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Darling v Mathewson and Burt

Robert Peston | 12:15 UK time, Tuesday, 18 November 2008

The chancellor has this morning delivered a swingeing kick to Sir George Mathewson, Sir Peter Burt and any HBOS shareholders who may think the battered mortgage bank has an exciting future as a state-supported independent bank.

HBOS logoThe context is the proposed takeover of HBOS by Lloyds TSB, which has the blessing of the government, but which the veteran Scottish bankers, Burt and Mathewson, wish to blow up - as does the Scottish National Party.

Alistair Darling makes a number of pertinent points which will make many HBOS shareholders curse, but may persuade them that they have no alternative but to vote for the takeover.

First, he says that "there is no automatic right of access to the recapitalisation scheme" - which is not what Burt and Mathewson have believed to be the case.

Darling says that any institution applying for an injection of capital from taxpayers "must have a sustainable business model and delivery plan" and its "funding profile, sources and mix must be clear, broad-based and sustainable."

HBOS's own board determined that it flunked those tests, that the probable alternative to being taken over by Lloyds was full-scale nationalisation - hence its decision to agree to be taken over by Lloyds TSB.

The onus is therefore on Burt and Mathewson to prove that the HBOS board is wrong, that HBOS has a sustainable future as an independent organisation - in spite of its exposure to the tumbling British housing and commercial property markets, and in spite of its reliance on funding from the collapsed asset-backed securities market.

Mathewson and Burt may be right, and the HBOS board may be wrong.

But it's courageous of them to battle on in the teeth of the conspicuous doubts of HM Treasury.

Even if Mathewson and Burt were right, Darling has given HBOS shareholders a second reason for holding their noses and backing the takeover by Lloyds.

The chancellor has consistently made it clear that the terms of the capital injection for HBOS were agreed by him on the basis of the business plan presented by Lloyds and HBOS as a single, merged entity.

If that takeover were no longer to take place, he would wish to re-open the negotiation.

What does that mean?

Today's statement from the chancellor says that even if he were to agree to inject capital into an independent HBOS, that capital would be hugely more expensive.

All the new ordinary shares required by HBOS would be priced at an 8.5% discount to the prevailing market price. As of today, that would mean that the new capital would be priced at 61p, compared with 113.6p under the current recapitalisation plan (the plan that would collapse if the deal with Lloyds collapsed).

The implication is that taxpayers could end up with a stake of more than 70% in HBOS, on the conservative assumption that the FSA, the City watchdog, determined that HBOS only required £500m of additional capital (which HBOS's own board fears may be unrealistically low).

Many would see a 70% taxpayer shareholding as de facto nationalisation.

What's more, the Treasury has also said that the coupon or interest rate on the preference shares which HBOS is selling to taxpayers, along with the ordinary shares, would be re-set.

The new interest rate would be based on "the rate at which eligible institutions have announced the issue of such instruments recently" - which is a pointed reference to Barclays paying 14% on the "instruments" sold to the state funds and royals of Qatar and Abu Dhabi (see this morning's earlier note).

In other words, an independent HBOS - if it were allowed to remain in the private sector at all by the Treasury - would be paying a stonking 14% interest on the prefs, not the 12% negotiated as a bank being taken over by Lloyds.

So what do you get when you crunch the chancellor's technocratic statement into a single sentiment?

Hmmm.

It looks like a pretty blunt warning to HBOS's beleaguered shareholders that they would vote down the takeover by Lloyds at their severe potential peril.

Comments

Page 1 of 2

  • Comment number 1.

    40,000 jobs plus many tens of thousands more that rely on the spending of those workers are at stake.
    Maybe our short sighted government should think again.
    If they keep the banks seperate until the financial markets get better they will save a countless number of jobs totalling at least into 6 figures.
    It will also mean less people unemployed and people having to be retrained because there is one less major bank on the highstreet.
    It will also mean more long term competition on the high street if HBOS stays seperate which is better for consumers.

    Everyone should write to their local MP, when they realise their job is on the line in the next election if HBOS isn't kept seperate then maybe they will act for everyone in the best interest.

  • Comment number 2.

    Whats new?

    New Labours bully tactics,as both institutions have massive problems,there is probably a better chance of rebuilding them as separate organisations.

    BIG is not always BEST?

  • Comment number 3.

    No automatic right of access to recapitalisation followed by, we won't let a UK retail bank fail full stop.

    I actually stopped reading there, the words are meaningless.

  • Comment number 4.

    Alistair Darling should legislate the merger under the Banking Act that handled Northern Rock and stop all this nonsense.

    This spoiling tactics from Mathewson and Burt seems to have no substance and is diverting the legislators and regulators from tackling the major problems of the economy (as it the Barclays farrago). Get the job done.

    If it is to be done it is best that it is done now so that we can all move on and fix the looming depression.

  • Comment number 5.

    HBOS stopped being a bank a few years ago when they became mortgage brokers.

    They are in no position to borrow hundreds of billions of other peoples money to sustain their busted model.

    HBOS shareholders need to move to the 5th and final stage of grief quickly; that of acceptance.

    The the other 4 stages have been seen on this blog regularly:

    Denial
    Anger
    Bargaining
    Depression

    Move on nothing to see here.

  • Comment number 6.

    An interesting comparison is Fortis Bank in Belgium, rather further down this road than HBOS: the court hearing is this afternoon, and if the Paribas deal fails, PM Leterme has said he'll wash his hands of the entire thing, refuse governmental support, and watch the depositors string the board up from the nearest lamp-post by their cojones.
    There's a statue on the green just outside the Fortis Brussels HQ which has long been nicknamed "the man stripped bare by his bank". This begins to be more than somewhat relevant...

