What was HBOS doing?

Halifax are threatening to take my fiancee to court over a £900 credit card debt, so when I read the description of the billions they've lent to property developers and businessmen, I feel just every so slightly annoyed! Are they threatening the spivs with the bailiffs Robert??

The irony isn't lost on us all bankrupting the country to save the bank- if and when the profits start rolling in...let me be the first to request a windfall tax.

Interesting thought- could the bank profits, [yet to be seen of course] act in a similar manner to North Sea Oil and Gas re ending/assisting the end of an economic downturn.

It would almost be the ultimate capitalist recovery.

Good banks + Bad banks

Isn't it funny how all the good banks are owned by the Private sector and all the bad ones are owned by the public!

As the patient lies dying, the vampire of private sector sucks the last of the blood from it's victim.

I have already heard 5 times this morning from 'experts' that there is a chance the Government will 'make a profit' - however the crucial answer is when? - 2020 is my guess.

If the Government thinks it can take such large stakes in banks and sell them off within 2 years to 'make a quick buck' - then it's demonstrating it knows nothing about share dealing.

What was it talking about the other day? Incentivising longer term investors?
Say one thing - do another eh?

Astonishing indeed Robert. Shouldn't the question be 'Why aren't the former HBOS directors in prison?

Surely those responsible for the HBOS failure should be punished.

Yet NuLiebour rewards Lord Stevenson with a job as gamekeeper with the FSA and Hornby is the boss of Boots. How can this be allowed to happen?

Is the Stock Exchange rallying to Lloyds share price because of the GBP 1.5 Billion savings in future redundancies? Does the bank really believe in a slow economic recovery in 2010, or is it doing what is has been told to say?

Interesting final point Robert, the focus on losses now will turn in time to the enormous profits to be made in a few years when there will be fewer competitors and effectively a small cartel.

If taxpayers feel out-done now wait till it really hits their pockets when remaining banks turn on the make buck screws.

Seems like whatever happens the tax-payer gets shafted. We take a big loss now from all their barmy loans. If at some point in the future they make a profit they will shell out nice bonuses to their staff.

As usual with the banks it's heads they win tails we lose.

I would not be at all surprised if they even find a way to justify bonuses based on these results. Something to do with a particular division exceeding its targets or some such guff.

Robert, sometimes I wonder who's side are you on? The British public are being made fools of here. Why not more criticism of the bankers?

Can anyone explain why the purchase of HBOS did not seem to trouble the EU or require approval when the future sale of NR will apparently require EU approval?

There seems to be massive contradictions and inconsistencies in relation to EU law/approval/competition policy.

No wonder that the Germans are sceptical about Gordon Brown's handling of the UK banking sector as alo an EU member - a lot of twisted politics and logic that has the appearance of a continuing regulatory MESS.

JPSLotus - isn't this in essence part of the reason why we are in this mess? HBOS wouldn't be taking your fiancee to court if he would have paid his bill.

No doubt the businesses who are not able to meet their liabilities towards HBOS will have entered receivership, hence they are not getting away with this scot-free either.

I agree that they should have been more rigorous in their checks, however I don't see why your fiancee should be treated any differently for in essence borrowing money which he can't - or won't - pay back.

In response to "writingsonthewall", it's hardly surprising that the good banks are owned by the private sector and the bad ones are owned by the public... it's the bad one's that needed bailing out, which is exactly why they're owned by the public. If they'd all been good, us taxpayers wouldn't have needed to get involved in the first place!
Whilst I am surprised at the extent of these losses, I also think it seems a little unfair to lump all the banks in the same bucket. What happened to HBOS and Northern Rock can't really be blamed on those at Barclays and HSBC...

Moods,
This post surely must be intended to make alexander curzon get a little crazy.
I don't have any problems with hbos halifax except for their policy to make you
change your 20-25 years mortgage to a new one every 3 years and charge you
350 squidlies for it. (this went to court a while back)

Watch out for Victor Blank's peerage for his part in this saga...

...it will be announced soon!

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

It clearly shows that all this hysteria created on this blog by Robert & Co about banks in generalis simply non-sense and shows a total lack of understanding of what is going on. The issue is too much debt (greedy society!), massive concentration and appalling risk management. This can happen to retail, commercial and investment banks as we can see and generalising as it is done is utter non-sense. And by the way it seems that the HBOS and RBS are back in the market undercutting prices (not charging for risk), but should they care they have taxpayer money to cover losses…the last bubble is dead long live to the next one!

