the textbook the purpose of markets is to ensure that wealth flows from the poorer to the richer by denying the former the means to say no.

Free personal banking doesn’t distort anything. Bailey’s excuses have been comprehensively trashed by the commentators. Banks make their profit out of charges for extras and, most of all, from lending our money out at interest, many times over (fractional reserve banking). The problem for banks is that interest rates are at an all-time low. They’re scared, because they’re not making enough money from our money. But the first to re-introduce bank charges will be the first to go bust as customers desert in droves. No-one dares do it. So the regulator steps up to ‘save the system’. Regulation, far from protecting us from the banks, therefore turns out to be the means of protecting the banks from us. Better check for space under that mattress now.  And darn that old sock.

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