Mutual mistrust

I am not against mutuals. Nor am I starry eyed about them in the way some people are.

They can be a way of giving more of the profit of an activity to the depositors or savers, as they pay no profit and dividend to company shareholders.

This can mean they are riskier than a shareholder business, as they do not have PLC style retained profits as part of their shareholders’ funds or reserves. They might pay too much out. There are no shareholders to fall back on and ask for more capital.

Some people seem to think they are morally superior to for profit businesses. This is odd, as the banks and insurance companies are still for profit, but they want more of the profit to go to the savers or users of their businesses.

The UK mutual sector is now damaged by two spectacular collapses. The UK’s oldest mutual insurance company, Equitable Life, was brought low by promising more than it could afford to pay out to policyholders and savers. The mutual sector’s largest bank, the Co-op, has just reported large losses, insufficient capital and a Chairman who lacked the qualities of mind and character to be a successful bank chairman.

It is difficult to see how either of these businesses had a more moral approach to business than the for profit competitors they faced daily in the market. The Co-op bank was not averse to using the complex ways and products of modern finance. Equitable Life got its sums hopelessly wrong, and ended up dashing the hopes and legitimate expectations of a generation of its savers.

I have no problem with a good well run mutual. This recent history should, however, be a warning of the special risks mutuals can pose. With no shareholdersto provide capital and insufficient conventional profit reserve some financial mutuals can be very risky. I myself always steered clear of Equitable Life because of its structure. As a result I have been able to represent my constituents caught up in that problem without conflict of interests. Quite a lot of MPs were in EL themselves.

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59 Comments

  1. Arschloch
    Posted November 22, 2013 at 5:28 am | Permalink

    I would avoid mutuals like hell. They undergo no scrutiny from analysts like a plc does. While even if it does not end up like the Co-Op or the EL, there is still a temptation for the management to take the mick at the expense of the membership. Knowing that very few members turn up for AGMs it was not unknown, for example, that the chairman of something like the Whippet & Ferret Building Soc would find it necessary to have a top of the range Jag bought for him as it was “essential for the efficient execution of his duties”.

  2. lifelogic
    Posted November 22, 2013 at 7:26 am | Permalink

    Indeed equitable was a dreadful failure of management, auditors, accounting rules, regulators and mutuals. Even now people, including my farther, now in his mid eighties, are still awaiting for the small promised compensation, some 13 years after the outrage and government incompetence became very clear.

    With regards to the co-op what sensible person would employ someone with a dog collar, a Labour councilor, politician and innumerate theology graduate to chair a large bank. What sensible regulator would ever allow it?

    I see that all six of the politicians found guilty (or pleading guilty) to criminal offences were Labour. Well I suppose Labour always do tend to think of other people’s money as being theirs for the taking. Just a shame we will have to suffer them again from May 2015 onwards.

    • uanime5
      Posted November 22, 2013 at 8:28 pm | Permalink

      Lifelogic you seem to have ignored the problems caused by Fred Goodwin at RBS. I wonder how many bankers would be prohibited from running a bank if they couldn’t have any of his characteristics.

      Regarding the Parliamentary expenses scandal you seem to have forgotten about the Conservatives Lord Hanningfield and Lord Taylor of Warwick also breached this law. So by your logic Conservatives “always do tend to think of other people’s money as being theirs for the taking”.

      http://www.independent.co.uk/news/uk/politics/former-labour-minister-denis-macshane-pleads-guilty-to-13000-expenses-fraud-8947187.html

      Reply Mr Oborne’s article which may have inspired the posting made clear 2 Tory peers had been found guilty, but all the MPs found guilty were Labour.

      • lifelogic
        Posted November 23, 2013 at 7:46 am | Permalink

        Yes sorry, I meant to say MPs not politicians. Many indeed most Conservatives are not what I would call Conservatives at all. I have no time for Fred Goodwin,whatsoever. How could anyone be so stupid as to buy ABN Amro almost blind & without due diligence, and how could the regulators ever have allowed it?

        The failure of RBS/Natwest and its calling in of many good loans has been perhaps the singe most damaging thing for UK growth. It has delayed several of my expansion activities, new jobs and projects for no valid purpose. I am fortunately now rid of them, not that the other banks are much better. They only seem to want to lend on new owner occupied mortgages or on huge margins.

        • Bob
          Posted November 24, 2013 at 10:45 am | Permalink

          @lifelogic

          most Conservatives are not what I would call Conservatives at all.

