Many years ago when the world was flat and I was much younger I trained to be a soldier. Since I was not the most disciplined of officers I spent a good deal of time on guard duty.
I was taught to be watchful and to issue the standard challenge which contrary to popular myth does not contain the words "friend or foe." We used passwords to make the identification in a world that was, in those days, far less complicated. No one was exempt even if you recognised them by sight.
Living in today's more complicated world we need to adopt the same watchfulness but now more than ever we do need to distinguish our enemies from our allies.
There are two banks that we own or at least have a substantial interest in and we have every right to consider them, if not friends, then allies. So when the Halifax, for example, increases its lending rate by 14% and cites as its example the cost of money on the wholesale market the public is encouraged to believe them.
In my self-appointed role as sentry to the nationalised lenders, I have been watching the LIBOR rate (London Interbank Offered Rate) which is the average price banks charge each other for funds. It is increases in this rate that was offered up by our 'allies' as the reason for their need to increase mortgage rates.
However, there is one inconvenient truth namely that since the middle of January LIBOR rates have been falling away and today they fell for the second time in a month, now standing at 1.040% and not the 1.75% quoted in Sunday's press.
I fully expect the banks will point out that they borrow funds in 3 month cycles and that today's LIBOR rate is not directly connected to the cost of funds that are outstanding today; but this is when my alarm bells start ringing.
There is a chilling familiarity in the statements made by the banking industry in defence of these rate rises, we have heard them many times before.
Another industry that once was ours and we entrusted to the private sector, the energy sector, has also fielded remarkably similar arguments in defence of its price rises. In trying to understand why the cost of gas and electricity was rising despite reductions in the cost of wholesale oil and gas we were given a series of baffling reasons why that should be so. The result is that we still do not fully understand it and prices continue to rise, as do profits for the energy supplier.
So given this opaque banking system and alongside continually climbing mortgage costs I do not think it unreasonable to issue the challenge "Who goes there friend or foe?"
It is vital that we understand this issue properly in order to call the banks to account. We should not tolerate the same lack of clarity that has so disempowered us in our dealings with the energy sector to migrate to our banking system.
I do not accept that the current mortgage rates are increasing because of LIBOR, the facts do not support this argument. I therefore have a series of questions that we should be asking our 'suspects'.
Clearly it is not LIBOR alone that drives mortgage costs and there are other factors. Some of these may be that the credit rating, particularly for Lloyds Banking Group, means it cannot raise funds at this rate, if this is the case then we should be told in much greater detail. Alternatively, the banks have a requirement to repair their balance sheets, particularly the ones that we own, and perhaps the margin that the banks are charging are increasing to facilitate that. There may be other reasons but without knowing what these are we cannot make a judgement
There is enormous suspicion, even now, with regard to the motives and the actions of the banks. It is vital that we understand the situation and that can only be done with absolute transparency. Our state appointed guardian the FSA is there to regulate the banks but we have seen how much impact regulators have had on the energy sector to be content with this in its current form.
We need our 'sentries' to require certain information from the banks on every loan it makes. We need that statement to set out the cost of funds, how that cost is made up, the margin the bank charges and the justification for this. All of this should have an auditable trail that is in the public domain. The technology and systems already exist to do this, the FSA can oversee and regulate this, and as is the case with a good sentry, there should be no exception.
We need to trust 'our allies' not just because we have so heavily invested in them but also because they are vital to our recovery. Because of recent history we find it difficult to do so. We need regulation to not only regulate but to serve our need for information so that we can make informed decisions safe in the knowledge that we are not being ripped off by an enemy in our midst. Who knows if we get it right for the banking sector we might implement it for the other basic requirements for life.