The histories of mutual businesses and the Labour party are intertwined but by allowing Nationwide to takeover two other building societies it looks like the love affair is over.

There are many different forms of corporate structure from family firms and partnerships through listed corporations, private-equity and foreign ownership. But the one with which Labour has most sympathy, more even than nationalisation, is mutuality or co-operative control.

And by forcing the Derbyshire and Cheshire building societies to join with Nationwide, mutuality will continue. Yet allowing Nationwide to takeover the two troubled tiddlers, means a monopoly is being made even more massive.

Nationwide is already bigger than all the other 58 remaining building societies put together. By allowing this three-way merger it will end up with well over 50 per cent of the movement and be more than five times as large as the next biggest society, Britannia.

Nationwide does not have a monopoly of the wider saving or mortgage markets, of course, and in theory, a clearing bank could have bailed out these societies – though in practice, banks have no capital to spare to take on new business, especially mortgage business.

Yet the government regulators have missed the chance to help create a strong second force to the Nationwide. Adding £13bn of assets to Nationwide’s £179bn makes only a limited difference; adding them to Britannia’s £37bn would be a big step forward. If Britannia also merged with Yorkshire then there would be a £70bn society to take on Nationwide.

The suspicion is the regulators can accommodate one big society but would rather see the rest disappear – and a crunch like this is a good catalyst for disappearance.

Mutualality is a problem form of ownership for government. When financial mutuals get into trouble there are no shareholders or parent to bail them out, as Equitable proved. HBoS and Bradford & Bingley asked their investors for help when they hit trouble: they couldn’t have done that if they were still building societies.

And in the absence of shareholders or willing bidders, governments find themselves under pressure to mount rescues – damned if they refuse (Equitable) and damned if they do (Northern Rock).

A diversity of ownership structures may seem a good idea but in desperate times like these it is a luxury the government thinks it cannot afford. It would rather create a monopoly than allow small mutuals to threaten financial stability.

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