B&B: end of an era
The reverberations from the nationalisation of Bradford & Bingley (see my note of last night for more on this) will be profound.
First, it takes out of the market the leading provider of buy-to-let and self-cert mortgages.
Once the £41bn of B&B's mortgages is publicly owned, it will be run down over the coming years.
And it's very unlikely that the government will feel it wants to use taxpayers money to provide new buy-to-let and self-cert mortgages.
In other words, two big chunks of the mortgage market will be all-but closed - since few other banks are remotely interested in providing this kind of mortgage, which are perceived as higher risk.
That will add to the downward pressure on house prices - and may be a source of anxiety to buy-to-let investors who may have difficulty refinancing their mortgages as and when they need to do so.
Second, the nationalisation will be seen as proof that the demutualisation of building societies - which began when Abbey National became a bank in 1989 - has been a colossal failure for both the former building societies and the British economy.
These specialist mortgage lenders were under such pressure to grow their profits, as public companies, that they became reckless adventurers in wholesale funding markets.
They raised too much money too cheaply on the global money markets, which they then lent too cheaply to British homebuyers.
Which then stoked up the housing bubble. And the popping of that bubble has done for them.
Every single demutualised building society has either collapsed and had to be rescued or has been swallowed up by a bigger bank.
Just this year we've seen the Rock taken into public ownership and HBOS, owner of the Halifax, bought by Lloyds TSB in a rescue takeover.
Abbey itself was taken over in 2004 by Santander of Spain largely because it was hobbled by unfortunate forays into clever-clever financial trading.
The conversion of building societies into banks is an instance where deregulation and the liberalisation of an industry appears to have been an unmitigated disaster.
The Nationwide, which refused to follow the trend, looks smart.
Finally, there is just a chance that the nationalisation of B&B will be the last serious crisis for a UK banking institution.
Well the debacles at Northern Rock, HBOS and B&B all stemmed from their excessive dependence on the UK housing market and on sources of wholesale funding that were vulnerable to disappearing.
Our remaining big banks have much more diverse businesses, so even though they will suffer as the housing market falls, they can generate profits elsewhere to compensate.
Also they have more diverse sources of funding, they are less dependent on the whims of money managers who can shift billions of dollars at the click of a mouse.
In that sense, the nationalisation of B&B and of the Rock are the British equivalent of America's $700bn banking bailout plan.
Their nationalisation - and the rescue takeover of HBOS - removes from the UK commercial banking sector its biggest source of vulnerability.
That vulnerability was the Rock's, B&B's and HBOS's excessive exposure to mortgages that are expected to be a big source of future losses.