          That’s why I don’t apply that epithet, I refer to them as Tories to avoid misleading anyone.

          If you do not wish to follow my example then perhaps you could just shorten the name to “con” ?

          Mr Redwood is a notable exception along with a few (too few) like minded colleagues.

  3. Mike Stallard
    Posted November 22, 2013 at 7:29 am | Permalink

    This is exactly what an MP ought to be doing in my opinion! Knowing what is going on. Warning. Being there as our representative.

    But not getting involved!

  4. David in Kent
    Posted November 22, 2013 at 7:34 am | Permalink

    While I do feel bad for those who have lost money by investing in the Coop I have to confess to a feeling of schadenfreude as I see this so-called ethical organisation brought down by its own incompetence and its moral failings revealed for all to see.

    • lifelogic
      Posted November 22, 2013 at 5:48 pm | Permalink

      What people often think of as “ethical” – things like so called “renewable energy”, anti nuclear power, anti GM, organic foods, using push bikes, paying more taxes, having a national health monopoly, biofuels, not for profit, being anti DDT etc. are often totally immoral and this often results in many deaths, starvation and frozen pensioners.

      • lifelogic
        Posted November 22, 2013 at 5:49 pm | Permalink

        Expensive religious energy is highly immoral in practice.

  5. lifelogic
    Posted November 22, 2013 at 8:10 am | Permalink

    With regard to the Reverend Flowers and the Coop, I just heard him described as “always immaculately dressed” so there was yet another good pointer that he might be totally unsuitable for any responsible position.

    • lifelogic
      Posted November 22, 2013 at 11:41 am | Permalink

      The dangers of lefties sporting dog collars & thinking they have a right to other money is further illustrated by Archbishop (now Lord) Rowan Williams:-

      State benefits should be fixed by law he suggests, so that no Government can cut them and be given a new name of “social share”.

      Why not just the name “magic money tree” or ” the augmentation of the feckless and creation of long term dependency fund”. Perhaps he or the CofE would like to fund all this? I certainly do not want to fund it (other than for those with health problems & truly unable to work). It is immoral and damaging for the recipients, the tax payers and the country in general on balance.

      http://www.dailymail.co.uk/news/article-2511518/Rowan-Williams-calls-law-ban-benefit-cuts.html#ixzz2lNByWJ00
      Follow us: @MailOnline on Twitter | DailyMail on Facebook

      • uanime5
        Posted November 22, 2013 at 8:31 pm | Permalink

        As long as people in work need benefits because they don’t earn enough to live on fixing state benefits in law is a sensible thing to do. Until all companies pay a living wage benefits will remain a necessity for many voters.

        • libertarian
          Posted November 23, 2013 at 12:47 pm | Permalink

          Uanime5

          The trouble with your post is that it shows that you completely fail to understand the problem fully.

          The amount of money people are paid intrinsically is immaterial as it depends on what it buys. What you and all socialists fail to see always is that the benefits paid to prop up living standards are taken from the workers in tax in the first place. Therefore a far better way of ensuring people have a better standard of living is to drastically lower taxes and thereby make peoples earnings go much further and all without wasting some of the money on bureaucracy.

          You have got to be pretty hard of thinking if you can’t see that organisations like the UK government and the EU have no money and create no wealth. Everything they hand out they took off you in the first place, took their large cut and then handed some of it back. It requires a huge level of ignorance to actually think this is a good and sustainable system.

      • APL
        Posted November 23, 2013 at 12:19 am | Permalink

        Lifelogic: “Perhaps he or the CofE would like to fund all this? ”

        I’m afraid the CofE is a lost cause.

    • Leslie Singleton
      Posted November 22, 2013 at 5:11 pm | Permalink

      lifelogic–For us, Ferraris in the Car Park was a good reason not to lend

      • livelogic
        Posted November 22, 2013 at 8:39 pm | Permalink

        Indeed I shall stick to my 10 & 15 year Volvo Estates, they are both still running just fine.

        I must have made a couple of million from the money saved (and wisely invested in appreciating property and companies) from not wasting it on new & rapidly depreciating cars every few years, over the last 30 years or so.

    • Arschloch
      Posted November 23, 2013 at 7:28 am | Permalink

      Careful by using that metric you are suggesting that Michael Foot would have made a great PM!