  • Comment number 7.

    That disposes of HBOS, but what is it in HBOS, apart from size for size' sake, that makes it appealing to Lloyds?

  • Comment number 8.

    There appears to be more leaks from the sinking treasury than first thought.
    Mr Murphy is not flavour of the month.

  • Comment number 9.

    Am I the only person who doesnt trust AD and GB to make the correct decision, I understand that they have spent alot of time brokering the present deal, but these veiled threats to shareholders smack of a lack of open mindedness.
    Let GM and PB try to put together a package that could save a scottish institution. Im not a scot, btw.

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    This is more Do As We Say Government. Whether or not HBOS is getting a good deal is utterly secondary to Gordon Brown getting his 'cudos' for arranging the deal with LLoyds.

    Politics trumps economics, for now...

    Behaviour such as this will unravel Labour in time for sure.

  • Comment number 12.

    This is simply scaremongering by an incompetent Government determined to push an unsatisfactory deal through at all costs in order to save face.

    As with the "weapons of mass destruction" in Iraq, when Governments have no case and no evidence, they resort to scare tactics. Most people won't buy it.

    It is in the interests of shareholders, employees and the British consumer that HBOS remains independent.

  • Comment number 13.

    So now the Barclays' deal is not so bad after all. If the Chancellor is demanding 14% for the preference shares, then the same "deal" may also apply to the other "Scottish" bank !!

    And everyone wondered why Barclays' board was so "stupid" as to accept a "more expensive" capital injection from the Arabs !!

    Then again, there will always those who shoot from the lip first and ask questions a long time afterwards !!

    Dick Turpin is alive and well and rides the High Road to Scotland !!

  • Comment number 14.

    If I were being cynical then I might wonder out loud whether Messrs Brown & Darling can afford, politically, to be undermined by their bank rescue scheme being picked apart.

    Is there any independent view from anyone else as to whether Mr Darling's statement of the conditions and costs for the government's rescue money is a fair set of terms, or just created in order to stymie this brave attempt by the Scottish establishment to propose a decent alternative to the government's presentation of itself as the saviour of the UK economy ?

  • Comment number 15.

    It would be helpful if those keen to spend money - and by default ascribe value - in supporting banks define some kind of view as to what they will actual be like as profit generating machines in the future. Clearly if any lessons are to be learned from the current crisis a return to the recent past should be avoided so just where will future performance come from? In another article on the BBC website it is mentioned that Northern Rock et. al. have not been included in debt calculations because they are assumed to have some future value - maybe but what? Perhaps the government and the wealth funds are picking up bargains but perhaps not. Certainly if future profits are to be driven by vanilla banking operations rather than esoteric financial instruments then margins will inevitably be driven lower. Not a game to play in unless you have the deepest of pockets and a prepared to stand the potential losses. As from the taxpayers point of view these losses would in large part be picked up by the next generation, who had no part in the creation of the current problems. We seem to be at risk of visiting the sins of the parents on their children. The same can be said of current tax cutting plans. Seems like a very slippery slope to me.Great caution would seem to be advisable.

  • Comment number 16.

    Dear Robert,

    Talk about a government panicking, me thinks there is now a rethink on Natianalisation by top bankers, is it that they see their profits disappearing after repayemts to the tax payer.
    and 57,000 jobs going at citi bank, just goes to prove profitscome before jobs.

  • Comment number 17.

    #5 daytrader

    Spot on.

    Seeing other contributors talking about saving HBOS jobs reminds me of the 1970's when Labour attempted to save mining jobs by spending thousands of pounds per tonne digging up UK coal from miles below the surface when Poland was selling it for a few hundred.

    If the job has no value then why pay someone to do it.

    HBOS is history and so is its business model, many its employees and most of the shareholders investment.

    Its a tough old world for those relying on an ever lasting virtuous circle of first time buyers taking on even more fantastic amounts of debt so they can kick back.

  • Comment number 18.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 19.

    I'm surprised to not read any "nothing new labour" stock quotes here:-

    "we're listening"
    "it won't happen again"

    And other such promises which simply should not be made - and if they are, the should be held accountable should they fail to stick to their promise.

    Otherwise, what's their promise worth? From what I've seen/read/heard of late, the answer is "NOTHING".

  • Comment number 20.

    This is released the day before the Lloyds Shareholders vote

    Mmmnn... No coincidence there then.

    Hope Darling has another job lined up after the next election and his safe Labour seat aint gonna be there after this debacle.

  • Comment number 21.

    #7
    1. Size. Lloyds was previously a target for being small enough to be a tasty morcel.
    2. Removal from the firing line. Now HMG owes them big-time.
    3. Probably a Lordship or two in due course. Outdoes a knighthood anyday. When do the laddies hand theirs back, by the way?
    4. Cleanliness. It'll take their kind of surgical excision to save this patient.

  • Comment number 22.

    I'm sorry, but all this article tells me is that Mr Darling wants the original arrangements to go ahead, and he uses as justification for this that the obstacles he has put in the way of any alternative arrangements are so high as to make there to be only one rational option for HBoS shareholders - to accept what's on the table.

    Isn't it time that he was made to explain why the deal is objectively superior to any alternative arrangement? Surely, the HBoS problems are there whether they are incorporated into Lloyds or not? If Darling is unwilling to accept HBoS has the capability of remaining afloat on its own, why should he expect Lloyds shareholders to take it on? Has he made Lloyds support conditional on swallowing the "poison pill" that, apparently, is HBoS? What are the synergies, if any, that are uniquely available to a Lloyds-HBoS marriage? Has Lloyds acquiescence been bought by a promise to allow over-exploitation of market share post-takeover?

