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HBOS says independence equals nationalisation

Robert Peston | 16:45 UK time, Friday, 14 November 2008

HBOS's board has this afternoon explained why it sees the independence of the bank as a highly unattractive option.

Halifax bankIn a document sent to shareholders about its plan to raise £11.5bn of new capital and to be taken over by Lloyds TSB, it says that it would need to raise more capital were the deal with Lloyds to collapse, by order of the City watchdog, the Financial Services Authority.

What HBOS calls a "preliminary indication" from the FSA - given a few weeks ago - was it would need to raise £12bn as an independent bank, a 4.3% increase on the amount HBOS is currently raising.

But HBOS fears it may have to raise rather more and on worse terms, were it to go back to the Treasury at this later stage and reopen negotiations on the fund raising. It tells shareholders there is no certainty about quite how much additional capital it would need to raise.

The letter to shareholders from HBOS's chairman, Lord Stevenson, is pretty alarming, It warns that independence could lead to "the loss of private sector status", or de facto nationalisation.

HBOS fears that all the increased capital would probably have to come from taxpayers - and that would give the state a large majority shareholding in the bank, perhaps of 70% or more.

Which explains why HBOS has rejected calls from the prominent Scottish bankers, Sir George Matthewson and Sir Peter Burt, for HBOS to remain independent.

UPDATE 06:00 PM

Some, such as Burt and Matthewson, will say that HBOS doth protest too much about the risk of the business losing its private sector status and becoming a nationalised bank.

After all, HBOS has confirmed what Burt and Matthewson contended, that the FSA had originally said that an independent HBOS would need only a few hundred million extra pounds of capital.

So for HBOS's case to be taken over by Lloyds to remain totally and utterly compelling, its chairman Lord Stevenson needs to demonstrate that he is right to fear that the FSA would now demand that the bank raise more capital and also that the Treasury would provide this capital on worse terms.

Shareholders may insist that he prove that he is not being alarmist.

Which in turn probably requires that the Treasury and the FSA both come out of purdah and state precisely how much capital they would want an independent Lloyds to raise and also the price of that capital.

PS This is the important part of the HBOS document:

7. Importance of voting

The HBOS Board unanimously recommends that shareholders vote in favour of the resolutions required to implement the Recommended Transaction.

It is important that all of the Resolutions are passed by the requisite majorities. This is because the Capital Raising and the Acquisition are interconditional and, together, they form the Recommended Transaction proposed and unanimously recommended by the HBOS Board.

If the Resolutions are not passed, none of the Acquisition, the Placing, the Open Offer or the HM Treasury Preference Share Subscription will proceed, and HBOS will be required to find alternative methods of increasing its capital base, and funding its business. On 11 October 2008 the FSA gave a preliminary indication to HBOS that if the Acquisition were not to occur, it would require HBOS to raise £12 billion of additional capital, made up of £9 billion of HBOS Shares and £3 billion of HBOS Preference Shares.

However, whilst HBOS would seek to raise additional new capital in those circumstances, there can be no certainty that the amount required would not be more than £12 billion or that HBOS would be able to successfully raise capital or as to the terms on which capital could be raised, including the terms of any participation by HM Treasury in any capital raising, or as to whether such fundraising would be on a pre-emptive basis. There can also be no assurance that HBOS would be successful in increasing its capital to the levels required to qualify for access to the Proposed Government Funding arrangements or to satisfy the requirements of the FSA on an ongoing basis.

This could result in an increase in funding costs arising from any credit rating downgrades or increased reliance on Government supported liquidity schemes; contraction of HBOS's balance sheet; and a longer time horizon than the one contemplated by the Recommended Transaction for the resumption of any dividend payments on HBOS Shares. Any capital raising might also be more dilutive and is unlikely to be available within the same time period as the Recommended Transaction.

There can be no certainty as to sources of capital if the Resolutions are not passed. The HBOS Directors would expect the UK Government to take appropriate action consistent with the policy objectives set out in HM Treasury's announcement of 8 October 2008 on Financial Support to the Banking Industry, which are to ensure stability of the financial system, and to protect ordinary savers, depositors, businesses and borrowers. Such action may include the issuance to HM Treasury of HBOS Shares on a basis which could be more dilutive to HBOS Shareholders than the Placing and Open Offer and the issuance to HM Treasury of other securities on terms less economically advantageous and more restrictive than the HMT Preference Shares or the loss of independent or private sector status for HBOS. The occurrence of any such action may cause the value of HBOS Shares to decline substantially with negative implications for HBOS Shareholders.

Comments

Page 1 of 2

  • Comment number 1.

    Why nationalisation at all? Why not administration and winding up? Those questions have not been officially addressed, everyone acts as if the answers are obvious. Spell it out for the rest of us please, Robert.

  • Comment number 2.

    The letter to the shareholders should mention that Hornby and the like will resign as that is what they want to here!

    Steve Andover

  • Comment number 3.

    It's the government that forced the takeover anyway, so it's evidently omnipotent either way.

  • Comment number 4.

    Bert - the more you write and read about this it is obvious that they all conspired to put Northern Rock down - think about it of all the banks they were the easy target and their model no different from the rest

    get some inside info here on who did what and we'd all get an eye opener

  • Comment number 5.

    #1 Nationalisation means Gormless Gordon has failed to derail the Scots Nats.

    Administration means that he has failed Scotland and will never get elected there again !!

    It is a choice of the lesser of two weevils, as was said in "Master and Commander" !!

  • Comment number 6.

    The public are in a state of shock.
    Shocked at their gloomy future.
    Shocked at the financial abyss.
    But most of all, shocked at the realisation of what incredible fools have been running our banks, overseen by a government that has been asleep.

  • Comment number 7.

    I think the short story is that there are no prospective private investors and the economies of scale obtainable in a merger allow the government capital infusion to be less than that which would result in total ownership.

    A more interesting story would be why the avenue of break-up and selling off has not been explored.

  • Comment number 8.

    Game, set, match.

  • Comment number 9.

    Are there any qualified accountants, actuaries or bankers on the HBOS Board? Being able to stack shelves in ASDA does not exactly provide someone to make decisions that determines a company's future, does it?

    No doubt this saga will run and run. Will the deal be done by Xmas 2010, or am I too optimistic?

  • Comment number 10.

    as i stated in earlier blog hbos is damaged goods and cannot remain independant now becouse all trust in them has flown.

    lloyds seems to be the only answer becouse the government wishes it.

    when the banking problems struck this government had an opertunity to resolve the problems very easily and fairly but there ineptitude and missmanagement has made our banking industry a joke and easy prey for overseas sharks.

    soon if this government continues as it is we will have no uk owned banks and our pound will become a third rate currency.

    thank you mr brown and government i hope you have been well paid for selling us out.

  • Comment number 11.

    As HBOS shareholder, I agree that, in current financial and economic situation, the takeover by Lloyds is a good idea for Lloyds, HBOS and the UK. One big bank is more effective and stable than two.