  6. Mick Anderson
    Posted November 22, 2013 at 8:33 am | Permalink

    I myself always steered clear of Equitable Life because of its structure

    Your education and life experience has given you the knowledge and wisdom to work this out before putting your money in. For the vast majority of the rest of us, they were just another financial services company in the marketplace, which we were assured was regulated in order to protect us mere mortals. I had some faith in the regulation before Mr Brown started fiddling, but now can’t trust either the companies or the regulators.

    Ignoring what has gone before, it could be argued that a Mutual has a more moral claim to be propped up by the taxpayer than a quoted company that has distributed all the profits to shareholders. Personally, I think that the Co-op should be allowed to go bust if the latest bailout fails, as should have the others. All that should be preserved are the depositors accounts.

    The one good thing from the Co-op problems is that it has shown that “Bonds” put forwards by the banking sector are not the same as normal accounts. That the Co-op would have been allowed to translate bonds into effectively worthless shares should be remembered the next time anyone is chasing a fractionally higher interest rate from such a “savings account”.

  7. Richard1
    Posted November 22, 2013 at 8:49 am | Permalink

    Leftists need to understand that there is a reason that over the centuries economic actors have chosen to coordinate their activities by coming together in companies, and there is a reason that profit making companies are the dominant form of economically active institution around the world.

    The reason is experience shows this is the best way to provide goods and services and means the most economically efficient allocation of resources. That doesn’t mean some companies won’t fail, nor that there aren’t incompetents and even rogues who can end up controlling them. The concept that there is some morally superior model – mutuals, the state, charities, is a nonsense. All have their place but ranking them for morality makes no sense.

    The coop nightmare is useful for two reasons: it will show that banks can be restructured at the expense of their owners and creditors and taxpayers don’t need to bail them out, demonstrating conclusively the wasteful absurdity of the Brown-Labour bail out. The other is it will hopefully reduce sanctimoniousness ( ‘ethical’ investing etc) in public life and put an end to the absurd concept that profit making businesses are not in most cases the best means of providing goods and services.

    • uanime5
      Posted November 22, 2013 at 8:52 pm | Permalink

      Leftists need to understand that there is a reason that over the centuries economic actors have chosen to coordinate their activities by coming together in companies, and there is a reason that profit making companies are the dominant form of economically active institution around the world.

      If you study history you’ll find that the first companies were formed so that people could engage in risky ventures without having to risk their entire fortunes. For example if you wanted to send a ship to India you’d set up a company and get people to invest in it. While people would be unlikely to pay 100% of the cost in exchange for 100% of the profits (and 100% of the losses) they would be willing to pay 5% of the cost in exchange for 5% of the profits.

      An example of this is an English company that was formed in order to trade with India. Along the way they found Russia and decided to trade with them instead. Interestingly they managed to make a profit.

      The reason is experience shows this is the best way to provide goods and services and means the most economically efficient allocation of resources.

      If this is true then why don’t all industries exclusively use companies? According to your claim a company composed of builders or plumbers would always be more effective than an independent contractor, yet reality seems to show the opposite.

      While companies are more efficient if the industry has a high capital cost (such as a factory or a large amount of R&D) there are many professions where a large company isn’t better than a small company, such as construction.

      Finally there are some benefits to outsourcing, so a company can be effective without doing everything in house. Thus “economic actors ” don’t need to combine to form companies.

      • Edward2
        Posted November 23, 2013 at 11:31 am | Permalink

        You have a strange history book Uni.
        Companies did not start in the way you describe.
        You can go back to Biblical times and see companies created to just trade.
        Your point on individual contractors is a weak one as they are effectively just one person companies invoicing their customers and trying to make a profit.
        Many of these embyro one person companies growing into large businesses.

        • uanime5
          Posted November 24, 2013 at 12:21 am | Permalink

          Care to name some of these Biblical companies, along with a definition of what is a company. While trading has occurred through guilds or by hiring artisans they were not considered companies because the business was not considered a legal person.

          Richard1 claimed that companies were the best way to do something because they involved a lot of people. I countered by pointing out industries where single person companies were more common than large companies.

          • Edward2
            Posted November 24, 2013 at 1:10 pm | Permalink

            Stop your nit picking and just admit you are wrong.

          • libertarian
            Posted November 24, 2013 at 4:15 pm | Permalink

            Uanime5

            Not interested in the Bible but the oldest company in the world is a Japanese construction company called Kongo Gumi which was founded in the year 578. My son’s private school in Uk was founded in 597.

