Smile: It's a Co-operative Bank

It's been a challenging few weeks for those of us who hold an ideology to the left of the political spectrum. I don't know whether I was more astonished to discover that the road to serfdom goes via the Brixton Maoist Centre or that my apparently ethical bank was actually being run by the 'crystal methodist'. I'm only waiting to discover that Shelley was an incestuous just peadophile for my despair to be complete.

I would hazard a guess that you shared my frustration after the financial crisis to hear from many economists and their media supporters that the answer to the disaster was not fewer markets but more markets. So I hope you will forgive me if I will paraphrase this response and argue that the answer to the crisis in the co-operative sector is more mutualism not less.

Ed Mayo, Director of Cooperatives-UK has been quoting the Financial Times's comment that the problem with the Co-operative Bank was not that it was a co-operative but that it was a bank. I would take issue with this comment on the basis that the Co-operative Bank a co-operative in the sense in which I understand that term. It was the bank of the Cooperative Group but it was never a membership organisation and I could never influence it policy although I have had my account there for years.

As an earlier guest post on this blog demonstrates the bank was following its market competitors by engaging in a whole range of activities that I feel its customers and members would never have sanctions have they been offered a choice. The contrast between the activity of the Co-operative Bank and the Nationwide Building Society, a large but none the less mutual organisation, is instructive. The Nationwide, a genuine mutual which has more than doubled its 'profits' this year, is anxious that it is not tarnished by the problems at the non-co-op Co-operative Bank.

For me the principles of co-operation are not challenged by the antics of Mr Flowers. Businesses run by the members for the benefit of the members and that do not deliver services to external shareholders are still the ideal form of economic organisation in my book. I have an account with the Co-operative Bank because it was part of the movement that subscribes to these values; I was always disappointed that it was not a genuine cooperative.

The problems for the co-operative movement is that it appears to have lost it sense of purpose and its ethical stance is now under challenge. To save its reputation it needs to divorce itself from those who would influence it, whether market players or Labour Party insiders. We need the cooperative to become truly ours. It is our job to wrest control back from those who would use it in their sectional interest and to make it the truly mutual business sector it has always promised to be.
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And the Risk-Takers Shall Inherit the Earth

One of the themes running through this blog for the past year has been a howl of protest at the transfer of value to a tiny, over-indulgent section of the world's population. The asset bubble enabled those controlling the world economy to acquire a vast share of the planet's value. Now those who failed to make a killing from some of their risky financial dealings are turning to the prudent and thrifty to make good their losses.

This is the essence of the heartfelt complaint from Graham Beale, chief executive of the Nationwide, at the size of his company's contribution to the financial compensation fund that the FSA require all financial organisations to belong to. Savers who chose the mutual, low-return, low-risk form of financial investment are being required to pay £250m. The FSA regulated building societies tightly, preventing them from joining in the asset bonanza, but now the losses have come home to roost they are expected to compensate those who did.

The Nationwide is required to pay more into the compensation pot than the London-based insurer-of-last-resort Lloyds. The unfairness stems from the fact that the amount levied relates to the amount of retail deposits an institution holds. So, in effect, the mutuals are being punished for being prudent and for having the confidence of small investors. The dealers in footloose venture capital are correspondingly favoured by the scheme, although their chances of needing compensation when risky investments turn sour are higher.

More iniquitous even than the plight of the Nationwide is that of the credit unions, whose members are some of the poorest in our society and whose mission is to encourage thrift and wise management of money amongst those who have least. Each credit union, with its hard-saved and comparatively tiny asset base, is being forced to pay a levy to the fund that insured the gambling of the super-rich.

Despite the temptation to join in the financial frenzy that lured some of the mutuals off their path of virtue, co-operative financial institutions have always operated with prudence and high ethical standards. But, like the credit unions trying to proselytise the catechism of thrift in a world that rewards greed, they must hope that their members have faith that they will get their rewards in heaven since here on earth Mammon seems to have the ear of the regulator. Tweet