    Why does the BBC not raise these unanswered questions, instead of reporting on the basis that what the government wants us to believe must be right? Are these concerns so inconsequential that it is frivolous to expect them to be dealt with?

  • Comment number 23.

    What is remarkable is that so many still don't get it - the 40,000 "jobs" that will be lost when HBOS gets sorted out are no longer valid jobs - the jobs were created by an imbalance in the economy (caused by cheap credit and the maniac marketing departments of HBOS & co) which is being corrected and unwound painfully.

    The measures needed are:
    (1) to speed up the correction by supporting the redeployment of those unemployed
    (2) protect the hardest hit from sinking if possible
    (3) establishing a credible financial system for the post-2008 crash world
    (4) ensure liquidity injected to get us over the crisis is genuinely a temporary measure

    we're broadly headed inthe right direction but recovery will take a while.

  • Comment number 24.

    Be careful very careful,if you opinion does not concur with New Labours outlook.

    You will be subject to DELETION.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    I think ive been deleted over 30 times in less than a week now.

    Guess my posts got up somebody's NOSE.

  • Comment number 25.

    12. At 1:01pm on 18 Nov 2008, Brodick1 wrote:
    This is simply scaremongering by an incompetent Government determined to push an unsatisfactory deal through at all costs in order to save face. ........


    What utter nonsense!

    Its an ultimatum to the Greedy beggars and any small following that they may have basically saying


    Oi you, stop it, we hold the purse strings now (with no real money in it, but never mind) and if you push this any further it will cost you dear at best and maybe your little Scottish bank at worse.




  • Comment number 26.

    well you should sell your shares in HBOS and LTSB. What is not being mentioned much is that part of the deal is they go back to making a lending spree which means they will burn through that capital in no time and then be insolvent.

    Would you rather own part of state-supported bankrupt bank or a battered independent bank?

  • Comment number 27.

    It is just as well for the stunningly successful (NOT) HBOS board that they are not social workers in an Inner London Borough.

    The fact that the existing board does have a "sustainable business model" ought to have the shareholders demanding their resignation without compensation.

  • Comment number 28.

    "there is no automatic right of access to the recapitalisation scheme" - does anyone really believe that they will let HBOS fail?

    This is a ridiculous deal. Shareholders love monopolies but it is the consumers and employees who will suffer.

  • Comment number 29.

    No. 1, Andrew Knight makes a good case that HBOS should be preserved in order to preserve jobs in a recession.

    As I understand it, this is not what Mathewson and Burt are arguing. They claim that HBOS is financially viable. (It has been said that HBOS is a "formidable money-making machine".)

    It would be great if they are right. But I doubt it.

    I suspect that GB and AD would much rather have an independent HBOS if they thought that it was financially viable. I can't see that there is any political pay-off in being associated with the demise of the Bank of Scotland, and with causing mass unemployment.

  • Comment number 30.

    Clearly the Lloyds deal has political favour, and he who pays the piper --------

  • Comment number 31.

    #7, #21

    Also the fact that HBOS Banking Licence allows them to actually PRINT Banknotes.

    Then LLOYDS can join in with the FIAT Paper kite scemes, so beloved of Golman Sachs, and thier Whitehouse shills, Henry Paulson and Neel Kashkari.


    #11, #14

    There is the small matter of European Competition Legislation however, which Gordon & Alistair seem to have overlooked.

    I explained this on another of Peston's Blog entries previously, but briefly Article 82 of the EC Treaty, forbids these actions of HMG on several different levels.

    Darling and Brown have stated that the 1998 Competition Act of the UK Parliament reserves this authority to HM Government.

    This IS NOT the case. Article 86 of the EC Treaty ( Old Article 90 of the Rome Treaty ), actually pre-empts this by making provision seperately for regulation of individual Meber States, being subject to the provisions of Articles 81 and 82, even if those States might legislate internally.

    Brussels has the authority to squash this deal, even after the fact. The UK Government will then simply receive a Directive from the Commisssion. Swinging fines will follow.

  • Comment number 32.

    #25 assuming you are a consumer, you will be the one who suffers. Lloyds executives will be the main beneficiaries as they exert their pricing power over the market.

  • Comment number 33.

    Take a step back to the day the Lloyds - HBOS deal was announced.

    HBOS shares were down something like 60 per cent in 2 days. All the evidence was that their funding lines were all being cut and that they'd be bankrupt within a week. A takeover of HBOS by Lloyds was announced, and seemed to be something that had been under discussion for several weeks, but had to be hastily announced in light of the pressure on HBOS, itself caused by the bankruptcy of Lehman's. That event caused investors generally to conclude that banks would be allowed to go broke.

    Where are we today? We have rumours of interest from Bank of China, and two former bank executives saying let us run an independent HBOS.

    The BoC deal looks like a red herring. There's no evidence they're buying shares in the market to build a stake, no announcement of contact with BoC by HBOS itself, therefore very unlikely that a bid will emerge. On this one I think BoC if interested at all, may buy parts of the HBOS business off Lloyds after they take over. That could help alleviate some competition concerns as well as reduce the cost in terms of job losses.

    As for M and B, they seem to think government capital injections are some kind of right. They're not. Though I think GB and Ally D have hardly covered themselves in glory through this crisis, Ally D is definitely entitled to suggest that HBOS has to have a robust business model if it is to receive a government injection. Its current business clearly isn't robust. Without the consolidation with Lloyds, we can be fairly sure that HBOS's funding lines would again come under pressure. Since the pressure in October, HBOS's position has got worse not better, with a worsening UK housing market, and much worse general economic news. M&B have not put up anyone suggesting they'd invest a single penny into an independent HBOS.

