Crunching the credit

One of the key ways that could be used to combat the insiduous effects of credit which the government could use to make life a little easier for people at the sharp end of the current economic crisis is very simple: introduce capped rates.

But as this report shows, the government considered it then quickly discarded it, citing false and unjustified concerns about people being forced to rely on unregulated loansharks. What a joke. What the white shirts in government don't get is that the legal and regulated doorstep and payday lenders are loansharks, some charging interest to the tune of thousands of percent, while proudly waving their consumer credit licenses.

The decision to simply ignore capping, especially without referring to countries where capping has proved to be successful in limiting the excesses of some lenders, is a decision that favours only the scum like the pawn shops and high rate check cashers, the gold scrapers and doorstep voucher men, pond life who profit out those at the bottom end of the income scale.

But capping won't work on it's own. So many people need to be helped out of the clutches of the blood suckers on the fringe finance industry. This is a time when the government needs to show some serious support for finance organisations like credit unions, who in some places are the only experts in finance in disadvantaged communities. Credit unions' provision for lending to small social enterprises and local businesses, a bedrock of the economy, could be expanded to encourage more local entrepreneurs onto a self reliant route to a sustainable economic success.

South Tyneside Credit Union

Pied Piper Peston

Today, BBC journalist Robert Peston sat before MPs and denied any responsibility for the start of the run on Northern Rock.

Bollocks.

The BBC reporter's breathless exclusive of Northern Rock's application for a loan facility from the Bank of England started the media frenzy and subsequent run on the Newcastle bank. I remember the Newsnight and early morning Radio 4 Today programme where Peston was wetting himself with glee at the attention. I'd never heard the word 'unprecedented' used so much by one person. And to think the shit the Today programme got for the 'sexing up' Iraq affair.

From then on, if there was bad news in the finance industry, Peston was the man to deliver it.

There's no doubt that Northern Rock's board and executive ran a risky and ultimately unsustainable business model. Borrowing short to lend long is always going to come unstuck, especially when borrowing from the developing basket case that was the US financial sector. But while the money rolled in and share prices were healthy no-one complained.

Peston's mealy mouthed excuse that the run was exacerbated by what he claimed to be poor branch capacity and website infrastructure doesn't stand up to scrutiny. Few, if any, retail banking organisations could stand the sudden onslaught of a media driven panic that Peston wrought. I remember on the morning after that first report television journalists hanging around outside Northern Rock branches asking customers if they were worried and thinking of closing their accounts. This was wag the dog reporting in action.

Peston's evasions in the committee today suggest that he was fed the Northern Rock loan story. He's certainly not facing the possibility that his exclusive was intended to bring Northern Rock down to be picked up by another hungry bank at a bargain basement price.

There needs to be a full accounting of the whole debacle, from the lax regulation, over confident boardrooms and fickle and greedy investors, to the media panic machine fed by the likes of Peston, and the people who fed Peston his exclusive.

Peston wasn't responsible for the run, but he holds some responsibility.

The blame game

The Guardian presents a list of "25 people at the heart of the meltdown", listing those thought culpable in providing the environment for the economic tits up we're all enjoying.

One question, where's the prophet of profit Milton Friedman? Just because he's dead we shouldn't let the evil bastard off the hook.

Blog Action Day 2008: 2

Today I'm joining more than 9,000 bloggers in talking about poverty. I'm saying today, but around the world Blog Action Day 2008 the conversation has started already. You can see some of the posts linked here. But talking about poverty isn't just about heartbreaking stories about starving children in far away lands.

It's local and it's also about solutions. It's the guy outside M&S selling the Big Issue trying to earn a living. It's Citizen's Advice giving that vital help and hope. It's even volunteers helping children learn how to read. It's those and a thousand other stories.


During the recent problems in the banking system one sector of the finance industry has remained unscathed. Credit unions.

Credit unions don't rely on borrowing from banks or money markets. They don't buy up debt or loan books from other financial institutions. Risk is controlled very carefully. Members' interests come before profit and there are no shareholders. Credit unions operate simply, using the savings of their members to make loans to other members.

They are mostly run by volunteer members: for the community, by the community.

All credit unions exist in a limited environment called a Common Bond. It could be anything from a simple staff or union savings scheme, to larger service organisations serving a community like the excellent South Tyneside Credit Union.

Often, credit unions are a way for those who have been abandoned by the big banks to save and borrow sustainably. People have been helped out of the poverty traps of pawn shops, cheque cashing shops and doorstep loan sharks. They've avoided being ripped off by high street high interest electrical goods stores. Some even used credit unions a couple of years back to fill the funding gap after the collapse of hamper firm Farepak.