    However, the ratio of 0.605 is too low. HBOS is undervalued. The ration does not represent the size and strength of both banks. Before Lehman's collapse of 16/9 HBOS shares were equal or more expensive than Lloyds for years. After collapse of Lehman Brothers whole financial market could not be considered normal. There were a lot of fears, irrationalities, panic, money markets froze, etc. Lloyds have exploited this environment to get a real bargain price for HBOS. Management of HBOS did not do a good job in negotiation of takeover terms.

    Money markets now are returning gradually to normality. In several months, once the dust of this turmoil settles people will realize that HBOS was undervalued in this deal.

  • Comment number 12.

    1. At 4:55pm on 14 Nov 2008, WerringtonSilent wrote:

    Why nationalisation at all?

    HBOS is basically a mortgage company, letting it fail would threaten each homeowner with a HBOS mortgage. Individually a repossession, collectively an implosion of the the UK's mortgage market.

    It would also send the signal that Capitalism and a free market is not the panacea of the western worlds prosperity.

    At this time, the worst that can happen to any commercial bank is government intervention or buy out.

    The capitalists will do absolutely anything including socialist ideology to maintain control

  • Comment number 13.

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

  • Comment number 14.

    The whole this financial mess shows the incompetence of people who govern countries, banks, look after financial stability.
    It has been developing for years and highly educated, highly paid people either were creating it or allowing the mess to be created.

  • Comment number 15.

    6. At 5:22pm on 14 Nov 2008, stevewo wrote:

    .....But most of all, shocked at the realisation of what incredible fools have been running our banks, overseen by a government that has been asleep.

    Why fools? Greedy yes, but have we not all been greedy? We have all geared our borrowing to levels far in excess of our salaries trying to get further up Jacobs Ladder.

    We have not got another system, would you have elected Michael Foot or Tony Benn 10 years ago? I doubt it. The Government and the western political system has been born from idea that as the western world discarded the shackles of manual labor, a world of asset growth and borrowing from asset growth would sustain it.

    So desperate to fill the hungry mouth of the fractional system that existed to feed on the fed they had to lend to status previously supported by the state. This was only sustainable up and to the cyclical downturn that expansion/contraction models follow.

    The result is what you see now.



  • Comment number 16.

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

  • Comment number 17.

    Stop bleating HBOS shareholders. You had no value until the bailout and a marginal value with bailout is better than no value pre bailout.

    Investment is about risk. Ultimately, Directors are answerable to shareholders. It is they, and they alone, who bear responsibility for managing the share capital of the business.

    No one complained about ever rising dividends in the past. Investment is a two way bet. Win or lose.

    Unfortunately, our global interdependency in all economic facets now will become more and more important in the future.

    Tax cutting today does not give fiscal stimulus. Most people will save the money that can afford to save or pay off more debt faster. Why not, with falling inflation and interest rates, this makes perfect sense. Moreover, the taxman gets no benefit either as consumption continues to gradually decline. In other words taxpayers and the national economies of the West engaging this mantra will be in a deeper recession in the short term.

    This recession will be hard for us all of that there is no doubt. However most of us should be able to survive. In the future, there will be bigger problems to worry about - food, resources, population stress. One for our children to think about I'm afraid.

  • Comment number 18.

    # 11

    Before Lehman's collapsed, a lot of things were different! Specifically in relation to Lloyds and HBOS, for a long time everyone loved the aggressive expansionary policies of HBOS (and NR before them). Lloyds was seen as plodding and getting left behind. Now Lloyds is seen as prudent, and HBOS' business model is seen as being completely discredited due to its exposure to UK residential mortgages. Hence the change in relative value.

    The objective measures of relative value are compelling. Lloyds originally offered about 0.8 shares for each HBOS share. They then revised this down to the current 0.6. Throught this period the relative value of Lloyds/HBOS has valued HBOS at less than the revised Lloyds offer, so you're being offered some premium to the current market price.

    Had Lloyds not stepped in with an offer, I think we can be fairly sure that HBOS would have collapsed within a day or two. All its funding lines were being withdrawn and the share price fell by about 60% over two days.

    If HBOS were undervalued by the Lloyds bid, then even in current conditions it's reasonable to assume a rival bid would have emerged by now. It hasn't. Similarly, I'm sure HBOS would remain independent if it could, if only because most senior managers at HBOS are going to lose their jobs as a result of the Lloyds acquisition.

    My guess on this is that the mysterious rival bidders will allow Lloyds to take control and then seek to buy some parts of HBOS, eg some branches where there is a Lloyds branch close by. That's cheaper than buying the lot, and hard for anyone to oppose as it would diminish the longer-term competition issues associated with the Lloyds/HBOS consolidation. It would suit Lloyds too: probably get better prices for buildings sold, and reduce the redundancy costs.

  • Comment number 19.

    POST 8 You can't be serious ? The board still have to face a fearless shaaareholder final charge into their vaaalley of debt [tennison i would say]]

    Florence kNightingale[a darling]will pick up the bodys of the fallen sick hundreds who paid their farewell taxis

  • Comment number 20.

    # 13

    Not sure what the point of your post is. If you're suggesting Building Societies in general are somehow immune from this crisis, I think you're misinformed. They will be announcing big bad debt increases at year end too. Several smaller ones have already been forcibly married, though I acknowledge Nationwide is one of the strong suitors that's doing the buying. In general, Building Societies, just like the banks, have stopped lending, though at least one small Society CEO I know suggested to me that it was borrowers who'd stopped borrowing, and his Society had adequate funding to meet any reasonable level of demand he expected to see.

    And if you cast your gaze a little wider, 2 of the 6 institutions that had to be fully guaranteed by the Irish government were Building Societies.

  • Comment number 21.

    Halifax - the company I have loved and worked for, for a very, very long time.

    How dare Messrs Brown, Darling, Hornby, Stevenson and the FSA ruin it. It is a terrible shame. It will never be the same again.

    Cannot believe the times we are living in!

  • Comment number 22.

    Remember the days long ago when there was national debate on the Social Chapter, specifically regarding worker representation in the company decision making process?

    'We cant have the unwashed hoi-polloi in OUR nice clean boardrooms' was the attitude.

    Shame the idea was trashed....

  • Comment number 23.

    Post 15,

    Not all of us have been greedy some of us live within our means, unlike this Government, who are trying to borrow their way out of trouble, is that not the exact problem borrowing or am I missing something here?

  • Comment number 24.

    This deal is becoming increasingly difficult to understand.

    On the one hand HBOS needs to raise 11.5 billion and then merge with Lloyds and everything is cushty.

    If the Lloyds leg of the deal falls away then HBOS has no idea how much it may need to raise other than it would be more than 12 billion, and it also has no idea how much this would cost.

    Therefore the idea must be that the existing Lloyds business is, in the short term at least, going to prop up and cross subsidise the existing HBOS business.