    So HBOS shareholders have only this choice at present: the acquisition by Lloyds, which gives them some share in any recovery in the banking sector, or the bankruptcy and destruction of 100 per cent of their HBOS shareholding.

    One final point. Much of the stirring around M and B appears to have the support of the Scottish government. If Alex Salmond feels so strongly about this, why doesn't he promise Scottish government resources to invest in HBOS? He could offer the difference between the current level of promised UK government injection assuming consolidation with Lloyds, and whatever FSA calculates as the required capital if HBOS remains independent.

  • Comment number 34.

    The fundamental question the directors of HBOS should be asking themselves is as follows:

    Is this proposed merger deal with Lloyds most likely to promote the success of the company for the benefit of its members as a whole?

    The HBOS directors have a statutory duty under Section 172 (1) of the Companies Act 2006 to ask this simple question.

    The directors should decide the answer to this simple question and respond urgently.

    Delaying and being caught up in all the media spin is most definitely not benefiting shareholders.

  • Comment number 35.

    I should point out that HBOS like Northern Rock would have to undergo downsizing of its mortgage books but it would still leave many more jobs intact that simply handing over the company to Llyods.
    Remember HBOS isn't just a bank, it has many divisions and jobs at stake.

    The government is happy in the short term to borrow its way out of debt with its plan to increase consumer spending by targeting tax cuts at those it thinks will go out and spend the money although in the long term everyone will have to pay higher taxes to cover this.

    So it raises the question of why don't they borrow to save HBOS and many jobs from being lost. It would also mean there would be more high street competition from banks in the long term.

  • Comment number 36.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 37.

    Try this for a reckless bank fix-it plan.

    Hand wheelbarrows of taxpayers' money to two huge banks, then allow them to merge so they can use their outsized market power to clobber what little competition remains.

    It sounds crazy but this is exactly what is happening with two of the biggest banks in Britain, Halifax Bank of Scotland and Lloyds TSB.

    Read on. . .
    http://www.theglobeandmail.com/servlet/story/LAC.20081117.IBREGULY17/TPStory/Business

  • Comment number 38.

    Well HBOS is shot to bits, obvious. There should be no automatic access to taxpayer money, yes. Jobs to go, inevitable. Never any assessment about consumer in all of this which is the most important issue. Why am I not surprised.

  • Comment number 39.

    37. At 2:44pm on 18 Nov 2008, macdone wrote:
    Try this for a reckless bank fix-it plan....? Reckless?


    A big bank handing out sensible money is going to be better any day than the mess those idiots got that HBOS into.

    Get over it.

  • Comment number 40.

    This is an extract from the stimulus package being announced on Monday, just swap Texas with Britain. Now there's a great idea.


    Nov. 18 (Bloomberg) -- Homeowners fleeing underwater mortgages in California and Florida know where to come up for air: Texas.

    ``Texas is an extremely friendly place to live if you owe money and do not want to pay,'' said Marjorie Britt, a bankruptcy attorney with Britt & Catrett PC in Houston. ``If you have a lot of money and even more debt and want to shelter your assets, you can live fairly normally.''

    Distressed borrowers can hang on to luxury cars, a primary residence, paychecks, retirement accounts, and even jewelry that creditors might claim elsewhere, Britt said.

  • Comment number 41.

    # 37

    Your link is to a Press release from the two financiers, I suggest. Interesting that it's from a Canadian media outlet, though, given the large Scottish diaspora there. Perhaps Mathewson and Burt see scope for capital raising there?

    The Canadian link is what makes me suggest that it's just a Press release. There's no way the Globe and Mail would have looked at this story without such prodding.

  • Comment number 42.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 43.

    The whole point of recapitalising the banks was surely just a short term measure to give them time to restructure and downsize.

    What seemed a sensible thing for any government to do during the panic in the world banking system a few short weeks ago is turning into another full scale cock up by this government.

    What on earth are they trying to achieve?

    The last thing any business truly needs is government interference on a long term basis.

    These are businesses who are capable given the right conditions of turning themselves around. They can never do this as long as this government continues to tell them what they should do.

    After all what does Gordon Brown and his cronies know about banking or business?

    They've never run a business in the whole of their lives let alone run a bank.

    Pity because running a country is the same as running a business. The books have to balance or it goes bust.

  • Comment number 44.

    I can't help agreeing with Globalrep. This Government will be sat back, isolated from the dreadful and scary mess they've created for my generation as we struggle with their legacy. They've taken us to war with an entire region and religion, signed up for a greater nuclear arsenal, driven the economy into ruin and handed most of what's left of our assets to an even smaller percentage of the elite, whilst saddling the rest of us with crippling debt and tax burden and ensuring that we'll very probably never agian be able to heat or feed ourselves
    Labour - power to the people. Cheers

  • Comment number 45.

    43. At 3:06pm on 18 Nov 2008, virtualsilverlady wrote:
    The whole point of recapitalising the banks was surely just a short term measure to give them time to restructure and downsize.

    Hmm was it? Was not also to ensure the taxpayers money invested would not be lost and even turn a profit?

    HBOS has a failed business model. It will not meet the criteria of the bailout on its own. As for the Government running a Bank, those two cronies and their greedy lot hardly can be called bank managers, can they?

  • Comment number 46.

    #39

    I agree HBOS have been idiots - get new management in.

    Excessive pricing power will not lead to sensible money. The public WILL suffer!

  • Comment number 47.

    #36. At 2:39pm on 18 Nov 2008, -Thoth-

    This comment has been referred to the moderators. Explain.


    #42. At 3:03pm on 18 Nov 2008, -Thoth-

    This comment has been referred to the moderators. Explain


    Free Speech ?

    Come on Peston & BBC play fair.

  • Comment number 48.