The Prime Minister Gordon Brown encouraged Lloyds TSB to merge with the struggling bank - Halifax Bank of Scotland (HBOS). At the time Sir Victor Blank and his executives had little idea how much trouble HBOS was in. What's more, as CEO Eric Daniels was later to confess to a Parliamentary Select Committee they also didn't carry out a full due diligence investigation before doing the deal. Nevertheless on November 19 2008 Sir Victor led his board in bulldozing the merger through an EGM despite the opposition of small private investors.

9. Ressie, she is paying it back and has been for over 3 years, a year before the credit crunch hit. Then last year Halifax started sending her threatening letters more or less demanding that she pay off the balance immediately which she can't afford to do. She is dealing with a debt management company who have told her that it's just scare tactics by Halifax and to ignore them, but it's pretty unsettling.

I agree with you that lenders should have been more discerning and people with credit cards should have been more careful, she has learnt her lesson the hard way. I'm not asking for her to be treated any differently or that she should be excused, what I cannot understand is why Halifax are being so full on over it, is Lloyds Banking Group going to go bust over 900 pounds? They will get their money back.

......and the current members of Lloyds's board must surely regret their failure to conduct a proper investigation, what's known as due diligence, of what they were buying........

Surely this is a failure if fiduciary duty.... Directors have a 'fiduciary' duty to exercise care and skill. These basic duties are found in case law - ie decisions in individual court cases over the years - rather than the Companies Act.... By not doing due diligence these directors failed to exercise care... at least they should be banned from holding office and perhaps even prosecuted in a court of law...

9. At 10:29am on 05 Aug 2009, Ressie81 wrote:

"JPSLotus - isn't this in essence part of the reason why we are in this mess? HBOS wouldn't be taking your fiancee to court if he would have paid his bill. "


...so why should JPSLotus pay his bill when the banks don't have to pay theirs?
The Government is allowing the banks to hand over all the bad debts to them (and effectively us) - so why isn't JPSLotus afforded the same honour?

Hornby + Co. were actually rewarded for running up bad debts (as pointed out above) - so why the contradiction?

It's no good blaming the people at the bottom for the collapse that started at the top - that's EXACTLY what they want you to do.

Divide and conquer my friend, divide and conquer.

Profits to a abnk come from charging customers. They are charging huge interest rates at the expense of the taxpayer. Let's not celebrate a bank making excessive profits. It comes from our pockets. Lloyds offer a loan for £7500 and up for 9.9% with base rates at 0.5%. Good for them but bad for an economy trying to recover and for a consumer unable to get a loan to help pay for that new car, extension etc.
Talking of cars, great to see Manufactoring growing again. Take out car manaufactoring and it's still dire. Taxpayers money being spent on a gimmick. My money. Expect 'solid' economic growth this second half as the US has spent over $1b in 6 days. Time to invest in car manufactoring companies.

Pretty accurate summary and maybe more investigation could have been done on HBOS but there were strict time constrainsts. The HBOS debt is related to bad commerical property loan impairements but should diminish as property prices recover? Retail Banking performance is very strong in both groups and I hope that if LBG adopts the same prudent strategy as LTSB then the bank will be stewarded in the correct manner.

Are these write downs for bad debts that have actually crystallised, or is some proportion of them a provison for bad debts that may or may not yet occur?

These banks may like to get all the bad news out quickly so they can show a great turn around a year later.

You say Lloyds did 'due diligence' on HBOS but it wasn't as much as they would have liked.

Surely 'due' means 'sufficient' by definition. Therefore the diligence was either due or it was not. It's like being pregnant - you either are or you aren't.

Either they did due diligence or they did not!

I just wondered if, after site maintenance, we can now use the £ sign.. It is beyond belief that the BBC blog shows a $ sign and not the £....

10. adrianturner

....and where do you think the profits of Barclays + HSBC came from that makes them 'good banks'?

Of course the struggling banks were taken over by the Government, and the beneficiaries were the ones that were not. They directly benefitted from the nationalisation of the banks - as good as public money being diverted straight to the private sector.

There are no good banks really - if NR, B&B and HBOS had been allowed to fail, then they would have brought down Barclays, Lloyds and HSBC as the whole system collapses.
What has happened is all the bad debts have been moved to the Government owned (or stake owned) banks and all the good debts have moved to the rest.
Your comparison to HSBC and Barclays is a false one - they may give you the impression they knew what they were doing more than the rest - but that simply isn't true. They have both utilised the asset guarantee scheme and I seem to recall in the case of Barclays that shareholders paid the price with a watered down holding thanks to a big investment from the middle east.