    However if no-one knows the amount of Lloyds subsidy required (i.e the difference between 11.5 billion and something more than 12 billion) then how can anyone know that HBOS isn´t so toxic that it could terminally poison Lloyds? There are a lot of numbers that are bigger than 12.

    Is it not the case that HBOS raised 4 billion earlier this year. Presumably they must have burnt through that in order to be in their present predicament.

    Was it only a few weeks ago that AIG were in the hole for $86 billion, and only a few days ago that this was revised to something over $150 billion and counting.

    Something very fishy going on here. Not least the fact that the man from HBOS may as well get a neon sign on his head saying "I AM STUPID" Why would anyone, especially Lloyds shareholders, listen to such people?

  • Comment number 25.

    "So for HBOS's case to be taken over by Lloyds to remain totally and utterly compelling, its chairman Lord Stevenson needs to demonstrate that he is right to fear that the FSA would now demand that the bank raise more capital and also that the Treasury would provide this capital on worse terms"

    Why does Lord Stevenson not clear off and let some other person not tainted by his failures make the assessment about how much capital is required?
    HBOS needs a new board.

  • Comment number 26.

    Sorry to change the subject, but has anyone heard anything about the Co-Op Bank? Am I right to assume that no news is good news?

  • Comment number 27.

    11. - HBOS shares are only worth what people are willing to pay for them at any given moment in time. Nothing more, nothing less.

    What they were worth before Lehman's folded is less than irrelevant.

  • Comment number 28.

    POST 15 ,Bankers wil make millions on their mortgaged housing chains by costing off the shekels of manual libor

  • Comment number 29.

    That HBOS's current management, led by Chairman Lord Stevenson and Chief Executive Andy Hornby, have failed shareholders through risky lending strategies and careless expansion.

    That is an allegation of criminal negligence against Stevenson and Hornby. Questions need to be answered:
    1:Why is the Serious Fraud Office not investigating this?
    2: At what point did the FSA become aware of HBOS's negligence with shareholders funds?
    3: To what extent is the Government involved in a conspiracy to cover this up?

    The shareholders in HBOS as well as the general public need answers.

  • Comment number 30.

    It would appear that i am banned from commenting on HBOS as the majority of the posts have beem deleted.

  • Comment number 31.

    Ultimately, Robert, the bank is safe following either route. But from outside the boardroom it is mighty difficult to tell what the real situation is.

    It could be either - we really did screw up big time/the situation is even worse than we have admitted so far/we know we need a hell of a lot more capital and private shareholders are going to be diluted so enormously, that left independent, we will be as near as dammit nationalised.

    Or it could be - we are very embarrassed about how we've got into this mess/we feel we should stick to the first plan suggested/if we changed our minds now the board would be left with no credibility whatsoever, so we feel we should stick with the existing plan.

    Which route is best for shareholders?

    Difficult.

    But I'd say I know which route is best for the personal interests of the Board of Directors.....

  • Comment number 32.

    #12: In a winding up, mortgage borrowers would be under no threat. Their mortgages would be sold to another company for servicing for pennies in the pound, leaving the shareholders and bondholders with almost nothing. Bad luck for investors, but that's how risk goes and the assets just pass from one capitalist to another. In a bailout, investors are merely diluted and taxpayers will bear the losses arising from defaults. I do not see what we the nation have to gain from this latter model.

  • Comment number 33.

    What I and many others find abhorrent about the bailouts of the financial system is that these vast sums of money were presumably always available, you can't just pluck 5,000 billion pounds out of nowhere..

    So why wasn't this money used in the UK for improving the 'real' economy? New roads and a radical overhaul of the Rail Network, affordable high quality social housing, free university tuition and a lot of other 'quality of life' projects could have been paid for with a fraction of the money used to prop up the banking system.

    No-one in the civil service is going to accept a 2 percent pay rise 'because thats all the government can afford' when they see the vast gobs of money handed out to financial institutions, for once the great union term 'derisory' is actually applicable in its literal sense..

  • Comment number 34.

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

  • Comment number 35.

    *21 Porthcressa

    I have no time for the Halifax. I remember them doing me over in my student days and when I protested to my branch for them to rescind their 'computer said no'! This was despite me having a part time job (which was paid directly into my Halifax account) with a couple of months left on my course they froze my account. I could've been left homeless if it wasn't for friends lending me money! This was not long after they became a plc. Good riddance to 'em!

  • Comment number 36.

    23. At 6:46pm on 14 Nov 2008, steveng781 wrote:

    Not all of us have been greedy..........

    Collectively we have, enough to technically bankrupt the nation. Fact.

    The only thing removing the technical part of it are the mortgages. They are secured and therefore, can be paid and (if the system works) will be repaid over time.

    The government debt plus the mortgage debt collectively are the uk's bond of repayment for world investors. Take out a mortgage bank or two and you have Armageddon UK (note UK not world, this is a very British problem).

    Uniquely, we are unable to sustain mortgage linked failure.

    The Banks, the production worker, the railway operative, the gardener,the window clean, the spy and all our lovers have succumbed to bonus related pay (bonuses).

    Over production of goods that do not fail, Brands that say ''quality and staying power''

    Capitalism that preaches the bonuses will continue indefinitely, just keep on selling.

    In this (western) world greed is success, success is greed and we are all part of it whether we practice it or not

  • Comment number 37.

    32. At 7:03pm on 14 Nov 2008, WerringtonSilent wrote:

    #12: In a winding up, mortgage borrowers would be under no threat.


    Tell that to Northern Rock Mortgage holders

  • Comment number 38.

    Administration is a viable option,let the loan book run out.

    Sell the branch network to a new operation that can only act as a bank with no lending powers just providing deposit and payment services.

    Even at zero interest it would be worth it not to worry.

  • Comment number 39.

    33. At 7:26pm on 14 Nov 2008, citygambler wrote:

    What I and many others find abhorrent about the bailouts of the financial system is that these vast sums of money were presumably always available, you can't just pluck 5,000 billion pounds out of nowhere..


    When a natural disaster occurs, do you think the millions of pounds donated by us on behalf of our government is real money?

    When the government announces on our behalf that it is going to buy Northern Rock, do you think Alistair Darling sends a BACS payment to the Board?

    The Money Tree is fictitious, its bytes on a computer database

    MORE IMPORTANTLY IT BUYS INFLUENCE

    There is no such thing as national charity or international charity.

    If you would care to look at how the IMF supports nations and the how they insist on very very capitalist processes to be implemented before computer bytes are lent, you will have an eye on the Westerns world and its ethics.

    The same ethics that bang a 83 year old women for not paying her poll tax, control

    Maintain control an thou will maintain power

  • Comment number 40.

    32#
    Do you pay into a pension fund?

  • Comment number 41.

    On the subject of dilution of shareholdings by quasi nationalisation, is'nt it Lloyds intention to have a rights issue once the takeover is complete. If shareholders cannot afford the take-up then dilution will happen anyway!

  • Comment number 42.

