In a lingustic twist I first heard from a Polish friend -and one that would amuse my friends Prospero and Sancho- the Spanish caja de ahorros became in English a 'cage of horrors'. I mention it only because the English version in Spain is getting close to being the truth.
As I write, the news is full of more horrors of the financial variety. The Spanish government took over a relatively small building society, Caja Castilla La Mancha, during the weekend. Ministers of all kinds have been on the box reasssuring the public that 'everything's fine', 'the banking system is solid', 'stronger than ever', etc. etc. Caja Castilla La Mancha, CCM for short, has some 2.6 million depositors, many of whom have been withdrawing their money rather rapidly of late - the queues were around corners in the news. CCM had a 'temporary liquidity problem', according to one of those political heads. How temporary is temporary? How long is a piece of string?
Caja de ahorros transliterates to 'box of savings', or Savings & Loans in the US and Building Society in the UK. We know about those there. It's a different story in Spain; Spain is different, said a successful ad campaign for tourism years ago. It is.
The autonomous region of Castilla La Mancha is governed by the PSOE, so naturally the opposition PP is putting all the blame on the national government. They fail to mention that Caja Madrid (governed by the PP) is having its own internecine war among the factions headed by regional head Esperanza Aguirre and the capital's mayor, Alberto Ruiz-Gallardón. But why? What has politics to do with a building society?
In Spain, every autonomous region has its own building society, often several, as in the cases of Madrid, Catalonia or Andalucía, for instance. The majority of their Board of Directors is appointed by the region's government, as is the Chairperson (hate that word!), in a form of apportionment that naturally favours the party in power. That's what's happening at Caja Madrid, for example.
Building societies in Spain, like everywhere else, were born to serve those who did not have access to the normal banking system and from the 18th to the mid-20th centuries were known as montes de piedad, or 'amounts of mercy', which is/was a euphemism for pawnshop (image). They were established in provincial capitals and obliged to open branches in rural population centres. Their services were pretty much restricted to mortgages and smaller loans and became powerful institutions. But banks provided all the services the building societies offered and a lot more.
The cajas de ahorros, which were run largely by management committees made up of their depositors, couldn't therefore compete for our money so they were 'democratized'. The cost was a loss of depositors' control and the opening up of the whole system, with the market presently divided about 50-50 between cajas and banks. In fact, you'd be hard put to know the difference unless you thought about it.
The difference, of course, is at the top. A bank is run by a Board elected by shareholders and a caja is run by political appointees. It must be said, though, that these appointees are often no more than figureheads, and the actual business is run by professional bankers. Don't ask me what happens at a Board meeting when those political claws come into play, though.
In answer to the headline's question: they certainly have done in the past, especially in Spain, where the rural population took longer than most other countries' to move to the cities. Whether they will fall apart as so many others have, we shall see.
(c) Alexander Bewick 2009
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