    Over the past few weeks, various people on these blogs have made categorical statements about "what would be in the best interests of shareholders in XYZ.plc".

    As shareholder in a number of these companies, I am not sure at all what would be in my best interests, although I have a fair idea of what would not - ie insolvency.

    I do wonder whether some of these advocates of shareholders interests are actually shareholders - that is (and you know who you are): is your money where your mouth is?

    On the broader point, given that jobs will (inevitably?) be lost in the economy as a whole, IF money is to be spent on saving some of them, would it not be better to support manufacturing, technology, Research and Development rather than the failed industry which has landed us all in this dire mess.

    I know where I want MY money to go - even if that means that I lose out on some/all of my banking investments.

  • Comment number 49.

    The more expensive the banks become the better it will be for all of us.

    Easy money must never be allowed to return

  • Comment number 50.

    What amuses me, is how the takeover was agreed at a certain price a month or so ago, and since then it has repeatedly been re-valued until I wonder if could actually pick up HBOS for the price of a bag of chips and a pickled gherkin the next time I go to my local car-boot sale...

    I'm not surprised certain people want to keep it independent if they possibly can.

    Surely, once the takeover was agreed the price is agreed. Well, in in ordinary world that's usually the case. How has the repeated devaluation happened in this crazy world we're currently experiencing.

    Lloyds TSB seem to be getting a bargain. What's actually driving this devaluation process ?

  • Comment number 51.

    There are 2 types of blogger on here - as there are 2 types of people interested in this story.

    The shareholders of HBOS and non-shareholders of HBOS.

    The shareholders will try and blame the Government, the board, the country, the system for what is going to amount to a large loss of investment.

    The non-shareholders will quote the small print and laugh at the predicament the shareholders face.

    So depending on which one you are, you will find this whole episode either highly amusing, or a tragedy in the making.

    This situation has made me consider the problem with shareholding. The issue is investors are far too far removed from the actual running of the business. The dillution of the shares means very few people actually have control of the company and it comes down to a few major shareholders.

    If you want to invest in the future, find a small business, a local one, and invest in that. The the disassociation of risk in exchange traded stock is where it all goes wrong. The assumption is they are low risk - where as the opposite is true.

    If you want to gamble your money based on the 'buy' or 'sell' of a broker, then you may as well go to the bookies and see if you can get any tips on the 4:30 at Kempton.

    Reward is, and will always be the product of hard work and effort. Don't believe anyone that tells you differently.

  • Comment number 52.

    #43 "After all what does Gordon Brown and his cronies know about banking or business?

    They've never run a business in the whole of their lives let alone run a bank.

    Pity because running a country is the same as running a business...... "

    Isn't this a bit self-contradictory?

    The cronies certainly have plenty of experience now, even if much of it is in making mistakes. The question is - can they learn from them? My own instinct is that Brown's ego makes this difficult, but that the jury is out on Ally D. Looking around at the rest of the politcical spectrum, I have some time for Vince C and maybe David D. Others, even if intelligent, seem too bound to vested interests.

    Can we have nominations for a "Ministry of all the Talents"? (And I don't mean just Lord High Executioner and Lord High Everything Else!)

  • Comment number 53.

    #51 "If you want to gamble your money based on the 'buy' or 'sell' of a broker, then you may as well go to the bookies and see if you can get any tips on the 4:30 at Kempton."

    I disagree very strongly - I'd rather buy shares in the bookie! (I have!)

  • Comment number 54.

    #44 - ejswede.

    ...you forgot the banning of protests around 2 miles of parliment to ensure that the angry public cannot burn the place down.

    These anti-terror laws are for the Government to protect itself FROM THE PEOPLE.

    No two bit band of rebels in Afghanistan are going to threaten the houses of parliment.

    ...think about it. What are the chance of Al Queda bombing the HoP - very slim indeed. However what are the chances that this recession creates enough poverty for the masses to get off their backsides and do something about it and want to take revenge? - more and more likely by the day I would propose.....

    That's when it really becomes power to the people.

  • Comment number 55.

    45 Peter's kitchen

    It is not clever to pick out only a part of someone's blog and turn it around to suit yourself.

    If you quote someone else you should use the whole context as this does not give a balanced opinion of what was said.

  • Comment number 56.

    #53 - ...and you would be doing well.

    In the City AM it noted that if you had done the OPPOSITE to the broker recommendations over the last 12 months, you would have made less of a loss (if that can be viewed as a good thing!) than if you went with their recommendations.

    When all the un-employed have plenty of time on their hands over the next 4 years - read up about Brownian motion and then you will understand why making money in shares is about probability rather than skill or knowledge.

    It's like me telling everyone I'm better than magic johnson because once I managed to get 6 3-pointers in a row with my eyes shut.

    I think Magic Johnson would laugh at me...

  • Comment number 57.

    # 55

    I totally agree with you, do you want to apologise to #43 now?

  • Comment number 58.

    Anyone else wonder what Thoth posted?

  • Comment number 59.

    #47 Thoth - as this is a public forum subject to the laws of defamation, you can't do a Claude Cockburn and ask "Why are these lying B****s lying to me?"

    You have to express yourself more obliquely: ie "Not withstanding their undoubted moral probity, it might be mistakenly construed by a cynic that these lying B****s are ..... etc.

    Or perhaps euphemistically: "It appears that the cat who stole the cream wants to be put back in charge of the dairy?"

    As the fictional Scottish Tory is alleged to have said: "You might think that - I couldn't possibly comment!" ;-)

  • Comment number 60.

    Robert,

    Is it just a coincidence that leaks from the Treasury regularly appear in your blogs, or something more sinister.

  • Comment number 61.

    #55, hmm, should be a sign "Don't feed the trolls"....

