Jump to content
House Price Crash Forum
Sign in to follow this  
Ash4781

'the Feeling's Mutual' John Mcfall

Recommended Posts

The mutuals are also failing though. Housing transactions stabilising at these lows will be a problem for the mutuals as they are monoline (overcapacity). They could up their mortgage rates on the lower volume I guess oh but wait they cannot compete against the banks with state backing, and economies of scale.

Mutuals better have or have had strong risk management as their capital side is more problematic as it's harder to raise capital. Ok they have that new capital instument profit participating deferred shares (PPDS) but that isn't putting people before profit ;)

Share this post


Link to post
Share on other sites
Guest happy?

The mutuals are also failing though. Housing transactions stabilising at these lows will be a problem for the mutuals as they are monoline (overcapacity). They could up their mortgage rates on the lower volume I guess oh but wait they cannot compete against the banks with state backing, and economies of scale.

Mutuals better have or have had strong risk management as their capital side is more problematic as it's harder to raise capital. Ok they have that new capital instument profit participating deferred shares (PPDS) but that isn't putting people before profit ;)

Collapsed mutuals requiring state aid = 0

Collpsed banks requiring state aid = err dozens to date.

I can't think of anything else to add. Dunfermline may have had part of its books supported from what I recall / West Brom mutated into the bast4rd child of a bank? NB regretably had to mis-spell bast4rd - (despite my correct grammatical use of the word) because of the niceties of the censorware here.

I suppose what would be useful would be a breakdown of state support (i.e. my taxes) for banks versus state support for mutuals. I think the latter is likely to be miniscule. I'm willing to bet the money shoring-up RBS is more than the whole value of the mutuals combined.

Edited by happy?

Share this post


Link to post
Share on other sites
The mutuals are also failing though. Housing transactions stabilising at these lows will be a problem for the mutuals as they are monoline (overcapacity). They could up their mortgage rates on the lower volume I guess oh but wait they cannot compete against the banks with state backing, and economies of scale.

No enterprise can compete against the state. I'm not sure that economies of scale are relevant; the mutual sector includes players of many different sizes (and the tendency is towards merging).

the reason the mutuals haven't failed per se is that when any have been in danger,they have been 'taken over' by Nationwide.

Dunfemline,Chesire,West Brom ?

I'm unsure as to the extent of govt aid to encourage nationwide to take these on.

I'm not aware of any such aid; what's certain is that NW has had to pay significant additional FSCS levies to bail out banks and their depositors. The mutual sector as a whole has had the strength, so far, both to keep its own house in order and to help keep the private banks' house in order.

Share this post


Link to post
Share on other sites
Guest happy?
the reason the mutuals haven't failed per se is that when any have been in danger,they have been 'taken over' by Nationwide.

Dunfemline,Chesire,West Brom ?

I'm unsure as to the extent of govt aid to encourage nationwide to take these on.

I'm not clear why you put taken-over in quotation marks - perhaps you could explain.

Several smaller societies have been taken-over by the Nationwide - Dunfermline being a subtantial society. The West Brom hasn't been taken-over by anyone - I referred to it as a bast4rd child because of the creation of a bizarre new bond to keep it afloat.

The Yorkshire has also taken over a couple of smaller societies (Barnsley and AN Other whose name escapes me). Speculation was at one time that the West Brom would also merge with the Yorkshire - but presumably due diligence persuaded the Yorkshire otherwise.

This is not part of some grand conspiracy though - there is a long history of mergers in the mutual sector - scale of economy dictates it. I would argue that the merger process is far from beneficial to the mutual movement as a whole, and I would also query its benefits to the taxpayer too.

If followed to its logical conclusion there will be only one building society left in a decade (The Nationwide) and presumably in the next recession, like the banks, this too will need a bailout from my wallet because it's too big to fail. The original post had a germ of truth in it: how do we let financial organisations collapse without dragging us all under?

Share this post


Link to post
Share on other sites

Ten years ago, the logic of the market was that Nationwide stood to "clean up": increasingly out-compete the banks and take an ever-growing market share. Along with the tiddlers, some of which might grow. Some people were saying so, even back then.

But that logic had a premise, that bad money should not drive out good to the extent of bailouts. That premise has now been crushed.

Share this post


Link to post
Share on other sites
Guest happy?
Of course, it's worth remembering that Halifax, Bradford & Bingley, Northern Rock, Alliance & Leicester were all mutuals until recently.

They were of course until the big bang and the tosh about free markets got bought hook line and sinker by a gullible public and greedy directors who saw their chance to get rich quick. At the time many people pointed-out that they were small fry who would either get gobbled-up or crushed. Those who took this line were derided - now it seems the banks' previous mutual status is the cause of their collapse - not their failure to recognise their niche.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   289 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.