I am surprised you cannot see the scam that is being played out in our banking system - it seems pretty obvious to me what is happening.

Can anyone explain why the purchase of HBOS went through 'regulatory approvals' with a 'nod' and a 'wink' and apparently without EU approval but in contrast, the proposed disposal of Northern Rock will require EU approval?

Why should government disposal of NR to the private sector require EU approval when the 'merger' for creation of this huge bank did not?

Massive inconsistencies and massive government/EU failure? We can forget this all too quickly.

It clearly shows that all this hysteria created on this blog about banks in general by Robert & Co is simply non-sense and shows a total lack of understanding of what is going on. The issue is too much debt (greedy society!), massive concentration and appalling risk management. This can happen to retail, commercial and investment banks as we can see. And by the way it seems that the HBOS and RBS are back in the market undercutting prices (not charging for risk), but should they care they have taxpayer money to cover losses…the last bubble is dead long live to the next one!

Oh joy .........house prices are on their way back up again so this will allow the banks to do their thing all over again.....

HBOS is bust because Govt encouraged house ownership claiming it made everyone richer. Stupidly Hornby and co believed the Govt as well.

Fact is people that those running our banks are just not very bright.

1,

I can say for a fact, that will NEVER go to court (Small claims). It will be written off (or Down in reality due to the contract they hold with the debt collection agency) and passed to a debt collector, who will probably settle for 300 to write it off ;-)

We should all stop complaining and move our accounts. I am with HSBC but they are just as bad, interest rates at 8.7%. I shall move.

This government does not seem to be sorting out the banking system. It is tinkering at the edges rather than going for the root and branch change which is needed. Gordon Brown has lost all credibility.

Until we have an election banks and bankers are getting away with murder. I'm not sure they realise how bad they have been or how their missmanagment and greed have ruined so many lives and will continue to do so well into the future.

What we're also overlooking is the political dimension to the takeover. In 2007 the SNP was trumpeting the performance of the Edinburgh Financial Centre as one of the big reasons why Scotland could be a successful independent nation. By reducing HBOS to a part of the London based LBG, Labour was trying to weaken the SNP's case. It also helped prop up Darling in his Edinburgh SW seat which would have been devastated had HBOS collapsed.

Funny how it was the 2 big Scottish banks that caused all the problems (while we have a Scots chancellor and a Scots PM but thats another story) one would imagine that job losses when they occured would hot Scotland hard


But no! nearly all the redundancies, and there have been thousands of them, announced by the new organisations running them Lloyds etc, have been in England with hardkly any jiob losses in Scotland at all!

Strange that

PS one has to look very carefully to find iut this info as they are being very reticient in reveakling where the job losses occur

#4 Regrettably complete stupidity is not a crime in this country, long though I have wished for it to be so. It would be difficult to prove that they entered into these loans knowing that the outurn would be so disasterous, however obvious that is with hindsight.

The astonishing thing to me in Pestons blog is the statement (not given as a mere possibility) that (and it is obvious) this group and our other "State" banks will be midas like fonts of wealth in the quite near term.

That is obvious due to the restricted competition and the fact that much as it is decried the system needs credit. The problems were not caused by borrowing or lending but by incredibly reckless borrowing and lending sustained only by the belief that a nirvahna of never ending asset appreciation and cheap money had arrived.

If any ordinary person like myself and the vaguely informed Mr Peston can see that these are de facto goldmines , why has Mr Darling not stated that the sell off will of commercial necessity take place over the medium term to maximise the peoples return on the bail outs.

Mr Peston refers to the huge sums that we now guarantee, but as is obvious the toxics are being run down and worked in by dint of the huge margins the high street ops are achieving on their bread and butter trade; i.e Mortgages and loans to creditworthy people. ( 3m libor 0.8= v 5 yr fixes at 5+ and personal loans at 8+%)

The lagging effects of unemployment will increase dramatically the losses on credit card and other riskier personal debt, but as the CC issuers are running at between 18 and 40 (Forty!)% there is a substantial margin covering these risks.

The Uk has by far the most flexible employment market in Europe due to the emasculation of the T.U movement and our open door immigration policies. Recovery will start sooner and take off faster here than anywhere outside the US and BRIC.

The worries often hystericalised on here about the public sector are really just petit tory squealing if one looks at the net employment costs compared to the effect of net tax take, consumer tax take and benefit costs of large reductions in the public sector workforce. (If you sack 10 x £ 20k civil servants the net benefit after loss of their taxes, consumer spend taxes and their benefits is not £200k but more like £30k, but also depresses consumer confidence and lowers market wage rates.) Most of the public service jobs are necessary but there is undoubtably a large degree of padding, slimming it down would be advisable and should be done, but machete like slashing, while gratifying would create more resultant mess that the benefits will warrant,considered pruning at a rate exceeding the tendency to growth is the way.

