During the height of the global financial crisis in 2009, writing in Rolling Stone magazine Matt Taibbi famously described investment bank Goldman Sachs as:
“...a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money...”
Tragically, several of these huge vampire squids seem to have recently consumed the Co-operative bank. But how did it come to this ? And is all hope lost ?
The exposure of the relentless and ruthless practices of most banks during the 2009 financial crisis led to an increasing disillusionment by the public of banks and the finance industry in general. One exception and a glimmer of hope had of course been the little known and relatively small ethical banking sector – its best known example in the UK being the Co-operative bank.
So where did it all go wrong for the Co-op bank ? Many argue it began with a change in the bank from a more modest approach to growth to a more aggressive expansionist policy which began with the acquisition of the Britannia building society in 2009, and ended with the now failed bid to acquire Lloyds bank branches from the UK government. It was the Britannia’s huge bad debts on its mortgages and the increased scrutiny of the Co-ops balance sheet that highlighted these debts, which in turn was brought on by the Lloyds acquisition attempt - that many say led to the downgrade to junk status of the banks bonds.
This downgrade provided the ideal opportunity for US hedge funds to buy into the Co-op, who subsequently forced the Co-op to cede ownership and control of the bank to them.
So what do we know about these Hedge funds ? Collectively they are known as the 'LT2 Group' two of the most prominent are Silver Point Capital (run by two former Goldman Sachs employees) & Aurelius capital management, whose track records makes for grim reading and sadly reveals them to be particularly rabid vampire squid indeed.
Should we then simply despair, give up all hope and let these ruthless beasts of capitalism have the last laugh - while they consume what little good in finance is left ?
Perhaps not.
Firstly, if these evil squid possibly have a brain cell between them – it might have occurred to them that the vast majority of Co-op bank customers are there not by accident, but due to the Co-op being a mutual and having an ethical banking policy – which is of course at complete odds to US hedge funds and the values they stand for. If Co-op bank customers leave in there droves as a result, there clearly won't be much left for the squid to feast on. So rationally, it's in the hedge funds interests for the Co-op to maintain its ethical banking policy at the very least. There is some indication they are conscious of this from a recent statement they issued.
However even in this scenario admittedly, how many would feel comfortable being with a bank who was ethical but was owned by evil vampire squids who are clearly not ? Is it ok for 'bad money' to be used to do good ? Is the answer simple ? After all, walk into any ethical shop and buy something fairtrade and feel good – yet the taxes you pay for those as well as taxes on your own income go to a government that generously subsidies nuclear power, and funds intelligence services that spy on its citizens. To be ethical then – should we stop paying all taxes, for example ? Is being perfectly 'ethical' really achievable ? Should we be realistic and accept some imperfections in a road to that goal ? Or should we simply despair and run away when perhaps an imperfect world fails to live up to our high expectations ?
There are in fact some precedents for the the unexpected benefits that can occur when an ethical company is taken over by an evil one, such as a recent analysis of the changes that have occurred to L'Oreal after they took over the Body Shop.
Secondly, there is now a campaign started up by ethical consumer magazine to bring the Co-op back into mutual ownership. If enough customers join this campaign and it achieves prominence using its bargaining power well, this holds some hope of reversing the stranglehold of the hedge funds by using the most powerful weapon of all – the power of mass numbers of customers potentially switching away.
Of course, some might say this is pointless, there is no hope – i'm just going to switch away anyway. If thats you, I would urge you to stay for now and support this campaign. You also need to know that increasingly campaigning groups have achieved a great deal: such as 38 degrees reversing various aspects of government policy, and even individual citizens embarrassing and reversing the policies of big companies such as LA Fitness through the use of social media and other means. The world is changing, and ordinary people have far more power than they realise - and even more so when they choose to act together. Governments and big corporations are hoping you can't be bothered and will shy away – will you choose to ? Or are you be prepared to stand up for what you believe in by taking just 60 seconds to sign up for the campaign to bring the Co-operative bank back into mutual ownership ?
If this campaign fails eventually or you feel you don't want to support it and simply switch away anyway – there are various options as well as a best buy table of accounts in the ethical consumer magazine. Mostly those these options include credit unions, as well as current & saving accounts offered by other institutions with varying degrees of 'ethicalness'.
So while there are options to switch away, many are far from ideal. Yet amongst all this there is still hope, and I urge you strongly if you are an existing customer with the Co-op bank not to immediately switch and to join the campaign to re-mutalise the bank and give it some time to have an effect before you consider switching your account. We don't have to lay down and let the evil vampire squid win without a fight. In the longer term, there is clearly an increasing demand for ethical banking – and even if the Co-op does implode, perhaps eventually a new provider will rise to offer the ethical banking that so many people are increasingly demanding.
Hope is only lost, if we give up on it !
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