  • Comment number 62.

    #56, well analysts for a while have basically been an adjunct to the sales team. Most fund managers have their own analysts - who may or may not be any good.

  • Comment number 63.

    #60, how dare you imply that there is nothing but biased, ignorant quasi-Treasury press releases? When is the review of the BBC's charter? I am sure that now is not the time for the BBC to have to be "self-supporting"....

  • Comment number 64.

    thoth???????????????????????



    The words

    Mortgage

    Mandelson

    Lie

    Resignation

    All these words seem to be defamatory despite the fact a certain combination is true.

    As an aside my name linked to HBOS cause problems.

  • Comment number 65.

    This Gov't wants high unemployment.

    Which Housebuilder will they Nationalize first in their power trip ?

  • Comment number 66.

    #62 - yeah that's what they tell you!

    So what is the 'formula' that accurately predicts human behaviour?

    I've never seen it, but apparently all these analysts know it off by heart.

    I think it goes something like this in boom times:

    E / (I+(F*G)) = P

    Economic strength (Growth) / (Income + (Greed*Foolishness)) = Profit

    So when the Economic strength increases the Profits are bigger, but the greed and Foolishness increase to maintain a steady profit as a balance - i.e. it's never enough

    However when the Economic stability decreases (or worse, goes negative - recession) then the profit is decreased, and by a greater amount if the Greed and Foolishness is large (which is often is at the end of a boom)

    Eventually Growth goes negative and so does the profit.

    I had better be careful here - I don't want to get into trouble with the FSA for giving poor legal advice - even though I just made it up, there will be people out there who start investing on this principle.

  • Comment number 67.

    @64 Alexander Curzon.

    The problem is that when someone complians about a comment it's removed irrespective of whether the complaint is true or not.

    What tends to happen is that party activists then complain about things they just generally do not like as opposed to not like or object to for a specific reason.

    I know this to be true because I used to be a party activist for the Labour Party but I'm alright now thanks.

    Personally, I don't think a post should be pulled unless it contains unacceptable bad language or is directly insulting to a named person AND the insult has nothing to do with the subject of the blog.

    Sadly, control freaks think otherwise.

  • Comment number 68.

    Now everyone must admit Labour has done its level best to create an equal Society.

    We all are equally up the creek !

    Hyperinflation on its way, Pension Funds losing huge sums of money.

    Massive job losses in whats left of the economy.

    International investors running from the UK Stockmarket as though it had the Plague!

    What next ?

    A decent pay rise for the Public Sector ?

    One that takes into account the surging cost of living ?

    Hardly likely !

  • Comment number 69.

    This Lloyds/HBOS debate is really little to do with finance but more about Gordon Brown.

    Mr Brown is driven by his own ego and nothing else appears to matter. The most obvious illustration is the 10p tax fiasco when he repeatedly refused to accept that there were any losers. Only acceding when the increasing criticism from the Labour benches became a threat to his personal position.

    At the time negotiations began on the Lloyds/HBOS deal, such a deal was illegal; against the law on monopolies. Difficult not to imagine government were complicit.
    Subsequently there appears to have been a series of controlled leaks promoting the merger and villifying a stand-alone HBOS.

    Now we are in recession, worried by the threat of depression. Job losses are announced daily and government are readying to add billions more to the billions of debt already accrued in an attempt to alleviate those losses.

    It seems contradictory, therefore, to change the law and refuse a trivial amount - relative to current and future commitments - in order to sacrifice the large number of jobs that this merger will precipitate.

    For me, this debacle has the hand - or clunking fist :) - of Gordon written all over it.

  • Comment number 70.

    #66, reminds of Warren Buffet's 3 Is. In any investment there are three stages:

    1) The innovator
    2) The imitator
    3) The idiot

  • Comment number 71.

    HBOS is a busted flush. The started out as a good operator in corporate banking, got into bed with Halifax, and wanted to take over the UK's banking market. Towards the end their Integrated Finance team were effectively buying companies, with equity risk priced as debt, out bidding trade buyers in the auctions. The most stupid thing to do from a banks perspective. HBOS deserve to collapse, I just feel sorry for Lloyds TSB, who if it wasn't for the HBOS takeover would not require any funding from the government.

  • Comment number 72.

    #64 alexander - that's brilliant! All you need to do is toss in a few well chosen words at random: rather like a verbal jigsaw puzzle.

    Anyone with any intelligence can then solve the puzzle and rebuild the picture. They haven't found a reliable way to detect thoughtcrime yet!

    Rearrange the following words to get a different meaning: (Various solutions possible)

    should
    Brown
    resign
    he
    is
    not
    incompetent?

    Then subsequent posts could suggest alternative words. No-one need be defamed.

  • Comment number 73.

    I have a good solution for the economy and the tax payer. How about we sack the majority of civil servants (particularly any job advertised in the Grauniad) and put them on the dole - it would be cheaper for the economy taxpeyers pay their inflated salaries and pensions, cheaper to pay them dole. They can then go and get a productive job in the private sector, work the same hours that we do, have the same self funded pension that we do etc etc.

    The result would be we could cut income tax by 5p and slashing council tax. That would be a good start.

  • Comment number 74.

    hbos cannot fall any further or will drop off the radar
    Why not cut to the chase & take them into national ownership and see how the mop flops check the books and see what can be salvaged at half the price.
    As we stand you are just throwing good money after bad.

  • Comment number 75.

    So what do you get when you crunch the chancellor's technocratic statement into a single sentiment?

    Hmmm.

    It looks like a pretty blunt warning to HBOS's beleaguered shareholders that they would vote down the takeover by Lloyds at their severe potential peril.