    #37: "Tell that to Northern Rock Mortgage holders"

    They are perfectly fine if they bought at 3x income, put 20% down and budgeted for the interest rate hitting 10% as it inevitably does over the course of any 25 year repayment period. After all, that is just common sense. Everyone did that, right?

    #34: "Put a bank into receivership and confidence in the banking system would be totally shot. The assets at the moment wouldn't reach anywhere near fair value, whilst money markets will completely frost over."

    It would not be totally shot, investors would breathe a sigh of relief knowing that is one less trap for them to fall into. Money markets would thaw. They are frozen because no-one trusts anyone. They would be liquid again once everyone who is insolvent is bankrupt and not nailed to a perch. And what is "fair value" of assets when they are based on collateral valued at twice its true value?

  • Comment number 43.

    38#
    Not viable unless all the staff are volunteers.

  • Comment number 44.

    # 38

    The institution you describe already exists. It's called A Matress.

  • Comment number 45.

    #40: I pay into a pension fund, but I am the cash sitting on the sidelines waiting to see who is left standing. I want to know who is broke and who isn't before I budge.

  • Comment number 46.

    #13 you are sadly deluded, I worked for them they are as reliant on the interbank market as anyone else - have you forgotten about the subprime exposure (granted limited compared to some) they have to what was UCB Homeloans (soon to be defunct and replaced by the Portmans sub prime book)? It makes me smile, all of a sudden we have "experts" who really have not got a clue!

  • Comment number 47.

    The HBOS board - ALL of THEM - should resign immediately !

    Why ? - 2 Reasons

    1. For getting HBOS into the mess it is in now.
    2. For actually admitting that if the LloydsTSb deal does not go ahead, they have not got the faintest idea how the company they are supposed to be running will carry on - will they need 12 Billion pounds - will it be more or will be less ?
    The Chairman is a disgrace to come out with bullying tactics.

    Will someone organise an extraordinary meeting to sack the lot of them !!

  • Comment number 48.

    Robert

    Why on Earth (or even Mars) does anyone take the HBOS board seriously ? This board has presided over the destruction of a bank.Tramps from the Embankment would have created better shareholder value!

    The shareholders should vote this board of Directors into the dustbin of history. As they have been useless all recent decisions should be 100% reviewed - especially the Lloyds-TSB merger.

    The spirit of Malachi Malagrowther lives on, lets hope the shareholders share his vision.

  • Comment number 49.

    As a Lloyds shareholder I would like to thank these two gentlemen profusely.

    What they have managed to do is to cause HBOS to reveal the true extent of the basket case which Lloyds is being asked to take on and, as a result, to greatly increase the possibility of Lloyds shareholders voting it down.

    Unfortunately the bottom line is likely to be that the HBOS shareholders are totally wiped out when HBOS is nationalised, broken up, and sold off in bits. The only consolation might be that if the purchaser of the retail banking portion is an overseas (middle east?) investor, then they may see some advantage in preserving the trading name as Bank of Scotland, which is waht seems to be the only important aspect for many people.

    So, it will be good for Scottish self-esteem, good for the prestige of the Scottish Nationalist (who will claim to have save the bank from the dreaded English), good for Lloyds shareholders (who will no longer be saddled with a enormous and probably unquantifiable burden), but sadly no good for the current HBOS shareholders but they were probably not SNP voters.

  • Comment number 50.

    It's a bit concerning to know the Government needs to pay market rates for the "world class" management the banks need to see them through this crisis. Given that the banks have been paying millions of pounds to people who have done more damage running their banks than would someone brain dead in a coma, just how much will the going rate be?

  • Comment number 51.

    45#
    If you pay into a pension fund you are part of the capitalist system.

  • Comment number 52.

    49#
    "sold of in bits", what's to sell? HBOS has already sold off Bank West in Australia for a 658 million loss which incongrously helped their capital position!!!!!l

  • Comment number 53.

    Mr Peston,

    On this matter you are good at acting as downing St standard bearer, not so good at asking the right questions.

    Apparently, Bank of China (reputable international bank, part owned by RBS) was about to announce a bid. This was sabotaged by a premature leak to you and, we learn, a cold shoulder from the government.

    Why were we not allowed to learn what was to be in the Bank of China bid?

    Would it have been better than the Lloyds bid?

    Would it have save thousands of jobs in Yorkshire and Scotland?

    Would it have saved £11.5bn of taxpayers money by replacing the government capitalisation?

    Are such investors not welcome?

    We do not know the answer to these questions because the BoC was scared off a matter of days before showing their hand.

    The real story, possibly an unhappy, even scandalous, one is to be found in the answers.

    Instead, you chose to be an instrument of powerful anti-competition, anti-consumer, job-destroying business interests by colluding in efforts to destroy a possibly better alternative.

    As for this latest blog, is this the best HBOS can do in arguing against independence?

    It is shocking that these people, already promised lucrative contracts by Lloyds are allowed to sell sharholders, stakeholders and customers down the river.

    What are we missing?

  • Comment number 54.

    50. At 9:37pm on 14 Nov 2008, Anarchyrulesok wrote:

    It's a bit concerning to know the Government needs to pay market rates for the "world class" management the banks need to see them through this crisis. Given that the banks have been paying millions of pounds to people who have done more damage running their banks

    12% is a good return until inflation kicks in

    paying million of pounds..

    Paying a % bonus on fools that borrowed above on a false promise that the helium balloon will still pump enough happy gas in it to sustain friction

    Damage the banks?

    Its a fire sale not contained to the banks and as the ash falls on the floor. Those in the rafters saw the flames and jumped ship months ago, those at the bottom will have their Pompeii

  • Comment number 55.

    i don't get this as i've said before im not a banker and don't seem to understand this (nor does anyone else for that matter) but why on earth would Lloyds takeover HBOS when the entire amount of mullah needed is unknown??? that defys logic (correct me if im wrong)

    would you buy a smashed up car off someone if they told it needed not only a new clutch but potentially new brakes, engine, tires e.t.c....

  • Comment number 56.

    hi rob, I found this pic of you writing one of your midnight blogs

    http://i62.photobucket.com/albums/h115/mcjhn/pc1.jpg

  • Comment number 57.

    Winding up and adminstration for defaulting businesses! No more bail outs.

  • Comment number 58.

    Hi,

    It seems like an age ago now but when HBOS was initially in trouble and Lloyds TSB offered to bail them out a figure of around 12.4 Billion was mentioned. Subsequently it was revealed the Lloyds TSB was also in trouble and needed help from the government bail out.

    So were Lloyds TSB deceiving us and was there initial interest in HBOS an opportunist action to pick up HBOS on the cheap?

    Lloyds TSB are effectively using the governments cash to finance their takeover?


    It looks like Lloyds TSB lost 12.4 Billion and more in the space of a couple of weeks, are they fit to manage another bank?


    It is now clear that both banks need help. It appears that the government thinks it will be cheaper if the two banks are merged. The fallout in terms of jobs losses is bound to be significant.


