Please! I Need It!

This blog is closed and has moved to http://Charlottegore.com. See you there!

So I've written about how banks decide who gets credit. I've explained how the credit crunch reduces the number of people who will be able to get access to borrowing.

I also said that, many years ago, my first job with HBOS (or what was Halifax Plc back then), was sat on a helpdesk fielding calls from branch staff and customers who'd been "declined" credit.

This is the time when my heart was turned into a cold, black lump. Some people, for whatever reason, believe that banks are some kind of social service. Contrary to this popular belief, how much you need the money is not something that's ever going to influence a bank's lending decision. Yet, despite this, people would ring and tell me - if they were lucky enough to get through to the Ice Queen Hell Bitch of Death - how they'd run out of money and needed their overdraft extending so they could feed little Timmy, or that they just needed their credit card limit putting up a bit, or they needed a small personal loan to do the job. They'd shout. They'd scream. They'd curse my name. In the end, I'd tell them, "No."

I had to. My only power was to refer things to a manual underwriting team. In fact, my job existed so that they could get on with underwriting while we took the grief off the unhappy buggers that got turned down.

Some people simply cannot understand that they can't afford more credit. They don't want to hear it. You try to explain this and they'd say, "But I need it!" and I'd have to say something like, "Yes I can appreciate that," and they'd say, "Well how am I going to feed little Timmy? Do you expect me to starve?"

To this day it still amazes me that people would try this sort of thing. I'd helpfully suggest friends, family or even the Government's Crisis Loan system - but I'd point out that, in their current circumstances, it was impossible for us to increase their borrowings with us. They'd scream and curse my name, but I wouldn't fold. I couldn't.

This is called responsible lending. It's not mean. It's not greedy. It's about making sure that customers that are already in financial trouble are not put into an even worse situation because they've been given credit they can't afford. Credit is not just free money. It is a product that you buy, and it costs money. 

Often people would say, "What kind of stupid system is this? You only lend to people who don't need it!" which is sort of right. We only lent to people who could afford it, which for some people is the same as saying people who "don't need it" but I didn't want to be deliberately rude and would instead try to empathise with their situation. 

I was glad when I moved into IT, put it that way. 

So I'm writing about this because I note, with dismay, the tendancy for audience members in "Question Time??!!" to get hearty cheers when they say something like, 

"We should nationalise the banks. They're a social utility."

Agh. No they are not. They are not the country's surrogate Mummy and Daddy. Banks are a business, and have a duty to their investors and depositors to lend money responsibly - not lending to people who can't afford it - and only when there's a realistic expectation of getting the money back - not lending to people who are too great a risk. 

Imagine a situation where the banks have been nationalised because it's considered they are, in fact, a 'social utility', and are told that if someone really really needs money for whatever reason they can't refuse to lend. What do you imagine would happen in such a situation? 

It becomes a double-whammy nightmare of massive losses (and court fees) incurred by the tax-payer, then terrible headlines as the Government owned banks throws people out of their homes, or sends round bailiffs... and this would be primarily the Government's core vote here, too. A cold, emotionless, privately owned bank acting in its own interest can politely explain to a customer that they can't afford to borrow more from the bank and end the story there. A publically owned bank would just lose money hand over fist. "Repay your debts!" says the newly socialised bank, "I can't afford to! How will I feed little Timmy?" and they'll reply, "Oh, yes, sorry. Never mind. Sorry for bothering you. Do you need another loan?"

So this is the lesson is this: Don't Nationalise The Banks. It will not help. We've already got partial nationalisation, which is in itself part of the problem - the banks are having to pay back the bailout money quickly, and the cost of borrowing from the emergency fund is more than they can sell it on for. The banks are having to recapitalise and pay back the Taxpayer and are supposed to be able to increasing lending, too - all while having suffered the end of the wholesale credit markets. It's a complete farce and an impossible situation.

Banks may be public enemy number one. It might be populist and easy to shake your fist at them and demand that the Government "does something" about them. I hope sanity prevails, for all our sakes. 

This blog is closed and has moved to http://Charlottegore.com. See you there!