    = = = = = =

    Sounds to me like:

    He's asking for a vote of confidence from people who are all standing over a trap-door ..... and he's the one holding the 'drop' lever!

  • Comment number 76.

    sorry about the language used in 74 been in a meeting all afternoon with saluting flags and pushing envelope people.

  • Comment number 77.

    #74, i agree it should either be complete nationalisation - with the requisite wiping out of shareholders or no intervention at all. Partial nationalisation was always going to be a pig's ear.

  • Comment number 78.

    Lets go back to....
    Thursday September 18 2008 16.25 BST

    http://www.guardian.co.uk/business/2008/sep/18/lloydstsbgroup.firsttimebuyers

    Paragraph five...
    In a statement rushed out immediately after the 7am merger news, the FSA said it was "satisfied that HBOS is a well-capitalised bank .........."

    Oh dear...
    What has gone wrong I wonder?

  • Comment number 79.

    Do you notice that once you get past 5.00pm all the cushy job people go home ie civil servants

  • Comment number 80.

    Just wondering why the Govenment is putting so much into this and it strikes me that it must mean that there is some political advantage to be had for pushing the merger through.

    If it is not too simplistic, I assume that the whole idea is to undermine the Bank of Scotland as the major financial plank of an independent Scotland and therefore hamstring the Scottish Nationalists who until Glenrothes where looking like wiping out Labour in Scotland.

    Nothing would annoy Salmond more than BOS being run by sassanachs!

  • Comment number 81.

    #31

    The EU Competition Directorate got a message when Mandy was booted upstairs. I wouldn't count on that one, not least because the Commissioners are up for replacement before any such constraint can possibly be brought to fruition, so the boys in that particular back room are highly motivated not to make any waves twixt now and then.

    Further news on the Fortis front: the judge is allowing the takeover to go ahead, but forcing a review of the price. Talk about judicial suicide, if she forces it up, Paribas walk away, she takes the drop for everyone., must have had an offer she couldn't refuse....

  • Comment number 82.

    I'm not to sure what all the fuss is about!

    On the one hand we have a government who agreed to bail out HBOS using taxpayers money on terms that were considered to be fair to the taxpayers (who was unwittingly being asked to take a risk) and the the shareholders. Since then and even though matters appear to have worsened the government remains steadfast in saying that it will honour its terms of the original agreement.

    Now we have a couple of well respected bankers, albeit retired, stepping forward to say that they can resurrect the banks fortunes without the need for taxpayers money, so the bank can remain completely independent. Quite how they are able to do this remains a mystery but one suspects that since they are a couple of bankers with an eye for easy pickings, they are simply trying to stall or frustrate the governments plan long enough for it to fail. Then they will hope to force the government into offering them better terms and conditions.

    If these two respected bankers really do believe they can resurrect the banks fortunes and save countless thousands of jobs, without the help of the taxpayers money then let them do ahead. Also since they by now they will have made more than enough money to live off and do need any extra money then let them offer to do so without any reward or remuneration. Let them return a favour to the banking industry that has served them so well and generously in past years.

  • Comment number 83.

    Given that in recent weeks we've seen many Banks publish job loss figures (RBS, JP Morgan, Morgan Stanley, Citi etc) I am curious as to why no job losses have been announced for either Lloyds TSB or HBOS. We can all speculate at the extent, but when is it likely the market will hear the figures and when would these commence?

  • Comment number 84.

    It seems generally accepted that HBust is not an viable entity on it's own after this mess has been sorted. So RP is right surely Burt and Matthewson need to prove they have a better plan than the current board. Afterall as part of the deal this board ceasses to exist, their own shareholdings are dimished greatly and they get no bonuses or obscene pay-offs. If they could have engineered any other outcome which would have better profited themselves and theri shareholders I am sure we would have heard about it now.

    UK Plc cannot afford it take it on like Northern Wreck - just what % of the nations mortgages would then be directly controlled. Even the conservative estimate of a bailout direct to HBOS would place 70% in public ownership to get the funding it required - de facto control and hence presumably the same issues of 'competition'. Imagine NR and HBOS combined mortgage books at increasing rates and customers trying to remortgage.

    It also serves to tweak Alex Salmonds nose which is probably a political plus point for GB/AD from the proposal.

  • Comment number 85.

    Why don't those two bankers offer to buy N/rock and use their talented model to revive that institution - it would still have the northern feel to, if not dressed in tartan?

    I know they must feel that the take over is akin to Elizabeth taking Mary's throne, but they have not exactly elected the future in King Alex, have they?

    This is not just a Bank takeover going on, its stealing the crown of the Alex the first and Labour dearly want that neck, dont they?

  • Comment number 86.

    Presumably HBOS total exposure to housing market losses doesn't change by its merging with Lloyds, nor does the amount of funding required from the securities market (unless Lloyds has lots of uncommitted deposits laying around..) So the only valid argument is the amplification of the risk if left without Lloyds broader based assets and funding.

    But this risk has been priced by the FSA as requiring an additional 500m, presumably factoring in the housing and funding risk. "Not so", says Darling, and slaps a huge risk premium on top, to "get the best deal for the taxpayer". Astonishing.

    Isn't the real story here about how the Chancellor is overriding his own regulator and making up his own rules as to who should and shouldn't be given taxpayer funding, and at what price? Is that Gordon's scribbles I can see on the back of an envelope?

    If I were cynical I'd say he's hopeful that such a banking giant may still relent to pressure and lend more to the housing sector than the two would have done independently, in a desperate attempt to make taxpayers borrow to boost the economy and their election chances. I'd also like to see if Lloyds would still require taxpayer funding if they stay independent, and how much.

  • Comment number 87.