The futures murky, but it is always coming, how you prepare for it is the key. Lets acknowledge that however accidental there will be upsides to the govts actions and make sure that they are utilised to minimise the downsides that the Big Bang Bubble has caused.

LLoyds is known short term pain, with Known medium term growth to come, lets not throw out the baby with the bathwater and please let us hang on in at least until the gravy comes on stream.

#4 archoptimist

"Astonishing indeed Robert. Shouldn't the question be 'Why aren't the former HBOS directors in prison?"

It seems that in the City of London/Edinburgh versions of the game of MONOPOLY, the GO TO JAIL square has been omitted.

The executive LUCKY DIP square which replaces it has cards such as COLLECT A PEERAGE, or GET A NEW TOP JOB, or RETIRE TO YOUR COUNTRY ESTATE.

EXPLETIVE DELETEDING EXPLETIVE DELETEDS!!!!

30. At 10:51am on 05 Aug 2009, grannyfromthesticks wrote:

"Until we have an election banks and bankers are getting away with murder."

Sorry, we don't elect bankers in this country and there isn't a mainstream party which is about to change the behaviour of the banks any time soon.

Therefore the election will NOT solve ANY of the problems we have at the moment - even if it makes the public feel like it's done something.

Much as in the US, where the electorate thought the election of Obama would bring the change they desired, but gradually it's all slipping back into the same old routine where public funds are diverted to private pockets.

Who complained about my post @ 13?

Did I say something to offend the bankers out there?

GOOD - I show no remorse.

May I be sentenced as a traitor to my Government but a warrior for humanity.

Can`t wait till Friday to see what RBS have "achieved" would be interesting to see their invoices for smoke and mirrors.

# 22 Interesting phrase "due dilligence" wonder if Fred Goodwin realised whether or not he was pregnant with ABN AMRO.

As for reform of the "banking" system, possibly too late, the inter-species breeding has probably taken too big a hold; supermarkets are the same now and could be next to wreak havoc with our lives.

Shouldn't the directors of Lloyds , HBOS and Mr Brown the grand architect of this mess be sacked and punished?

Seems to me from a lot of posts on here, that people are swallowing whole the Govt line they are being fed via Pestion 'that his is all the fault of the banks.'
Remember the Govt were quite happy to ride a debt fuelled decade long boom, where all of the funding was taken on by the General Public. Through remortgaging over inflated houses, to buy foreign made consumer goods they didn't need. And the public were paying for it personally through larger mortgages on falling assets. No real growth actually occured.
The govt loved the tax take from the City, Property and Retail sectors, to pay for it's ever expanding public initiatives. So decided to leave the regulation of banks completely inadequate, as long as the city provided the funds for everyone to keep on spending.
People incorrectly felt they were doing well, and voted the govt back in twice.
Now everythings gone pear shaped the Govt is blaming the banks, but doing nothing about them. Why?
Because they need the banks to fund the ever growing PSBR.
Think you need to see through the smokescreen, the Govt tells Banks to lend more and hold more capital?? Hmmm, they can't do both.
It's the banks fault companies are going bust becasue they're not lending them enough?? What about people are worried about their jobs and are not spending as much? Bank lending can't and shouldn't clear that.
No More Boom & Bust!
Golden Rule!
Anyone twigging it yet?

Nail Head and Hammer!!!


18. At 10:38am on 05 Aug 2009, writingsonthewall wrote:
9. At 10:29am on 05 Aug 2009, Ressie81 wrote:

"JPSLotus - isn't this in essence part of the reason why we are in this mess? HBOS wouldn't be taking your fiancee to court if he would have paid his bill. "


...so why should JPSLotus pay his bill when the banks don't have to pay theirs?
The Government is allowing the banks to hand over all the bad debts to them (and effectively us) - so why isn't JPSLotus afforded the same honour?

#24 WOTW

You have hit the nail on the head!

First, all of the profits were privatised and so it shall be that all the losses will be socialised.

Capitalism at it's very best!

I'm glad to hear that Gordon Brown is considering doing some voluntary work in his constituency as part of his summer break. Hopefully this will divert attention from the inconvenient history in which one GB played just about every card possible in getting Lloyds to take on the "dead bank walking" that was HBOS. If I recall correctly he was trying to shore up Labour seats threatened by the SNP at bye-elections, mainly by saving jobs at the "BOS" while leaving the "H" to its own devices.

