The previous week it appeared we were coming out of the downward spiral following the nationalisation of Fannie Mae and Freddie Mac. The move gave a much-needed boost to the US and UK mortgage markets. But Lehmans’ Chapter 11 application, the fall of HBOS and the takeover of Merrill by Bank of America shows the parlous state the market is still in.
The American dream to grow at all costs and dominate all markets appears to have created a house of cards on the brink of collapse.
Depressingly, many experts talk about the impact the US market has on our economy as if we have no control over our destiny. This may be true for lenders owned by US parents but the same does not necessarily apply to UK-based financial services firms, particularly regional building societies.
We use the term global credit crunch as if it is a natural disaster we have no control over. But it’s not – it is man-made. When the dust settles there will be many to blame, from the lenders that relaxed their policies and abandoned prudence to the regulators and institutions that were meant to oversee what banks were doing and failed. I have little sympathy for plc organisations. They made commercial decisions and shareholders knew the risks. What makes me sad is the demise of some regional societies.
Over the years I have opened many accounts with small mutuals so I could vote against wacky proposals by individuals who wanted a share of the potential windfalls. I guess I was an anti-carpetbagger. Now I find some of these organisations I love being forced to merge and I’m incensed.
Once upon a time regional societies were run by local butchers, bakers or candlestick makers – successfully, I might add. They served their local communities with distinction.
Didn’t latter-day managers have any sense of history when they took these small organisations into riskier waters?
Clients in the communities they once served now have less choice – so much for slogans such as ‘community matters’. I am reminded of a quote from former Prime Minister Margaret Thatcher, albeit in relation to another subject.
She said: “No generation has a freehold on this earth. All we have is a life tenancy with full repairing lease. This government intends to meet the terms of that lease in full.”
It’s a shame the managers of some lenders didn’t think in the same way.