What's more, savings in credit unions are covered by the Financial Services Compensation Scheme in the same way as deposits held in banks and building societies.

Anyone can have a credit union savings account, and at the minute you'd be daft not to. If you haven't joined one, you can find your local one now. As well as members, credit unions need volunteers, so if you've got some spare time and want to learn some new skills (or teach some of yours) your local credit union would like to hear from you.

South Tyneside Credit Union
Central Office,
119-121 Prince Edward Road,
Harton Nook,
South Shields
Tel (0191) 454 7677

Blog Action Day 2008: 1

Three years ago last July, I joined the thousands in the Make Poverty History event held in Edinburgh. The participants in the march around Edinburgh's historic city centre were from many backgrounds, a coalition of campaign groups, charities, religious groups, trade unions and individuals who wanted to try and make a difference. From babies to the elderly, and from most, if not all, ethnic backgrounds.

The sea of people in white walking down Princess Street was something to see with your own eyes, and be part of.

But it achieved fuck all.

There was some disappointment from many who thought, like me, that Bob Geldof's Live 8 hijacked the event, focussing media attention on the televised concerts and pretty people looking concerned. His event turned the eyes away from Edinburgh to the wealthy stars who arrived in jets and limos, performing in their designer gear to a crowd consisting largely of the label generation.

This wasn't helped by MPH's own little branding tool, the white band.

The reality is, that after the events, the world's governments got on with business as usual carving up the world for their wealthy benefactors.

Despite the disappointment and lack of global action, it doesn't mean we should give up. As well as global justice, there's poverty on our streets, in our faces. But our government don't care about these people. They don't invite you to posh dinners, contribute to election campaigns. Bejaysus - most of them don't even vote! MPH was one of those things which helped politicise me and realise that the current raft of the three 'grey' political parties really don't give a shit about anyone.


I'm lucky enough not to have experienced extreme poverty. Whilst our family was one of the many thousands to exposed to Thatcher's brutal and ruthless culling of traditional Tyneside industries I was young enough not to realise or not care that we were poor. Looking back, I'm under no illusions - despite some of the hardships we encountered we had food on our table and a roof over our heads. There were many people in South Shields and on our own estate much worse off than us.

The Thatcher era heralded a me, me, me UK which is still with us today, from the rich robber bankers to the feckless hoodies and chavs, to twats in 4x4s parking on pavements. This is as much as a poverty of ethics, expectations and responsibility. No such thing as society.

Now the world is experiencing a brief blip in it's economic fortunes, partly because of greed, partly because of stupidity and partly because of the strict adherence to the religion of free market economics. Many people in the UK will suffer, but the repercussions will fall the hardest on the developing nations as the developed nations reign in aid spending.

It's a disturbing irony that since MPH western governments have kept their hands and their cash in their pockets whilst developing nations struggled, yet quickly found money to throw at the financial system.

Blog Action Day is in a small way, with thousands of people, trying to keep the issue of poverty on the agenda. If we keep having the conversation, we won't be letting anyone forget.

Cancel Christmas says Ashby

The North East's own Ebenezer Scrooge, Robin Ashby, has branded the Christmas bonus and 4% wage rise awarded to Northern Rock staff as "disgraceful and entirely inappropriate".

It doesn't help that the Guardian describes the rise as 'hefty'. Footballers and corporate directors get 'hefty'. Whilst unexpected, two hundred quid is the least the bank should be giving it's loyal staff for what they're going through.

Ashby whinged that "a discredited management team is rewarding employees for their failure and I'm sure all customers and investors will be furious". So kind-hearted Robin thinks that all Northern Rock staff should be punished for the credit crunch, or for the failure of the board? Is this his Christmas message?

It seems he was quite happy with the management team when it was raking in millions on it's business model of high risk and low costs - and paying rich folk like Ashby healthy dividends.

"Why should employees, who have good pay packages anyway, be rewarded when we lose money?" What a nob, assuming that every employee of NR has a good pay package. The employees are hard working people, working for a company which keeps it's wage bill low and productivity high - performance which contributed to the success of the company.

It's obvious that Robin couldn't give a fuck about the staff who put up with rude and obnoxious customers during the September run. He couldn't care less that they are all worrying whether they will have a job next week, or be bothered if they were all made redundant, or that blow-hards like him are unfairly devaluing Northern Rock staff

Cockweasel. (thanks punkscience)

Just for laughs

Professional cheeky chappies Ant and Dec decided to chance their arm at a bit of current affairs humour on their Saturday night show with a dig at Northern Rock.

