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The “shotgun wedding” of Lloyds and HBOS

February 16, 2009

“If you think you want to advance on this, we will deal with the competition issues” — so said Gordon Brown to Lloyds Chairman Sir Victor Blank last September, sweeping away the one big problem to a merger between Lloyds and HBOS.

At the time, Brown said the government had acted quickly and decisively in removing competition concerns and prodding the merger forward, despite concerns about the risk that Lloyds was taking.

Now the full scale of HBOS’ losses — 10 billion pounds in 2008 – has become known and the share price of the merged bank has taken a dive. Fears are growing that increasing fears that the government will have to pour in more money on top of the 17 billion pounds it has already spent to acquire 43 percent stake — or even nationalise it altogether.

Opposition parties have been quick to claim that Brown pushed through the “shotgun wedding” of a healthy, prudent Lloyds with the toxic HBOS to avoid the embarrassment of having to nationalise the Edinburgh bank.

But several analysts have noted that the two banks had long been talking to each other about a merger and that all Brown did was facilitate it.

How much blame do you think rests with the government in the Lloyds affair?

Comments

Blame?

The obsession with allocating “blame” for the financial crisis has reached the point where it achieves nothing except to distract attention from the original cause.

Yes, there are individuals and governments to blame for causing the crisis, but the Lloyds/HBOS fiasco is nothing more than what happens when any large organisation, whether it be a private company or a government, goes into headless chicken mode.

That mode is precisely what the government has been in since the crisis broke. The opposition parties for their part would do well to stop crowing about the dismal performance of the government and start providing some solid proposals for what they will do to recover the situation after the government has been thrown out.

If they fail to provide alternative policies which people can instinctively see are sensible, the government will survive by default and the recession will be longer and deeper than it need otherwise be.

Posted by Peter | Report as abusive
 

However badly the Government handle things, any eventually improvement in the economy will be proclaimed a victory compared with the ever more doom-laden prophesies of the current feast of gloom

Posted by Andrew | Report as abusive
 

LLOYDS BANK was doing ok before the saga of HBOS,but not that great.The possibility of a merger with HBOS was a temptetion to produce a super bank in the high street.The govt pushed through and helped the deal,that true.But the chairman and CEO knew exactly the value of the damage but refused to quantify it and they gambled it.That’s just reckless but a least for LLOYDS it is a possibility to put all their toxic in one pot,HBOS.Not to good for the shareholders,but do they care?banking is a brutal environment.

Posted by didier | Report as abusive
 

What an unseemly mess, with all parties trying to play Pass The Parcel.
Yesterday, when Lloyds were trying to deflect criticism regarding bonuses, they managed to include all the branch staff into their averages. Even part-timers I don’t doubt.
What a laugh! Do bankers and politicians think we’re all stupid and unable to see through their waffle?
If all these high paid idiots can’t accept what caused the problem, how on earth are they planning to get themselves (and us) out of the mess?

Posted by Spike | Report as abusive
 

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