I'm a little bemused by the reaction to the collapse of Farepak. This is clearly a tragedy for those who have lost their savings, and with them the hope of the material aspects of Christmas cheer. Not only that but those who were Agents will now have "lost" money on behalf of their family and friends - not a comfortable position to be in .
What I find curious is the degree of disapproval, or even condemnation heaped on Bank of Scotland, the company's bankers. Banks are of course an easy target, especially for those Members of Parliament who have a limited supply of commercial awareness and a plentiful supply of constituents who have lost money. But the bank's motive in all this is nakedly clear - to make money for its shareholders, perhaps with a nod in the direction of good conduct to the community.
So what is really really surprising is that the finger has not been pointed more firmly at the directors. The demise of the Company, and the failure to protect deposits must be their responsibility. No doubt the Administrators will be looking closely at their conduct. I once had a role advising a turnaround company, which sadly proved not to be capable of turning, but the directors ensured that customer deposits were sacrosanct. Accordingly when it failed, it was with cash in the bank to meet customer deposits, and the directors conduct was beyond scrutiny. Why was it otherwise at Farepak? I accept that we don't know all the facts, but are the right questions being asked at this stage?
This is becoming an apologia for the banking community, which was not my intention, but one other fact leaps out. The shareholders repeatedly declined to invest in turnaround proposals - so why should the bank have been prepared to take an equity risk? The margin on secured lending does not compensate for capital losses unless you do a lot of lending and make few losses - such is the economics of banking.
Still I can see why the press loved the story with the Scrooge connotations at this time of year, and - with the Pantomime season fast approaching - some cliched villains in the form of the "bank", and a "knight of the realm fat cat businessman at the helm".