    I would prefer to see the management of HBOS fight for it's independence, even if it has to grovel to the government for a bigger share of the Lloyds TSB/HBOS handout. But perhaps HBOS still have to much ineptitude to hide.

  • Comment number 59.

    The 12 percent loan notes(/or whatever they are called) pay a far higher coupon to HMG than the banks pay to their customers but why should normal small savers have to subsidise the government?

    Yet another question with no good answer! (Let alone the 14 percent that Barclays are paying!)

    PS Anyone any answer as to why lowering interest rates now will not simply stoke up another, and even more unsustainable, housing bubble! I am really interest to know. These 'smart' bankers (Greenspan etc.) admit that interest rates were too low for too long in the past decade and this stoked up the bubble. So what is the logic behind doing the same thing again to fix the problem? There must be an economist out there who can answer my question.

  • Comment number 60.

    #58 JOBS!

    That's is the only thing worth preserving here (but not the members of the board).

    Shareholders have been slaughtered by the spectacular incompetence of those utter morons in bank board rooms.

    When will justice be served? Surely they have acted so recklessly that they have endangered the security of the country. (Anti terrorism laws might as well be used for something)

  • Comment number 61.

    What is becoming very clear is that no one knows what the hell will happen next.
    We are all in uncharted territory. As a Lloyds shareholder. I am inclined to vote against this merger. I am fed up with all the self interested comments on this blog. Some supposed intelligent comment is still only guess work. My forecast for the Ftse at the year end/early next year is 3500, my guess, which is as good as anybodys is that this will be at the bottom.
    The damage that has been done and is being enacted by the group of 20 will burden our children and grandchildren for years to come.
    Robert you and your sidekick Nick are mere tokens in what is a very big game

  • Comment number 62.

    ...and so it seems that no-one has a rationale for this deal - other than fear of the consequences of a failure to conclude.

    What about a fear of the consequences of succeeding with this bogus, irrational, stupid idea?

    Through the BBC your Government is speaking, orbiting your living room, and cashing in the bill of rights.

    How can you have an FTSE 100 company whose management has no idea how much money it needs to continue to function? How can you have another top 100 company who wants to acquire a company whilst it is in complete ingorance of the value of the target?

    None of this makes any kind of sense. This is not capitalism, this is not socialism, this is deranged ga ga business. How can anyone take this seriously?

    Please, please someone explain to me how this works.

  • Comment number 63.

    To a mere mortal like me (with no vested interest at all OTHER that what ethically seems right) there are a number of unescapable facts here.

    1. HBOS would never have gone under. Does anyone on this blog seriously think the govermnent would let a retail bank, wth its hundreds of thousands of BUINSESS (never mind personal) account holders, go under. GET REAL.

    2. if NR was allowed to be nationalised, then why not HBOS? For 1 we dont lose choice and options where to bank. 2 - thousands of skilled financial sector workers keep their jobs, homes, familes in a time of crisis - meaning less unemployment benefit. 3 - the money will eventualy be paid back on advantageous terms to the taxpayer ( i dont care how long it takes) when the banking sector recovers (and it will) .
    4 - the reports suggest that it might take - wait for it - up to £12 billion of taxpayers money for HBOS to be saved. Well, if £12 billion is good enough for RBS to be saved, its good enough for HBOS in my eyes.

    So who loses out - investors. Well guess what? I dont give a monkeys. These are the people who have made a fortune out of the complete greed and mismanagement of the banking sector over the last 7 years (at which point there was no GAP between what the banks loaned and what they actually 'owned' to loan). I've lost money through the stock market and put it down to mistakes. Never in my life would I put my 'mistakes' before thousands of peoples jobs.

    Its about time everyone stopped thinking about their own personal greed and starting thinking about the bigger picture.
    Jobs, the future growth of the UK economy coming out of this disaster, and and a prosperous economy for our kids in decades to come.

    Lets not forget - the UK is today one of the worlds top service based economies (much to my dismay that manufacturing is dying a death). We can't let our top service companies disappear from existance. If we continue to let this happen, what on earth does the country have left to offer .......

  • Comment number 64.

    "If you pay into a pension fund you are part of the capitalist system."

    Born and bred. That is why I want the assets of companies that fail auctioned off to someone who might make better use of them.

  • Comment number 65.

    Can Robert tell us what is in this for Lloyds? the directors must by law act in the best interest of the shareholders, i fail to see how buying a "pig in a poke" can be of any benefit to Lloyds shareholders!

  • Comment number 66.

    There is much talk about the board of HBOS being incapable of getting itself out of this crisis were it to remain independent.

    However, if two of the most experienced and most successful bankers in Europe if not the world, Sirs Peter Burt and George Mathewson were to take the senior positions on the board it would then have the leadership it needs to steer its way into calmer waters as an independent entity.

    All we need is for London Labour and its unionist allies in the press, not to mention the BBC Mr Peston to step aside and allow it to happen.

    As it is, the shareholders will decide, not Brown or anyone else.

  • Comment number 67.

    #20 "In general, Building Societies, just like the banks, have stopped lending, though at least one small Society CEO I know suggested to me that it was borrowers who'd stopped borrowing, and his Society had adequate funding to meet any reasonable level of demand he expected to see."

    Either way, it is all a matter of semantics. If a lender raises the cost of lending high enough, he will drive away most of the borrowers except those who have the most solid collateral backing.

    What will cause this system to fail is when the government force the lenders to lend at extremely unrealistic rates to extremely risky borrowers without due regard to risk management. Lending by dictat !!

    The Communist government of China forced their banks to lend in just such a manner to their State Owned Enterprises (nationalised industries). Just prior to China's ascension to WTO membership in 2000, China had to write off trillions of its SOEs *toxic debts* and re-capitalise its banks in a massive way. Fortunately for them, they had the hard cash to do so but it still caused a huge dent in their reserves which took them a while to recover from.

    Britain has no (nil, zero, zilch, zip, nada) reserves to write any of this off against. On the contrary, Britain is eyeballs deep in debt itself. Any lending by dictat will only dig Britain deeper into the hole.

    Knowing this, the foreign money is punishing the Sterling for the sins of the government.

  • Comment number 68.

    From the stand point of poker Gordon has won a pot for Britain ,as the pound ditches our debt diminishes ,we can live without more,soon to be less cheep chinese imports and our landfill sites are nearly full anyway [Demonstrating a dastardly plot by the Chinese politbureau to end chritmas as we know it ],

    Now that the Gordon banks are in the first eleven , Barclays doesnt want to play ball and wants to run off with the silver bonus sandheaders in close play

    And to think that Gordon came riding into town on the back of a Don quixote whom the public greeted with hail hosanna ,maybe they thought he was foinavon from the westminster stables .Well gordon got him over the hedges and won national leadership and thats all that matters

    Perhaps Jesus should have let the bankers turn over their own tables like Gordon Brown did, with his encouragement of them to get carried away with the irrational exuberance of "things can only get better" and "no return to tory boom and bust "[who doubts it now that we are absolutely buzst lightyear to infinity and beyond]

    Anyway Its about time that it happened again and it is part of the 2000year economic cyle

    Gordon was right ,there wont be a boom and bust like it for another 2000years

    Thanks to the BBC and posts like this Gordon will survive despite those who wish to nail him down next to a couple of ceo's for thinking he was better than foinavon augustus

    And as Gordon goes up in the world enterprise with his right hand Peter the Rock Man. having denied him thrice , those awaiting for the soaring olympic penta cost whilst sinking into the lickquidity, should shout




    "save us Lord G,beam us up Scotty "

  • Comment number 69.