            I would suggest that you either google before you post or better still don’t get involved in subjects you have no knowledge of at all like business, jobs or employment

      • Richard1
        Posted November 23, 2013 at 1:08 pm | Permalink

        Thanks for the history lesson. I don’t think anything you have said contradicts my post.

  8. Alte Fritz
    Posted November 22, 2013 at 8:52 am | Permalink

    Mutuality was indeed a USP for the Equitable and it caught many world wise lawyers as well as MPs. My one commercial dealing with Co Op illustrated an organisation which was very much tied to a politically driven agenda which did not follow from its mutual status as such, but rather its links to Labour. It put it at a competitive disadvantage without doing any long term good for its employees.

    Mutuality seems a good small scale idea which does not always do too well on a large scale.

  9. Bert Young
    Posted November 22, 2013 at 9:20 am | Permalink

    I invested in “mutuals” several years ago because I believed they had a limited future and would be a good way to receive interest ( while they lasted ) and produce capital when they “de-mutualised” . Like you , I steered away from Equitable Life because my investigations showed they were poorly managed . The discipline that was imposed to appoint independent arbitration to ensure a reasonable settlement to investors proved to be satisfactory and , as a result , my investments paid off . Nationwide were a different kettle of fish , I deemed they were too big and were not offering leading edge rates of interest ; if they were to de-mutualise it was difficult to see who would be in a position to merge with them or take them over . Mutuals are organisations of the past ; the investment culture has swung to the discipline of the Board Room and PLC competition .

  10. lifelogic
    Posted November 22, 2013 at 9:47 am | Permalink

    Another excellent blog from James Delingpole today, he is surprisingly perceptive for an Oxford English graduate and quite witty too.

    http://blogs.telegraph.co.uk/news/jamesdelingpole/100246933/on-green-issues-no-one-talks-more-crap-than-david-cameron/

  11. Brian Tomkinson
    Posted November 22, 2013 at 10:04 am | Permalink

    Perhaps you could explain the following taken from the BBC website:
    April 2012
    The Financial Services Authority (FSA) tells the Co-op Group it does not have enough capital to be allowed to expand by buying the Lloyds branches.
    July 2012
    It is announced that, contrary to the FSA’s earlier advice, the Co-op Group has emerged as the preferred new owner of the Lloyds branches, in a £750m deal. This happens despite the Co-op not raising any extra capital, according to the BBC’s Robert Peston.
    Chancellor George Osborne says the planned expansion of the Co-op Bank will create “a new banking system for Britain that gives real choice to customers and supports the economy”.
    24 April 2013
    The planned sale of Lloyds branches to the Co-op Group falls through, with the Co-op blaming a worsening economic outlook and the tougher regulatory environment imposed on banks. Business Secretary Vince Cable expresses his disappointment.
    May 2013
    The Co-op Bank is found to have a £1.5bn black hole in its finances.

    Is it any wonder that there is not mistrust, but a total lack of trust, in senior politicians from the three main parties in Westminster?

    • alan jutson
      Posted November 22, 2013 at 6:09 pm | Permalink

      Brian

      Yep !

      Both of the examples Given by John, both spectacular failures, both under the supervision of the FSA, a government bred organisation, which itself failed.

      Then you can add RBS not a mutual, LLOYDS TSB not a Mutual

      Then we have overspending by NHS Trusts, The Ministry of Defence.

      Seems like none of this matters at all, as no one taken to task.

  12. lifelogic
    Posted November 22, 2013 at 10:20 am | Permalink

    Interestingly Questiontime last night was short of two panelists due to a fire at the side of the train track. Buses, cars, coaches and vans could just have diverted round it in a few minutes, but trains can be brought to a standstill by one tree, a few leaves, snow, ice, fires, a left bag, staff shortages/illness, electric gantry problems, strikes, terrorist threats and countless other things.

    • uanime5
      Posted November 22, 2013 at 9:55 pm | Permalink

      Roads can also be closed by a tree (especially if it covers two lanes) snow, ice, fires (no one wants to go near a car on fire if it’s producing a lot of smoke), and terrorist threats (especially if they threaten to blow up a bridge).

      Reply But you can steer a car onto an adjacent road whilst the train is stuck on its blocked track.

      • lifelogic
        Posted November 23, 2013 at 7:49 am | Permalink

        Yes but you can turn round and take another route in a car.

