Freddie mac and Fannie may are the two mortgage institutions that sit at the heart of the US housing market. When the sub prime lending market collapsed, down they came with 5.4 trillion dollars of toxic debt.
Now, the US Government Accounting Office has issued a report http://www.gao.gov/products/GAO-11-33R opening the door to these being restructured and restarted as co-operatives.
Housing ought to work particularly well on a cooperative basis because people in homes have a long term interest and you can structure land, housing and finance in ways that keep costs down. In Germany, a regulated, largely cooperative mortgage sector has escaped the Anglo Saxon model which gave us speculation and short term choice – hundreds of mortgage products all premised on the fact that rising house prices meant more than the ability to repay.
At present building societies are being squeezed because the regulators want to treat them as if they were wannabe toxic banks rather than doing what would make more sense and demanding that banks behaved like building societies…
Good luck, Freddie and Fannie
Mutual models for the state… can they work? I do hope so and there are some inspiring examples, like the Fostercare Co-operative, that show how.
The Paymaster General says it is more engaging to work in a co-op – the door is now wide open.
For all our success and recognition, our eyes should be wide open too though for employee businesses that don’t operate as cooperatives;
– Airlines in the USA – where share-owning United Airlines senior staff ransacked the business and ordinary staff and customers were left with the pieces
– Buses in Manchester – which were employee owned and then demutualised to sell off
Co-op Bob is keen on social co-operatives in Italy, which is a proven multi-stakeholder model with public interest written in as a core purpose.
We have worked with Local Partnerships and Employee Ownership Association on a mutuals information line. The advice, if you’re public sector and want it, is on 020 7296 6705
We have a Big Society bank, a Big Society song (thanks, Pete), a Big Society Network – and now… a Big Society book.
“A co-op” author Jesse Norman (new MP for Hereford / South Herefordshire) says “is a form of organisation in which, very crudely, control is distributed not one share-one vote, as in a company. but one member-one vote. This gives it an intrinsically democratic character. It makes it hard to raise external capital, and it means a co-op always needs strong leadership on pain of becoming a talking shop. But it also makes co-ops extremely stimulating, energising and often entrepreneurial places to work.”
In a charming launch speech yesterday evening, Jesse likened the Big Society to blind men and elephants… and followed up to say that the elephant in this case was not Anne Widdicombe.
No… no Big Society dance. Please.
There has long been a radical critique of banking that revolves around the question of how money works – in particular, how interest works and how new money is created.
The idea that money is something we have created and that could be organised in different ways is not easy to get hold of. Even so, as David Boyle has charted in books from “Funny Money” to “The Tyranny of Numbers”, we have had no shortage of creative alternatives – local currencies, transition town pounds, negative interest scrips and ideas for carbon-backed money systems to align economic incentives with climate realities.
The debate has moved into the open in a welcome way with the recent references by Mervyn King on the limits of ‘fractional reserve’ banking.
James Robertson and Joseph Huber have estimated that the free income granted to UK banks from this model – termed seignorage – adds up to around £20 billion pa.
Shann Turnbull, the great radical theorist, puts it simply. Unlike co-operative credit unions that lend out money that members save, he says http://www.ethicalmarkets.com/wp-content/uploads/2009/04/mysteries-of-the-financial-system.pdf“the Bank of England was formed with the extraordinary privilege of issuing currency notes redeemable into one pound weight of sterling silver when it only held a small fraction of silver it promised to provide on demand to its note holders. This legal fraud of fractional banking is now hidden by paper money not being redeemable into anything to allow paper money to be created by a stroke of pen or computer mouse.
When we use our overdraft or credit card to pay for goods or services, our bank creates a deposit. It is this feature that makes bank different from credit unions that redeem an existing deposit.
There is no sound reason to allow banks seeking a profit to have the privilege of creating public money for private profit. The practice of governments then borrowing money from private banks, and paying interest funded by taxpayers for money that the government could create itself, cannot be justified or explained. Mervyn King has got it right.”
I went to give evidence to the commission being run by Lambeth Council on how to become a co-operative council. With some trepidation, I found it was to be held in Room 101.
In Orwell’s vision, the room contained your greatest fears. In this one, I found my friends Victor (Adebowale) and Allison – not so scary.
Council leader Steve Reed has posted this today as an update on their plans http://cllrstevereed.files.wordpress.com/2010/11/coop-council-guide.pdf
The last government dabbled with some pretty poor models of fake mutuals. Network Rail proved to be one of the worst – an unaccountable non-profit not all that much better than in it’s sorry chapter as a unprofitable for-profit.
Christian Wolmar has a trenchant analysis (thanks Dave) of what has gone wrong – and a call to try a proper co-operative model instead http://www.christianwolmar.co.uk/2010/11/rail-654-rocky-times-ahead-for-network-rail/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+feed%2Fchristianwolmar+%28Christian+Wolmar%29
“With independent shops, pubs and even banks battling to survive, co-operative ownership is proving popular” says the Mail