    " UK in for 'prolonged recession'" - BBC headline

    I thought it was from the Department of the Bleeding Obvious !! Many have already commented/predicted this situation in this and other blogs. Why does it take the British Chamber of Commerce so long to make it "official" ??

  • Comment number 70.

    #68 In the '70s, the writing was on the walls !! The message said -



    Jesus saves



    ....with the Woolwich !!

  • Comment number 71.

    #66 "All we need is for London Labour and its unionist allies in the press, not to mention the BBC Mr Peston to step aside and allow it to happen.

    As it is, the shareholders will decide, not Brown or anyone else."

    It would be for the best all round if it was so. However, for it to happen, those two "experienced bankers" and the shareholders will have to dig so deep into their sporrans that they may find holes at the bottom of them.

    All the posturing and rhetoric has come and gone. Now is the time for whoever has the *real* hard cash to put up or shut up !!

    I am not for or against the government-sponsored back-door nationalisation of HBOS. I am just looking at the realistic chances of the future operations of that organisation. I feel for those thousands whose livelihood hang in a balance while politicians of all stripes and colours posture and use this as a political football !!

  • Comment number 72.

    " Budweiser takeover gets clearance"

    "Some US politicians had expressed anger at the prospect of a foreign takeover"

    Great !! So now the Chinese can simply re-nationalise Tsingtao beer from Anheuser Busch by pointing out that *THEY* are a foreign company !! Since a large proportion of the profits of Anheuser Busch come from China, the shareholders will not be happy chappies !!

    Protectionism works both ways !!

  • Comment number 73.

    "Meeting on the sidelines of the (G20) summit, the Japanese, Chinese and South Korean finance ministers said they might expand their mutual currency swap arrangements."

    Ha bloody ha !! This is just turning a "de facto" into a "de jure" !! They've been doing this for yonks on the quiet. Throw in the South East Asians and you get the true picture of their financial power !!

    It's all down to those ghostly spiderwebs of family alliances that date back hundreds, if not thousands, of years, that are the true conduits and drivers of commerce and industry in the Far East !!

  • Comment number 74.

    No 53
    I agree with you.

    The bid of BoC would save many thousand jobs that would continue to feed many families. It would possibly offer better value to HBOS shareholders and maintain banking competition. It was clear that BoC did not want to be named prematurely. Why Mr Peston named BoC and who asked him to do it is a mistery. Obvously there is an invisible power that is keen on Lloyds taking over HBOS.

    Mr Peston, can you please explain why did you name the BoC?

  • Comment number 75.

    Now Gormless Gordon wants to lecture us about tax cuts !!

    *This man had cut taxes before* !! It was he who cut out the 10p tax and push the lowest paid people higher up the tax brackets !! So he is not lying about cutting taxes; he is just "economical with the truth" !!

    It's no wonder he is so dizzy if he is spinning so much !!

  • Comment number 76.

    #65

    Agreed, there is a risk for Lloyds shareholders.

    But, the answer to your question is that this deal creates a oligopoly and all businessman love an oligopoly because it allows margins to be maximised (read customer screwed). This is why there are competition laws - to protect the consumer.

    Big institutional shareholders will vote for this deal. They don't care about the low HBOS price because they hold both companies and what they lose on one (HBOS) they gain on the other (Lloyds) and they get an oligopoly to boot.

    Incidentally, this may be part of the government's calculation too because it will be a 43% shareholder. If profits are maximised at the expense of the consumer HM Treasury's tax take goes up.

    In another time this would have been called a STEALTH TAX.

    Don't expect Robert Peston to point any of this out to listeners/viewers.

  • Comment number 77.

    Are the people who ran HBOS fools?

    Oh yes but they're also industrially treacherous having failed to invest in Scotland or the UK's growth and they've happily provided funding to overseas buyers intent on buying what's left of our industry and to the dreaded Private Equity companies that have made huge fortunes without creating virtually anything new.

    In Scotland risk equity capital availability fell from an already pretty small £15m in 05 and 06 to a frankly miserable £2m in 07. That's less than the CEO of the main banks earned that year.

    Fools? Yes but dangerous and unpatriotic as well.

  • Comment number 78.

    Comment 67 : ishkandar

    "What will cause this system to fail is when the government force the lenders to lend at extremely unrealistic rates to extremely risky borrowers without due regard to risk management. Lending by dictat !!"

    Isn't it said that this is exactly what the Clinton administration did with Fannie Mae and Freddie Mac; that the disequilibrium that this caused to the US mortgage market fed through to weaken the entire world financial structure; and that what made its ultimate collapse inevitable was the refusal of authority to recognise that the Clinton decision was a real-time mistake, that it needed to be reversed, and that the infection it had introduced to the system must be eradicated.

    I'd be willing to absolve the Clinton administration from the initial responsibility for all this if I can be persuaded that the original Freddie/Fannie decision was a passive response to circumstances rather than an active attempt to change things.

    But surely the central weakness that has led to where we are has been the huge over-confidence in the decision-making process being structured to produce the best decisions. This leads to a major bias in favour of tinkering with what we've got, even if reason suggests we'd be better off re-building to a new specification.

  • Comment number 79.

    If HBOS do not know their liabilities, for the last 12 months:

    1: What have the Internal Auditors been doing?

    2: What have the External Auditors been doing?

    3: What has the FSA been doing?

    4: What were the Credit Rating Agencies doing?

    5: What were the Treasury Inspectors doing?

    Is it not criminally negligent to operate in this way?

    Some of the above are RESPONSIBLE for checking aren't they?

  • Comment number 80.

    cannot help feeling that if this merger goes through, then once we are through all the credit crunch problems, everyone will be demanding that this new massive bank is split up because it is too big and too powerful!
    seems to be a complete waste of time and money allowing the merger now.
    there must be a better solution than a super-bank!

  • Comment number 81.

    No. 53 I read your post on BoC with interest, over the past week my ideas of what constitute this crisis are changing, and I now feel that a BoC investment in a major UK bank would be an asset not a liability.

    At the moment shipping in the far east is landlocked, why? because western banks are not extending letters of credit to suppliers.

    This situation directly affects the stability and security of far eastern nations as well as our own. Commerce has virtually halted.

    BoC can not issue Letters of Credit to western commerce/industry, it does not have that ability.

