Death of De-Mutualisation

moonrakerz

Could we have a moment's silence to remember the passing of another get-rich-quick scheme: ie:- Building Society De-Mutualisation ?

With the nationalisation of Bradford & Bingley all the ex Building Societies have now gone; either swallowed up by a larger banking organisation, or - down the pan.
The mighty Halifax ("The Largest Building Society in The World") was reduced to just being an "H" before it was consigned to oblivion. Northern Rock and Bradford & Bingley, once two of the most respected finance houses in the land have both been driven into bankruptcy by - greed.
Greed by the management of some of these organisation; but also greed by the public who saw this as a "nice little earner".(I will make no comment about the "carpet bagging" thread on this site !!!)

The tale of Bradford and Bingley is a salutary tale. In 1999, following the stampede to de-mutualise, it was the second largest building society in the country with 2.5m members.
The first attempt to de-mutualise, led by a former butler (a Michael Hardern) was defeated by a management which wished to remain as a mutual. A second attempt led by Mr Stephen Major, a plumber, was successful. From the start, the de-mutualisation didn't go quite as planned - the payout to members/shareholders was only half that which the "pro" lobby forecast.

The new "thrusting" management (all the old "fuddie-duddies", who had run the business very successfully for years, had quit) of B & B had to find a way to "grow the business".
Mortgages for Mr & Mrs Smith in Acacia Avenue - oh no, boring, boring. How about "buy to let" and "self-certification" (where we don't have the bother of checking to see if people are actually earning what they say they are) ? It didn't occur to them to see why the other finance houses were very wary of this market - it was too b****y risky. Not only were the lenders "spivs and speculators" (I hate to quote a Politician - especially a Scot !), many of the borrowers were too !

Mr Hardern, Mr Major, where are you now ? Lazing on a beach in the Bahamas ? I somehow doubt it. I hope you were better at butling and plumbing, because you were lousy financiers ! Didn't you both do well ? Don't worry about the £40bn now needed to prop up the B & B, the rest of us will pick up the tab !
9 years from boom to completely and utterly bust.
Unfortunately, as usual, the "innocent" have now been dragged into this shambles. How many more billions of taxpayer's money will be thrown down the drain to try and salvage these organisations ?

In the good old USA there is a right-royal fight going on in Congress over the $700bn that Mr Bush is trying to spend to fix the same problem. Where are our elected representatives ? In Parliament looking after our interests ? No chance.
They've all just come back from their hols and are now, in Manchester, Bournemouth or Birmingham, telling us what a grand job they are/will be doing to fix the problem next week/month/year - fat chance again !

One other point that has been overlooked in all the hoo-hah of late. Last year the Government issued discussion papers and draft legislation to allow Building Societies to increase their borrowings from the wholesale money markets from its current 50% to 75%.
Could someone please remind me what caused the "credit crisis" in the first place ?

You just couldn't make this up, could you ?

napoleon

I bought a load of beer and chips with the windfall money so it's not all bad.

rizla01

I just cannot understand why the bonuses can't be clawed back from those to whom VAST sums of money was awarded??

Those in receipt of these disgusting amounts are the ones guilty of perpretrating these 'Crimes' - NOT the taxpayer, who is going to suffer over this fiasco.

Milarky

While the passing of B&B into state-ownership may mark the formal end of demutualised buidling society, you talk as though the decisions that the (new) B&B Board took were because of Hardern and Major. Did they get get put on the Board or something?

No. What about the other examples. What about Halifax. With all those mortgages dragging them down isn't their failure more to do with the nature of the business they were in all along having gone pear shaped rather than how they managed it (through leverage?)

Surely mortgage lenders have all been caught out behaving imprundently to some extent. Some have more deposits and less reliance on borrowings than others but they've all been 'at it' to some extent. Look at Britannia. Still a building society, but leading the charge to raise building society restrictions on borrowing you mention so they could still act like 'mortgage banks' even without demutualising.

Nationwide. Apparently they just stopped lending in the last year and have mopped up the lions share of deposits (aka 'flight to quality') In addition, Nationwide has become the FSA's building society 'white knight'. I seem to recall that another big mutual - Standard Life - enjoyed a period of 'flight to quality' when its rival mutual, Equitable, got itself into trouble (for playing the mutual card too well!) but then got into trouble again on the stock market falls in 2001-2003 - and it's now a plc.

bristolleedsfan

moonrakerz wrote: »

One other point that has been overlooked in all the hoo-hah of late. Last year the Government issued discussion papers and draft legislation to allow Building Societies to increase their borrowings from the wholesale money markets from its current 50% to 75%.
Could someone please remind me what caused the "credit crisis" in the first place ?

You just couldn't make this up, could you ?

Its been posted many times on here by Baby_Boomer that Brittannia BS ( a mutual) lobbied the Government ( by lobbying I mean Brittannia BS board of directors and CEO, not "Carpetbaggers". ) for a change in the law to allow Building Societies to do what you have described, so its neither been "overlooked" nore is it new news.

No mention of either Derbyshire or Cheshire BS in your attack on the "Carpetbaggers". :think:

"Much respected" John Wriglesworth doesnt mention "Carpetbaggers" once. :rolleyes2

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=173684

moonrakerz

bristolleedsfan wrote: »

Its been posted many times on here by Baby_Boomer that Brittannia BS ( a mutual) lobbied the Government ( by lobbying I mean Brittannia BS board of directors and CEO, not "Carpetbaggers". ) for a change in the law to allow Building Societies to do what you have described, so its neither been "overlooked" nore is it new news.