      • Bazman
        Posted November 23, 2013 at 10:51 am | Permalink

        If you owned a helicopter you would not have these problems, so what are we doing about the absurd noise and safety laws that prevent helicopters taking off and landing where they like? Large twin rotor ones as used by Russian oligarchs are currently banned in this country for no reason it seems. How often do you see one on a hotel? Never. What does that do to the economy and what is Boris doing to rectify this? Lefty green environmental nonsense by envious BBC types.

        • libertarian
          Posted November 23, 2013 at 12:57 pm | Permalink

          Baz

          Whilst your post was an attempt at cynical satire it is in fact wrong. I have no problem taking off and landing my helicopter in the grounds of my estate or at hotels, conference centres and various race tracks around the UK. I highly recommend you get yourself a second hand Robinson R22 Beta blimey you can pick up a good second hand one for less than the cost of an Aston Martin DB9….whats not to like?

          • Bazman
            Posted November 24, 2013 at 2:22 pm | Permalink

            Always saw you as a propeller head not a petrol head libtard.

          • libertarian
            Posted November 25, 2013 at 5:51 pm | Permalink

            Baz

            I’m loaded fella R22 & an Aston Martin. Use the helicopter to go motor racing !!

          • Bazman
            Posted November 26, 2013 at 11:15 am | Permalink

            Which confirms this. In my experience those who claim to be wealthy are not, but I’m sure you are rich..

  13. oldtimer
    Posted November 22, 2013 at 10:26 am | Permalink

    All businesses must pay their way or go bust. A mutual is no different in this respect to any other form of business. The more capital that is required to run the business, and the longer the lead time between investment and return, the more likely it is that a company structure is the better alternative. Rubbishing or complaining about the profit motive or the need for businesses to retain and reinvest profits for their future is a deeply damaging aspect of public attitudes in the UK.

  14. stred
    Posted November 22, 2013 at 10:43 am | Permalink

    I used Leek and Westbourne, Abbey, and Northern Rock and these have not been managed terribly well. My bird tried to take a mortgage with the Coop a few years ago and was a victim of attempted ID fraud,(etc ed). It seems that about 20 years ago the managements of mutuals decided they should be paid more like bankers and since then they have been behaving like incompetent ones.

    • stred
      Posted November 22, 2013 at 5:17 pm | Permalink

      Correction. For Abbey substitute Bradford and Bingley.

  15. margaret brandreth-j
    Posted November 22, 2013 at 10:46 am | Permalink

    Businesses , companies , private, public institutions need reserves .This is common sense. It is morally superior to demonstrate common sense as it is in the interests of common women and men, which we all are and deserve a place which represents all the hard work we put into life and subsequently invest in organisations to make these top ( sometimes dubious) people sucessful.
    The reserves however are probably reinvested….am I correct? and is where the financial wizards need to realise that it is not their money, but ours.

  16. Mark B
    Posted November 22, 2013 at 10:53 am | Permalink

    The problems of the mutual’s that you used were more to do with their maladministration rather than the concept itself. Bank’s such as Northernrock have also had their problems and shareholders’ could not save them without government assistance.

    One must also not forget, that Government, or more aptly the FSA, did not carry out their function as overseer of these organizations’.

    The Icelandic people had the right solution to these problems. Liquidate the bad bank’s. Refund depositor’s monies, and lock up those responsible for the mess in the first place, thereby acting as dis-encouragement to others for malpractice and, encouragement to savers.

  17. Sir Graphus
    Posted November 22, 2013 at 10:57 am | Permalink

    Mutuals are fine, as long as they don’t start to think their virtue is a justification in itself. Thus poor returns, or the disasters above become excusable (to the employess and management, in advance), because they are by definition virtuous, and for the public good.

    We’ve seen what happens when the NHS, state education, and the BBC are infected with the same mindset.

  18. Gary
    Posted November 22, 2013 at 12:48 pm | Permalink

    of course, we won’t mention the private banks that would not be in business at all without being hooked up to the govt teat, either directly in govt ownership, or indirectly through QE and HTB. The biggest welfare scroungers in the world are banks. I don’t see any austerity for them, I don’t see any bankers of consequence in jail. We live in a crony kleptocracy.

    • Bazman
      Posted November 23, 2013 at 10:43 am | Permalink

      Tell it how it is Gary. A banker who is incompetent, of moral questionably and takes hard drugs. Who would have thought this!?