    Robert

    After his handling of this affair. I would expect the people of Edinburgh South to 'get rid of Darling at the next election.

    The HBOS affair just stinks.

  • Comment number 88.

    #80 An interesting conspiracy theory - not totally implausible; but I favour a multiple rooster up theory.

    BOS was moved out of Scottish ownership by Burt et al when they engineered the merger with Halifax. The housing boom and HBOS policies then busted the Bank. HMG thought it couldn't take the political flak, especially in Scotland, that would result from letting it go to the wall, and therefore "incentived" LTSB to "rescue" HBOS. However, it has slowly dawned that this rescue is really scrapping and cannibalisation, rather like a car which has been written off.

    One way or another HBOS is now fiinished. Some are trying to make political capital, others are trying to rescue their reputations by finger pointing. Yet others are just hoping that this issue can be buried in some way. I do not think it was ever remotely in HMGs interest for this issue to arise in the first place. This is like the story that, when asked what represented the greatest challenge for a statesman, Harold Macmillan replied: “Events, my dear boy, events”.

    I think this has become a "lose-lose" situation for HMG and probably always was.

  • Comment number 89.

    #85 The irony of all this is that BOE was founded by a Scot, William Paterson and that BOS was founded by an Englishman, John Holland.

  • Comment number 90.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 91.

    There has been a problem...
    Your comment contains some HTML that has been mistyped.

    Data at the root level is invalid on line 1

    ............. could have been true..... if I'd inserted ANY html, which I had not!!

    You've got a problem, Peston!!

  • Comment number 92.

    So, HM Treasury has fired off it's big guns at HBoS shareholders, but what happens if the Lloyds TSB shareholders reject this merger????

    Many of these people have asked, 'whats to be gained from taking over the mass of toxic so called assets that HBoS have'

    Can not for the life of me see what Lloyds TSB shareholders have to gain in the short/medium term.
    Perhaps in 10 years time, this MIGHT look like a good deal for them.

  • Comment number 93.

    Dear moderators. Please just remove the phone numbers of the BoC and PBoC, I guess it was pretty stupid to include them.. despite the relevance.

  • Comment number 94.

    I'm unhappy about the proposed Lloyds/HBOS simply because it seems likely that it will restrict the ability that Lloyds would otherwise have had to provide loans to businesses to help see them through this recession. Without the merger Lloyds were one of the few banks in a strong enough position to do so.

    HBOS's problems relate to the mortgage market. The mortgage market is dead, and it would be for the best if it remained so until house prices hit bottom (i.e. return to affordable levels) - probably in another 12 months time. The Government should be urging what's left of the banking sector to direct their limited funding towards those things that keep the economy afloat rather than trying to resurrect the mortgage market.

  • Comment number 95.

    I’m not a HBOS shareholder but I guess there are plenty who have already written off their investment and who would be prepared to vote down the merger because they see it as a government stitch up and a shareholder rip off just like Gordon Brown’s stealth tax on all pension funds in 1997 which has left most of us worse off.

    Maybe a nice protest vote but unlikely to count! I would be surprised if institutional shareholders behaved in a reckless manner as this could cause a run on the bank by ordinary depositors’ leading to an even greater funding gap and pushing HBOS to the brink.

  • Comment number 96.

    The Chancellor's unusually brusque comments are all too redolent to those of us living North of the Border, of the usual partisanship showed in any issue that involves Labour and the S.N.P.: unfortunate, for those of us who would wish to hear reasoned argument and see sound decision making. I do not single out the Labour Party as most politicians are hewed from the same quarry. Whilst not in any way seeking to censor democratic argument surely politicians must be beholdent to more than narrow party interest when dealing with a situation like the future of HBOS.

  • Comment number 97.

    Oh what a difference a few months make!

    Everybody has forgotten that what we have here is a bust bank being taken over by another bust bank.

    Has or has not Lloyds TSB taken advantage of the BoE's lender of last resort facility?

    And yet they have the outrageous cheek to extend their hand. Wanting more, a better deal. No talk of moral hazard. These bankers have no shame. They now see the paying business model to be getting wads of money from the taxpayer.

    And where pray will the taxpayers get the money from?
    Banks of course!

    Foreign banks, perhaps the odd sovereign wealth fund. All to be paid back sometime in the future.
    But hey, once Bretton Woods +n is agreed then we will be off again.
    Everthing will be OK. The banks will be fine. Job done.

  • Comment number 98.

    44. sounds like you've had a bad day in your bunker, with your tins and weapon stash. What reading material have you got down there?

    54. the masses will, if necessary, go to Mayfair, Bank and Canary Wharf first to take grim revenge.

    80. Lloyds are not Sassenachs, they're Breatnachs (Welsh)

  • Comment number 99.

    51#
    Too simplistic, ther are four types of bloggers who post here:-
    30% think everything is the government's fault.
    30% think everything is GB's fault.
    30% think it is GB's & AD's fault.
    10% actually try to post a comment on Robert's blog which actually makes sense!

  • Comment number 100.

    This whole HBOS situation stinks. Have a look at the Facebook group "Against the Lloyds TSB takeover of HBOS".

    I do not understand why Brown and Darling are pushing this deal through. They are trying to reflate the UK economy - how will adding an extra 40,000+ people to the Benefits queue, closing branches, creating a super-bank which will diminish competition for customers help reflate the economy? This move is very bad news for the UK economy and will cause serious problems in Scotland, Halifax and elsewhere. Why has David Cameron got nothing to say on this? I hope the shareholders haven't been duped and scared into voting for this deal - it is bad news for them too.

    Alistair Darling and Gordon Brown will have their names on every P45 issued as a result of this takeover - along with the boards of Lloyds TSB and Halifax Bank of Scotland.

 

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