I was actually referring to the general media, where I have not seen it mentioned once - unless it was in the Sun or NoW !

bristolleedsfan wrote: »

No mention of either Derbyshire or Cheshire BS in your attack on the "Carpetbaggers". :think:

I don't recollect launching an "attack" on carpet baggers - I fact I specifically said I wouldn't comment ! If the cap fits ................................
The Derbyshire & Cheshire BS are totally irrelevant to carpetbagging anyway. They got into trouble and were immediately rescued by another Building Society - at NO cost to the taxpayer.
(Incidentally did you know that one of the companies that was "sniffing around" Northern Rock with a view to rescuing it was AIG - now you definitely couldn't make that one up !!!)

bristolleedsfan wrote: »

"Much respected" John Wriglesworth doesnt mention "Carpetbaggers" once. :rolleyes2

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=173684

Quite correct, he doesn't. He was talking about the causes of the failure of the company, why should he mention "carpetbaggers" ? - I didn't either in relation to their failure.

I must agree to some extent with your and Milarky's, point about all lenders behaving imprudently to some degree. Surely this is where Government and the useless FSA should be involved (Do I hear cries of "nanny state"?). I daresay that if I was running a little Building Society and some slick financier showed me the way to financial heaven by de-mutualising I might be tempted ! Who wouldn't ? Adam Applegarth is still being paid £63,000 a month - in effect by the taxpayer - even after he wrecked Northern Rock !
Be honest with yourself, who actually gained from all the de-mutualisations - the man in the street or the men running these new banks ?

Milarky's point about the Britannia - totally agree - that's why I moved the money I had with them elsewhere - several years ago !

bristolleedsfan

moonrakerz wrote: »

I
I don't recollect launching an "attack" on carpet baggers - I fact I specifically said I wouldn't comment ! If the cap fits ................................
The Derbyshire & Cheshire BS are totally irrelevant to carpetbagging anyway. They got into trouble and were immediately rescued by another Building Society - at NO cost to the taxpayer.


Quite correct, he doesn't. He was talking about the causes of the failure of the company, why should he mention "carpetbaggers" ? - I didn't either in relation to their failure.

I/quote]


Just that the two characters you named were "Carpetbaggers" and the "pro lobby" you referred to were apparent "Carpetbaggers".

http://www.guardian.co.uk/business/1999/feb/13/bradfordbingleybusiness

http://news.bbc.co.uk/1/hi/business/the_company_file/250368.stm


"The first attempt to de-mutualise, led by a former butler (a Michael Hardern) was defeated by a management which wished to remain as a mutual. A second attempt led by Mr Stephen Major, a plumber, was successful. From the start, the de-mutualisation didn't go quite as planned - the payout to members/shareholders was only half that which the "pro" lobby forecast."

moonrakerz

bristolleedsfan wrote: »

moonrakerz wrote: »

I
I don't recollect launching an "attack" on carpet baggers - I fact I specifically said I wouldn't comment ! If the cap fits ................................
The Derbyshire & Cheshire BS are totally irrelevant to carpetbagging anyway. They got into trouble and were immediately rescued by another Building Society - at NO cost to the taxpayer.


Quite correct, he doesn't. He was talking about the causes of the failure of the company, why should he mention "carpetbaggers" ? - I didn't either in relation to their failure.

I/quote]


Just that the two characters you named were "Carpetbaggers" and the "pro lobby" you referred to were apparent "Carpetbaggers".

http://www.guardian.co.uk/business/1999/feb/13/bradfordbingleybusiness

http://news.bbc.co.uk/1/hi/business/the_company_file/250368.stm


"The first attempt to de-mutualise, led by a former butler (a Michael Hardern) was defeated by a management which wished to remain as a mutual. A second attempt led by Mr Stephen Major, a plumber, was successful. From the start, the de-mutualisation didn't go quite as planned - the payout to members/shareholders was only half that which the "pro" lobby forecast."

You seem to want to start an argument over something that I didn't say ! I didn't say that these two financial wizards (a butler and a plumber - priceless !) brought about the collapse of the B & B - the current management did that.
I didn't say that Northwich Victoria were a better football team than Leeds United either !

I wrote my little piece before I read the Times this morning - this sums it up, perhaps more eloquently than me !

http://business.timesonline.co.uk/tol/business/columnists/article4842838.ece

Craftyscholar

moonrakerz wrote: »

bristolleedsfan wrote: »

I wrote my little piece before I read the Times this morning - this sums it up, perhaps more eloquently than me !

http://business.timesonline.co.uk/tol/business/columnists/article4842838.ece

Thanks for the link.
As you say - sums it up eloquently.
Really sad to see so many financial organisations which survived for decades (even centuries) being wrecked by people who couldn't see further than their next bonus.

purch

You seem to want to start an argument over something that I didn't say

This is the MSE Forum mate....:eek:

................reading and understanding posts before replying to them is against the rules :rotfl:

Milarky

I didn't say ! I didn't say that these two financial wizards (a butler and a plumber - priceless !) brought about the collapse of the B & B - the current management did that.

But what you did say elides your meaning somewhat:

Mr Hardern, Mr Major, where are you now ? Lazing on a beach in the Bahamas ? I somehow doubt it. I hope you were better at butling and plumbing, because you were lousy financiers ! Didn't you both do well ?

What has this to do this the downfall of B&B? Once they became a plc they were free to act as they saw fit. This business of attacking plc status per se makes as much sense as finding faults with certain mutuals over mutuals in general.

Maybe there is a case that 'big bangs' are bad for businesss - because the sudden freedoms to operate and cash inflows lead to hasty decision making. I'd certainly accept that premise. (Remember 'TSB'?)

But demulisation (a la 'carpetbagging') can also be by sale of the business to an established business - giving cash to members (e.g C&G selling itself to Lloyds) Unless the members then go and invest the windfall they have no exposure to risk - and the business is likely (because it is merely a 'unit' in a larger concern) to be gradually changed - again exposing depositors to less risk.