  19. Normandee
    Posted November 22, 2013 at 1:14 pm | Permalink

    You won’t put this up on the blog but you need to know you need to be ashamed, you are a liar and a charlatan. You voted with Cameron against the Afriyie amendment, you are not sceptic at all, you are a died in the wool conservative who is now running scared of a General Election loss. Oh you may have doubts about the EU but when it comes up against your party loyalty (despite the party having gone out of business) it comes a long way behind. Bugger the people, bugger the nation state, my party before all.

    Reply I did not vote against the Afriyie amendment, so check your facts first.

    • Edward2
      Posted November 22, 2013 at 5:57 pm | Permalink

      I cannot think of an MP who is less deserving of your dreadful slur on our host in your first sentence Normandee.
      Bearing in mind your inaccuracy do you not feel an apology is in order?

      (And full marks for allowing the post in the first place.)

  20. Leslie Singleton
    Posted November 22, 2013 at 1:56 pm | Permalink

    It seems intuitive to me that something is missing in a Mutual. My first boss would have it that any commercial organisation is like a stool, with the three legs being the Owners, the Customers and the Employees and that if one of those legs broke the whole just collapsed. Maybe the Reverend Paul Flowers got away with his egregious malpractices because there was no ownership to pay more, or from the sound of things, any attention.

  21. An ethical investor
    Posted November 22, 2013 at 2:27 pm | Permalink

    The Co-op Group clearly could not call on its members to raise the equivalent of share capital but it could (and did) raise finance in the capital markets in the ordinary course of business and has various instruments listed on the LSE.

    The Co-op Group reported audited net assets of some £4.525 billion at the start of 2013, including £1.85 billion in respect of its wholly own bank. Its 2012 audited accounts published in March 2013 advised that the bank had sufficient regulatory capital, which would be further strengthened by the infusion of cash from the sale of the Group’s insurance operations. This is the same Group which is currently undergoing a liability management exercise which will result in substantial losses for its retail investors / creditors. The Co-op Group will not (or cannot) support its own bank to ensure that the bank will close 2013 with £1.5 billion of capital as required by the PRA.

    In the event that retail bond holders or preference shareholders accept the bank’s terms under the liability management exercise they are required to vote in favour of a resolution which will require these investors / creditors to give up all prospect of pursuing litigation against the Co-op Group / bank in respect of their conduct of the underlying banking business under their stewardship.

    In the event that this LME does not succeed, then the Group / bank have advised that the bank will undergo a form of administration under the stewardship of the PRA and that investors and creditors can expect a full write off of their investment. In other words, investors are being pressured to accept this resolution in order to reduce the amount of their losses. Many of these investors are pensioners who rely on these investments for income.

    It therefore falls to the regulators (FCA) to investigate the management of the bank, its financial disclosures and that of the Group to ensure a) restitution is made to those investors who have suffered losses which could have been prevented and b) that lessons are learned from the debacle.

    I nevertheless wish the Co-op well with this restructuring and hope that it and its management emerge stronger and better able to adhere to ethical principles which do not entail parking the cost of their failures on others. Trust in the Co-op will not be restored until we understand what really went wrong, why it went wrong and that appropriate action has been taken to ensure nothing like this can ever happen again.

  22. Mark
    Posted November 22, 2013 at 3:12 pm | Permalink

    Equitable Life got its law wrong, rather than its sums. It considered it had the right to judge what was fair as a division of its benefits, but the courts decided that they could interpret the letter of contracts to grant some beneficiaries an unexpected bonanza at the expense of the rest.

    • lifelogic
      Posted November 22, 2013 at 5:52 pm | Permalink

      Where they went wrong was the basic error of having to types of investors in one pot of money. One with guarantee annuities and one without it was bound to lead to conflict between them.

  23. Winston Smith
    Posted November 22, 2013 at 3:12 pm | Permalink

    I notice you did not vote for Adam Afriyie’s amendment. Why?

  24. outsider
    Posted November 22, 2013 at 4:32 pm | Permalink

    Dear Mr Redwood, You are right that there are both advantages and drawbacks to customer-owned mutuals. If they stick to their principles they should be beacons of stability, especially in bad times. But they will naturally lag leaden-footedly behind in periods of competitive high market growth, because they have to take a conservative attitude to risk and can only safely grow organically. They therefore form a useful ballast in the system.
    But when they betray their mutual principles to chase market share (Equitable Life) or try to expand rapidly by relatively big takeovers (Co-op Bank), they are heading for trouble.
    Governance by independent directors who stick faithfully to clear mutual principles rather than managers’ ambitions is therefore critical, not least because there is weak accountability to the theoretical owners.

