Mutual society robber barons

I have had an account at the Nationwide Building Society in the UK for 30 years. I believe that mutual societies offer the best way to serve the retail banking needs of ordinary citizens, and that they could and should do more to provide a working capital lending function for industry. I also believe that Lloyds and RBS, most of the equity in which belongs to the public as a result of the global financial crisis, should be mutualised. Sadly, no one in politics has the cojones to propose this.

Nationwide is the biggest building society in the UK, but the people who run it don’t think much like mutual society types. Mostly they impersonate bankers. Right now they are writing down hundreds of millions of pounds of bad loans from their speculation in commercial real estate activity pre-2008. Commercial real estate is a notoriously cyclical sector in which a mutual society has no business playing with its members’ money. The management is only able to pay off this folly because of the state’s provision of nearly free funds via quantitative easing, a policy that will have a fiscal cost for the whole of British society down the road when the Bank of England sells for less the bonds it has bought for more. However the people who run Nationwide are so gormless, or so self-serving, that they believe the profits that QE makes possible reflect their management genius (they being the same people who lost billions in commercial realestate speculation).

So the top boys and girls are paying themselves millions of pounds a year and jacking up their bonuses (details here). They run a bonus structure that operates over periods of 12 months and 36 months when banking cycles in the post-war era have been more like 10-15 years. Are they stupid, or just greedy? I hope they are just stupid.

Whichever, in the Nationwide AGM whose voting closes on the 22nd, I am voting against the remuneration report and the whole miserable lot of them. If you have a Nationwide account I would urge you to consider doing the same thing. If you vote online, do NOT use their immoral and deceptive ‘Quick Vote’ button which lets the chairman vote for you. The chairman, Geoffrey Howe (no relation), trousers £300,000 just for chairing the board. If you have read Asian Godfathers, you will be interested to know he is also chairman of Jardine Lloyd Thompson, which is the modern incarnation of the insurance business of the Keswick/Jardine godfather family of shafting minority shareholder fame…

Nationwide on your side

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