    Thus, if they obtained a foothold both here and in the US they securitise their own commercial interests in the east and this has the added benefit of securing our own.

    If this deal was scuppered by the premature publication here on the BBC (and i dont hink this was the case) then it is very much against national interest.

    And if GB pulled the plug... well, need I say more.

  • Comment number 82.

    Did you know that Lord Dennis Stevenson (HBOS Chairman) is a long time, personal friend of Lord Peter Mandelson, and that Lord Stevenson is also Chairman of the House of Lords Appointments Commission.

    Does that has anything to do with this proposed takeover deal ?

    Lord Stevenson is also of course the man resposible for vetting all those peerages that were investigated by the Met. Police, with regard to the vast sums raised to fund the Labour Party.

    Surely such a thing would not persuade the Government's Business Secretary, Lord Mandelson, to act in a way which would not necessarily be to the benefit of the Shareholders and the Public, but would instead benefit the Labour Party Financially ?

    ............. Shudder the thought..............

    That would mean that the Government was corrupt, wouldn't it ?

  • Comment number 83.

    Andy Hornby (HBOS' CEO) is offered a lucrative contract by Lloyds, which will come into effect if the takeover goes ahead.
    It makes Mr Hornby to be personally motivated to push this takeover ahead and disregard other possible bids. Is there any confilct of interests here? Is it legal?
    I would think that it must be ensured that HBOS management is not personally motivated to promote any particular option.

  • Comment number 84.

    #83

    The case of Andy Hornby is an interesting one.

    A few years ago he was on the Board of Great Universal Stores, when Victor Blank was the Chairman there.

    It wasn't long before that business was asset stripped, the various constituent parts sold off, and the company wound up.

    Does that sound like a familiar scenario ?

    ...............................................................

    Industrial relations law is relevant here, because someone who has accepted payments in kind or in cash from a third party, to carry on some business which is broadly similar to the business of his main employer, and which then affects the business of his main employer, is guilty of a breach of contract, and industrial mis-conduct.

    The remedy in law, would be to compel Hornby to pay all the profits he has made from this arrangement to HBOS.

    Furthermore HBOS are entitled to sue for damages, in compensation for any losses which they may have incurred due to the actions of Hornby. The 3rd Party or Parties involved in the moonlighting as the seconary employer, are jointly and severally equally liable, and they could also be charged with conspiracy to defraud under the 2006 Act.

    This might mean that LLOYDS-TSB could be in an even worse financial position than they are already. The corollary is that HBOS would see thier own financial difficulties evaporate.

  • Comment number 85.

    HBOS want this deal to go ahead and they have been discussing this with Lloyds well before September of this year. Lucky for them poor consumer confidence in HBOS coupled with bad business decisions wrecked the share price and made this all possible. As a staff member and shareholder it's interesting to see that no promised letter has arrived asking me to vote on what l want. HBOS no longer care it's business as usual and everybody will be much happier when we become Lloyds banking group. Actually no Andy H we won't because we'll be out of a job! But as long as you're okay that's all that matters!

  • Comment number 86.

    Re #76

    You have identified the major issue here, that this deal will produce an oligopoly.

    The key issue here is that the government has suspended it own competition rules as it claims that this deal is 'in the public interest', but has failed to specify what the public interest is.

    Reducing competition in any market cannot be of benefit to the public, so what is the benefit of this deal?

    Will it save the taxpayer so much money that we will be happy to pay more for bank services and mortages in the future? well, the best info we have says the difference between the money we will have to put into the individual Lloyds and HBOS banks will not be significantly greater than the merged bank, and both the banks and the government seem to be reluctant to be any more specific, or even talk about it at all.

    Final thought, how will the EU view this deal as it will certainly break their competition rules, so either we will be told to break it up or the government on our behalf, will have to give something to get the EU to look the other way, either way we lose.

    Any real examination of this leaves you with only one conclusion, there is some dodgy dealing going on here.

  • Comment number 87.

    I'm sorry.

    I have no idea why any of you think these guys are fools. You don't get to the top of anything by being a fool. The very idea that they might be fools is ridiculous.



  • Comment number 88.

    #86

    Article 82 of the EC Treaty states that :

    Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.

    Such abuse may, in particular, consist in:

    (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

    (b) limiting production, markets or technical development to the prejudice of consumers;

    (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

    (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

    .....................................

    I forsee a number of EU problems then with this proposed LLOYDS takeover of HBOS.

    We can be sure that Banks in other Member States, will want to object that such a future leviathon will breach many of these conditions, and if Brown/Mandelson/Darling insist on this deal going ahead, then it could conceivably lead to an international impasse, which could easily cause serious strife in Brussels.

    I cant see the German, French and Spanish bankers putting up with unfair competition emanating from "Perfidious Albion" yet again.

  • Comment number 89.

    Re #88

    That was (without all the exact language) my understanding of the EU regulations, so I suppose the question is - why hasn't the EU already stepped in to stop this merger? they don't usually wait until after the merger has taken place.

  • Comment number 90.


    - How can tell a banker from a beggar?

    - ?????????

    - Some beggars are honest.

    - Well, then, what's the difference between a banker and a fake beggar?

    - Fake beggars have money

  • Comment number 91.

    Re EU competition.

    They have said there is no reason to object as the new bigger Lloyds group isn't in a dominant position within the common market or in a substantial part of it. (They think the UK is less substantial in this case than they average Brit does)
    If it is dominant with in a member state only it is up to the member state (i.e. UK) to do something about it.
    A non banking hypothetical example to show the same point: Tesco taking over Somerfield would be a UK only competition matter, Tesco taking over Carrefour would be a UK, France and EU competition matter.

  • Comment number 92.

    Did I read somewhere that after the takeover of HBOS by Lloyds that the Tier1 capital required of the new joint bank was to be reduced by the Government?
    How does that work then?

  • Comment number 93.

    I did try to post a more fuller explaination of the workings of EU Law with regard to further obstacles due to the provisions of New Article 86. However for some reason the moderators have not allowed this to be posted, Why is that ?

  • Comment number 94.

    #91

    Whilst it is the case that the UK Government did attempt to restrict the usage of the old article 82, by the provisions of the Competition Act 1998, so that it would only apply to "cases within the United Kindom".

    This is a double edged sword.

    1. The Competition Act 1998, then provides that if such a case would not be considered for enforcement in a wider EU context, as you have remarked, then it would be valid to be considered by the UK Prosecution Authorities.

    2. If the old Article 82 did not apply, because of what you say, then it is most likely the case that the new Article 86 would then apply in this case.

    Article 86 of the EC Treaty (was Article 90 in the Treaty of Rome) makes provisions for the application of the competition rules to public undertakings and undertakings to which Member States grant special or exclusive rights.

    Article 86(1) applies to States, and ensures the effectiveness of the free-trade, non-discrimination and competition rules set out elsewhere in the Treaty:

    (1) In the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 12 and Articles 81 to 89.