  25. Antisthenes
    Posted November 22, 2013 at 5:14 pm | Permalink

    The left were always shouting how the co-op was an ethical bank and was run by local politicians who ran it only in the best interests of their customers and society and were therefore better at running a bank than by those rotten city bankers. They also screamed that it was the the horrible derivatives markets and speculators that caused the financial crisis. As usual they were wrong on both counts either from ignorance (which they woefully appear to be all too often) or it suited their purposes to tell outrageous lies (which they also appear to do with great frequency). The people running the co-op now have shown they are not equipped to run a kindergarten bun fight let alone a bank. As for the financial crisis that was caused purely by a large number of home owners not being able to pay their mortgages. A crisis that was of the lefts making that the left will no doubt fail to own up to and do a labour party/Miliband maneuver and shout loud and nasty and spin that it was not down to them gov as they may have started it but the next lot were to blame because they did not discover or stop it . It was the democrats either Clinton or the peanut farmer I forget which who to drive through equality insisted that mortgages should be given not to the those who could afford them but those poor benighted citizens who could not. It became known as sub-prime and the idea was taken up by other countries including the UK. Of course because the risk of default was higher sub-prime mortgages cost more and so those poor benighted citizens debt was higher and even more unaffordable. How many more examples of dangerous consequences of letting the left dictate policies and practices are needed (I think I quote at least one a day in comments on pages like this) to convince the electorate to never ever take any heed of them or vote for them.

    • uanime5
      Posted November 24, 2013 at 12:25 am | Permalink

      Given that the Co-op didn’t need a bailout, unlike RBS, they seem to have done better than other banks.

      Reply They do need a bail out and are getting it from the private sector, because this government has rightly said No to state money being used.

  26. uanime5
    Posted November 22, 2013 at 8:53 pm | Permalink

    Non-mutals can also have problems as well if the market changes or they have too much bad debt. Examples are the banks RBS, Northern Rock, and HBOS; and the retailers Woolworths, Comet, and Blockbusters.

    • Edward2
      Posted November 23, 2013 at 3:03 pm | Permalink

      Thank you Uni,I never knew that.

  27. theyenguy
    Posted November 24, 2013 at 4:50 pm | Permalink

    At the end of the age of liberalism, fiat investments have risen to attain their peak value.

    Under liberalism, fiat wealth investments have been inflated via central bank policies of investment choice, and schemes of credit and carry trade investment, based upon the sovereignty of democratic nation states, such as the US, VTI, and the UK, EWU, and their Treasury Debt, TLT, and BWX.

    (reference to a particular company removed ed)

    With the rise in the Interest Rate on the US Ten Year Note, ^TNX, from 2.48 % on October 23, 2013, Jesus Christ has opened the First Seal on The Scroll Of End Time Events, and has released the First Horseman of The Apocalypse, Revelation 6:1-2, the Rider on the White Horse, who has a bow, yet no arrows, symbolizing his ride over the world, to effect a bloodless global coup d’état, to transfer sovereignty from nation states to regional nannycrats and regional bodies such as the ECB, who will rule in regional governance policies of diktat. and totalitarian collectivism schemes of debt servitude.

    Beginning on October 23, 2013, the strong rise in the Interest Rate on the US Ten Year Note, ^TNX, and the steepening of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, seen in the Steepner ETF, STPP, steepening, has destroyed yield bearing investments such as Utilities, XLU, DBU, Real Estate, IYR, DRW, and had destroyed currency carry trade investments in the Emerging Markets, EEM, and their banks, such as BRAF, and EPI, and in Australia, EWA, KROO, ENZL, its bank WBK, and iron ore miner BHP.

    As nations lose their sovereignty to the bond vigilantes and the currency traders through debt deflation, interest rates are going to explode higher worldwide, further destroying fiat money, that is Credit, AGG, and Major World Currencies, DBV, and Emerging Market Currencies, CEW, stimulating investors out of Stocks, VT, and creating an investment demand for gold bullion.

    In the age of authoritarianism, there are only two forms of sovereign wealth, these being diktat, and the physical possession of gold bullion.

    As of November 22, 2013, the price of gold fell to $1,242, which is the cash price of production for a number gold producers; thus a bottom has been established for gold.

    Reply This site does not give investment advice and does not endorse these views.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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