Now, as we approach the 150th anniversary of this seminal book, we may be witnessing the same process unfolding in the banking world. Unsurprisingly, strong and adaptable lenders welcome the process.
True, the government gave the kiss of life to the Northern Rock dinosaur, which nearly became extinct when the era of easy credit came to an abrupt end. Since then intervention has been conspicuous by its absence.
That’s why the Council of Mortgage Lenders, the Intermediary Mortgage Lenders Association and the Association of Mortgage Intermediaries have called on the government to take a more proactive role to save the mortgage market. Indeed, they have been submitting learned papers to Sir James Crosby’s review charged with finding a way out of the credit crunch.
The problem is that Sir James has not been overenthusiastic in his response and in his interim report expressed the view that intervention might prolong the crisis.
Against this backdrop, last month Cicero Consulting invited the great and the good of the lending fraternity to a symposium at which it proposed a strategy to nudge the government towards intervention. The idea was to commission Oxford Economics to research the consequences of doing nothing to help lenders. Securitisation, after all, accounted for around 40% of mortgage funding before the crunch.
The idea was that news of an impending financial Apocalypse would be spun in the media and fed into the political party conference circuit this autumn, creating the climate for action. It was an exciting idea but required a budget of £100,000 that wasn’t forthcoming.
Lenders were reluctant to dip into their pockets to the tune of £3,000 each, although we know that one big high street lender and one sub-prime operator wanted to help.
But should we be surprised by their reluctance? The demise of NR has seen one aggressive competitor fall by the wayside and the drying up of the credit stream has seen many aggressive sub-prime lizards, or to give them their Linnaean classification, Reptilians americanus, become extinct.
Institutions with more robust funding models – the big high street banks, large lenders and building societies – can afford to reduce their metabolisms until the climate changes and they emerge into a brave new world with less competition where they can price for risk accordingly. Besides, there is always the risk that anything this government does would be the kiss of death so why buck the market?