IT IS almost exactly ten years ago and it was a lunchtime in Skipton that, this past week, I had cause to rue. I was having a pint and a sandwich with some architect friends and they were using phrases like “wholesale money” and “mutuality” which I barely understood.
High finance is not normally a subject for this column, probably because of this lack of understanding. But in my ignorance, I have just lost some £7,000 of my savings – and possibly more – and I would have fared much better had I listened to those friends of mine who were discussing with fierce local pride the Skipton Building Society.
Skipton Building Society
The Skipton, you see, is a “mutual society” which means that its savers get any profits accrued, as opposed to shareholders, and this was a time when many of the then-building societies were converting into banks by offering their members – and City of London investors – a chance to buy shares.
Why they needed to do this, my lunchtime advisers told me, was so that they could borrow “wholesale money” on the international banking circuit to expand their businesses. This is not an option open to mutual buildings societies run by rural hicks, the so-called financial pundits in the national press were saying, and they should get off their backsides and join the great bank rush.
Now this was one of thousands of similar conversations taking place in Yorkshire at the time, for this is the county that virtually invented the building society, that 19thCentury monument to Non-conformist self-improvement and thrift.
My wife and I had been long-standing members of the Halifax and had bought and sold no fewer than four houses in various parts of the UK with their mortgages and were living in the fifth. Thankfully, that mortgage was almost paid off and when the HBS became a bank, later to merge with the Bank of Scotland to form HBOS, we received a rather nice bundle of shares free.
After that, so-called “carpet baggers” – city slickers in search of a quick buck – had been investing money in mutuals like the Skipton in an attempt to force them to become a bank too and bring them a nice windfall profit. And that’s what was under discussion that lunchtime in one of Skipton’s most popular businessmen’s pubs.
My friends, all locals, had been brought up with the SBS. Many of them had had accounts opened in their name by loving relatives on the day they were born. Some had worked at the society during their school or college holidays, for it was and is standard practice for the society to recruit future staff by getting them involved young.
In the pub, they were incensed that London sharks were trying to bite chunks out of this venerable institution and had decided to vote in favour of remaining mutual even if these outsiders forced a vote. As it happened, that vote was never needed because the predators could not raise enough signatures to force one through.
in the meantime, the Skipton Building Society, the much mocked mutual, has become on of the most powerful financial institutions in the land
I was so impressed that, later, I did put a certain amount of cash into the Skipton although, foolishly, I withdraw most of it to buy a new car. Stupid move, as it turned out last week when the last of the former building societies turned banks, the Bradford and Bingley from just down the road, had to be nationalised.
And at the heart of the problems was that so-called “wholesale” money raised on the international finance markets. These new banks had borrowed and borrowed (and paid their fat cat executives millions of pounds in unearned bonuses) and lent it out on mortgages which might never be paid now that the housing market has collapsed.
My wife and I have lost an estimated £7,000 – and it could be more – on our HBOS shares from this time last year. And in the meantime, the Skipton Building Society, the much mocked mutual, has become on of the most powerful financial institutions in the land, with no debts, 19 subsidiaries and 8,000 staff.
And now I can explain why I think this is a suitable subject for a countryside column. The Skipton was kept as it was, and has prospered since, not because Yorkshire Dales folk are averse to a little extra cash and have a reputation for being careful with the brass they have, but they are also proud and protective of valued local institutions. This time, the country folk outwitted the city slickers – and I wish I had been one of them!