The sketch featured the diminutive one leaving the studio in a Mourinho-esque style pay-off. "I'm off to the bank" he says. Twice. They might has well have flashed the punchline at the bottom of the screen there and then. He then walked out of the studio to a branch of Northern Rock, where he pauses outside, shakes his head then cheekily looks at the camera (the trademark 'yes I think I'm funny' look) and then turns round and returns to the studio with his cheque.

Okay, I should have known better than to watch this tedious shit so it's my own fault. I was forced to watch it, honest, but once you're sucked in it's like watching a train crash in slow motion.

Given that Northern Rock has been the sponsor of Ant and Dec's All Star Cup golf event there is a hint of biting the hand that feeds you - so future sponsors beware.

I know there's no such things as out of bounds when it comes to comedy, but I'm guessing there's nearly 6,000 people who wouldn't laugh their tits off at tits Ant and Dec.

Hole lot of debt

More on the second Tyne road tunnel. The New Tyne Crossing Project Board has just announced that it's begging to be allowed to extend it's borrowing limit to £130 million and increase tolls. Since the second tunnel was given the go ahead by Alistair 'Rock' Darling in 2005, the project has rocketed up in price from £185m to today's announcement of £260m. Given that turf hasn't yet been cut, it's reasonable to expect costs to rise still further.

It's the kind of increase that would make the 2012 London Olympic committee proud.

Given the fragility of the wholesale markets at the moment, who is going to lend that kind of money, and if someone does, what guarantees will they want? The concessionaires can rely on HSBC and the Bank of Scotland, the Tyne & Wear PTA probably as yet don't have such luck. The current tunnel was bailed out in the 1980s when Newcastle City Council loaned the Tyne Tunnel money (interest free) to refinance the latter's loans because of the volatile lending markets at the time. £4.1m is still outstanding to Newcastle City Council.

Unfortunately veteran tunnel toll campaigner Stan Smith is too poorly to respond to this news, and there is little chance of local councillors having the nerve to call the Tyne & Wear PTA to account, so the announcement will probably go without challenge.

At a time when the finance industry is in such turmoil our politicians should be especially vigilant of dependence on debt. If the new tunnel does go awry, will the public be expected to bail it out again?

Time for a climate scare?

It's despairing that in the 21st Century people can be so easily panicked. The trials of Northern Rock is a classic example of mass hysteria, which leads me to think that, along with the growth of religion, 'intelligent design' (I know, it's a facet of religion, but it's special because it pretends to be science), and climate change scepticism there is an ongoing assault on reason.

The Northern Rock incident has made me think that if people took the threat of climate change as seriously as a manipulated media event then the UK would be running carbon free in a year.

Rock hammered

Northern Rock has long followed a model of borrowing short and lending long to fund it's growing mortgage business, which has so far provided the company with massive success. But the folk standing in the queues don't hear this.

To these folk, it doesn't matter that Northern Rock is looking at making at least £450m profit this year, or that the bank is otherwise in a financially strong position. It doesn't matter that Northern Rock, unlike Barclay's which was twice bailed out by the Bank of England last month, has yet to touch a penny of the Bank of England loan facility.

It also doesn't matter that, the more that people withdraw, the greater chance that Northern Rock will be taken over, which would mean massive redundancies in the North East's biggest finance industry employer. It doesn't matter that the loss of Northern Rock would also mean the loss of the Northern Rock Foundation, the biggest charitable giver in the North East, which could also mean goodbye to a number of local charities and good causes.

All these people see are the queues, and all they hear are the interviews with the headless chickens (although the rush to join the queues is more like a flock of sheep if you want to continue the farming analogy). To a large extent, the media herd has driven the events, starting with the BBC's misleading labelling of Northern Rock's request for the Bank of England facility as 'unprecedented'.

It's been interesting to follow the media coverage. Everyone with an opinion, including inveterate band wagon jumper Dave Cameron, has been falling over themselves to criticise Northern Rock or the government for not predicting this. Hindsight is indeed an exact science, but the reality is it couldn't be predicted. Of course there were risks in Northern Rock's model, but no one foresaw all the banks shutting their doors to short wholesale borrowers like Northern Rock. Normally, the banks loan money to each other, but Northern Rock and others were locked out by the liquidity freeze.

In a tsunami of silly media comment and downright stating the bleedin' obvious that has more in common with football than finance, the most idiotic comment award has got to go to ITN's annoying Chris Choi, who tonight called the queueing an "investor revolt", as if those people in the queues were on some honourable crusade, rather than a panic of self-interest.

Hopefully tonight's announcement by Alistair Darling will cool some heads amongst Northern Rock customers, quieten the nerves of staff and stave off a takeover, which would be disastrous for it's employees. And judging by the speed at which the queues dissolved when the rain started at 3pm in Newcastle this afternoon, here's hoping for a bit of bad weather to help restore calm.