    In particular, Article 86(1) it prohibits discrimination on the grounds of nationality through national rules governing public undertakings. It has also been interpreted as prohibiting States from creating or maintaining special or exclusive rights which would have the same effect as an abuse of a dominant position by the relevant undertaking.

    Article 86(2) applies to public undertakings and to undertakings that have been granted special or exclusive rights by a State:

    (2) Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.

    Article 86(2) provides a justification for acts that would otherwise infringe the competition rules, in particular Article 81 and Article 82, insofar as they are proportionate to legitimate purposes arising from their having been entrusted with the operation of services of general economic interest (public services) or having the character of a revenue-producing monopoly (fiscal monopoly: monopole fiscal in the French text).

    Article 86(3) entrusts the European Commission with enforcement of these provisions:

    (3) The Commission shall ensure the application of the provisions of this Article and shall, where necessary, address appropriate directives or decisions to Member States.

  • Comment number 95.

    Where has all the money gone?

    This is obviously a much larger question as it covers most of the UK and global banking systems.

    The answer we often here is that it is mainly due to the collapse of the US subprime market, a term I'd never heard of 6 months ago, so I looked it up. Basically it is lending to companies and individuals with poor credit ratings ( a bad idea in the first place I would have thought). As far a I can ascertain this amounts to 6.8% of the US mortgage market or somewhere between 125 and 600 Billion dollars, so this can't be the whole story? Not all subprime loans are defaulting on their debt.

    Then there is the plummeting value of banks and financial institution shares, many have lost more than 80% of their value.
    Shareholders have clearly lost confidence in banks.

    So, did most of this money ever really exist apart from on paper?

    The way I currently think of it is that banks have loaned money to banks who have loaned money to foreign banks who have loaned money to people who cannot afford to pay the money back. All these banks have been showing these loans as an asset and inflating their share price as a result. Does this sound familiar, looks like an old fashioned pyramid to me. Bankers used to call this "flying a kite" when account holder kept switching money between accounts.

    Now the bubble has burst and all those assets have turned to poison debt. Were all these banks relying on there governments bailing them out?

    I hope we have pulled back from the brink, but I suspect HBOS will not be the only casualty.

    Banks have taken us for mugs, the penalty will be that they are securely leashed.

  • Comment number 96.

    Lloyds and HBOS will marry because it is in Gordon Browns interest that this happens

    Brown knows that he will be out of a job and out of Downing Street in two years at most.

    What better than to walk into the post of Chairman or roving Ambassador of a Super Bank he helped form?

    Brown is driven only by ego and self advancement. His decisions are then easy for all to see. He has no love of Nation nor cares for the people of the UK. His love of self and power reigns supreme and drives every policy and every decision he makes

  • Comment number 97.

    I know it is early days still but, from what reports have come out the G20 meeting so far, it looks like:-

    1) the IMF will be leashed and will not longer be America's attack dog !! The major developing nations will have a greater, if not major, say in how it sets terms and conditions for all future "bailout" fundings to distressed countries.

    Implicit in this concept is that if conditions in any G8/developed country are such that they meet the criteria that triggered the terms and conditions imposed on Argentina, the same will be imposed on these distressed nations too. There will not be any "one law for me and another law for you" !!

    2) There will be tighter controls over how the World Bank operates and lends to developing countries and greater accountability of the funds lent !!

    It will mean that the funds are lent for specific purposes and there will be local and international accountability for the funds i.e. no more syphoning off of funds by local political big wigs, as had been seen time and again, with the tacit compliance of the lending nations for their own political agenda.

    3) There will be a global free-trade deal.

    This means no more rants like "British jobs for British people" !! (or substitute "Scottish" for "British", if you like). No more protectionism on grounds of national security. This must please the Bushies(??)/Bushites(??) no end since they blocked the Chinese takeover of an American oil company !! I'm sure it will also please the Brownies(??)/Brownites(??) no end if they try to block the takeover of HBOS by a Chinese bank or major shareholdings in Barclays by Middle Eastern billionaires !!

    There is always the option of opting out of the world economy and revert to barbarism since most of the critical components of today's society are made from imported materials. When and where was Britain's last titanium, aluminium or lithium mine ?? Without them, there will be no high capacity batteries for mobile phones, MP3 players and laptops and no cars, etc.

    4) Ensure that there is financial market transparency and complete and accurate disclosure of financial data.

    That's done in the barrow boys for a start. Off to the headsman with them !! No more dodgy deals re-packaged as AAA+ assets !!

    No more off-balance sheet items (resulting a serious burning of midnight oil by HM Treasury to re-state Britain's financial position) which will result in the true state of Britain's debts !!

    5) Ensure that banks and financial institutions do not incentivise (I truly hate this American word) risk taking i.e. send all the sales-oriented parasites to the wall and only reward (a much better English word meaning the same thing) their people when the deals are finally completed and the last penny of profit or loss has been accounted for !!

    This will result in a boom in demand for financial axemen/headsmen, roving professionals that will chop the company's/institution's deadwood for a fee and allow the management to point fingers at them when "the peasants are revolting" !!

    6) Strengthen the member countries' financial regulatory regimes !! No more jobs for the boys !!

    Also, no more excuses about "not seeing the manure approaching the rotating object" or "it was that fault of other countries/the world, honest, guv"

    7) Finance ministers of *all* G20 countries are to draw up a list of *FINANCIAL* companies or institutions whose collapse will endanger the global economic system.

    This instantly excludes *ALL* car makers and other manufacturers except for the financial arms of those companies. This will please the Yanks no end if they are thinking of bailing out their car makers.

    Picture of George Bush smiling sweetly as he hands this poisoned chalice to Nancy Pelosi !!

    Also, picture of Silvio Berlusconi with all sorts of punctuation marks in his speech bubble as he tried to get the unions to agree to the final Alitalia bailout before global regulations slam the door on it !!

    And finally, there has been many mentions of the Doha round of talks and implicit in them is that developed countries' subsidies for their agricultural sectors may have to be abolished.

    The Imperial gunboats are finally sunk by the economic torpedoes of the newly developed nations. A new World Order is at hand !!

  • Comment number 98.

    BTW, the picture of Gormless Gordon shaking hands seems to summarise this meeting rather well. One smirking and the other (Brown) trying desperately to smile !!

  • Comment number 99.

    " Crisis squeezes Croat Christmas" - BBC headline

    http://news.bbc.co.uk/1/hi/world/europe/7730813.stm

    Hooray !! At least one sane man !! Now, all we need is for our lot to stop with this spend, spend, spend nonsense !!

  • Comment number 100.

    Would it not be easier going back to small banks? HBOS could become Halifax & Bank of Scotland. RBS would be Nat West, Royal Bank of Scotland etc?

    Then there might be more diversification, better understanding of Risk etc. The toxic stuff could be assigned to the right bank with govt support and the others could arise like the Phoenix.

    The markets might just be interested in buying shares in Nat West on its own.

 

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