Is Banking Really 'free' as they claim?

cepheus

Linton wrote: »

Dunfermline was a genuine Building Society as was Derbyshire which got taken over by Nationwide. I dont know why they failed.

On 28 March 2009, reports indicated the building society was no longer viable, toxic assets would be stripped out and the remaining business put up for public sale.[2]

"Forced sale of building society". BBC News Online. 2009-03-28

Seems the only difference with the Banks, was they were not to big to fail (or be taken over), so Building Societies were not necessarily 'safe' either

Linton

cepheus wrote: »

Seems the only difference with the Banks, was they were not to big to fail (or be taken over), so Building Societies were not necessarily 'safe' either

Dunfermline failed partly because of bad loans for commercial property. Also it bought mortgage-backed assets which fell significantly in value from other financial companies including Lehmans. They also lost money developing software. From the same source, building societies can borrow up to 50% of their capital from the money markets, banks have no limit. So yes, when building societies started dabbling in things they didnt understand and doing business beyond their experience they came a cropper as well.

cepheus

Linton wrote: »

Dunfermline failed partly because of bad loans for commercial property. Also it bought mortgage-backed assets which fell significantly in value from other financial companies including Lehmans. They also lost money developing software. From the same source, building societies can borrow up to 50% of their capital from the money markets, banks have no limit. So yes, when building societies started dabbling in things they didnt understand and doing business beyond their experience they came a cropper as well.

As mentioned earlier though, the problem is that this ring fencing process wouldn't have saved Northern Rock at all. What we really want to separate is all non-box standard financial stuff and redefine it as speculative risky investment. Either that or we simply can't trust these to operate as public shareholding companies.