That aside, it is profoundly depressing that, as predicted, the banks are nationalising losses and privatising profit and there is zero chance of serious reform under this government...or indeed the next. NuLabour have had a love-in with the City over the past decade and have been completely seduced by its claims to economic preeminence...to the extent that most of the rest of the economy (i.e. about 88% of it) is largely ignored by policymakers. They have fallen over themselves to save the skins of self-aggrandising bankers whilst preaching stern economic orthodoxy elsewhere. To cap it all, they are now racing to unload all the profitable elements of the quasi-nationalised banks whilst leaving the taxpayer holding the dross.

The present situation tells us more about the rot at the heart of the political classes who are far more interested in cosying up to the "masters of the universe", some of whom should clearly be in prison, than they are in representing the interests of their electorate. Our present, admittedly unelected "business secretary" is demonstrably too keen on socialising on the yachts of the uber-wealthy to actually rein them in. Similarly, the Old Etonian clique at the top of the Conservatives seems hardly likely to bear down to hard on their chums...some of whom may be down to their last Ferrari.

Until Westminster can be separated from the City nothing will change...the British economy will become increasingly unbalanced, the remaining "national champions" will be dismembered into "more focused business units" and sold off. Small business will trapped between the retail banking monopoly, HMRC and a growing swathe of regulators who, too supine to tackle the big boys will simply dump mightily upon the defenceless. National value will again soon be defined in snake-oil financial instruments, anything productive will be demeaned as passe, we will all again borrow against our inflated house values and we will have learned nothing.

I agree that HBOS may have been some what reckless in lending huge sums of money--to the commercial propery sector--however they were certainly not alone and if it were not for this funding the construction industry would be in a much worse state and the economy as a whole.

The tax payer has been bailing out the entire finacial sector and not just Lloyds & RBS whom I believe will produce a very healthy return on investment in the near future for the tax payer.

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

islider55: #39

It seems to be everyone's fault about from us; "bash a banker" is getting tiresome now. Yoy need to understand that many re-elected governments have been passive on lending since the 80's.

Your comments about it being banks fault companies are going bust becasue they're not lending them enough is just plan daft. The government cannot tell Barclays and HSBC what to do in regard of their commercial decisions. They can only ask for them to be more supportive in relation to savings and business loan rates to stable businesses?

The same logic applies to Lloyds Group and RBS because as majority shareholders would you want to lend money if you are not going to see it returned back in your pocket? It's catch 22 situation and if anything LBG need to be run even more prudently than LTSB were previously.

plebians should be given fixed mortgages at boe base rate of 0.25% forever or until market goes up bigtime

So, was the HBOS blackhole created in America (as Brown is fond of wheedling into every sentence he utters) or Scotland ? I seem to rememebr a lot of gloating 2 years ago when the Rock collapsed from the other side of Hadrian's wall - something along the lines of how sound their financial services were etc - and here we are having bailed BOS and RBS to the tune of tens of billions.

43. At 11:26am on 05 Aug 2009, pipcampbell wrote:

"The tax payer has been bailing out the entire finacial sector and not just Lloyds & RBS whom I believe will produce a very healthy return on investment in the near future for the tax payer."

...and I am working on the 9th floor in the City and I swear I just saw a pig fly past the window!

Define 'near future'

define 'healthy return'

Investing 19 Billion (although I think it stands about 17 at the moment) in a business which is loosing 4 BILLION in the FIRST HALF OF THE YEAR in a CONTRACTING ENVIRONMENT will not produce ANY RETURN in the next 5 - 10 years. Any investor could tell you that.

You have been listening to too much 'Economic expert' nonsense. If you don't believe me take the facts to your IFA and ask him if he thinks it's a good deal.

We would need the Lloyds share price to DOUBLE before we make a profit and a similar amount for Northern Rock. As I pointed out yesterday this is a big ask even during a boom - let alone a recession.

The ONLY way we will see any return is if the Government allows QE to flourish and effectively starts the NEXT BOOM - which would have to be BIGGER THAN THE LAST ONE!

...and we all saw where that got us didn't we (or have you all forgotten already???)

and please don't forget - the Government BORROWS THE MONEY FROM THE BANKS TO LEND TO THE BANKS - how can that be a profitable model?

Sometimes I think the country has lost control of it's senses. However I have noticed that a lot of the bizarre comments come from users who never post again - is this the propaganda machine in action?

Thanks for the update, but that says nothing about what will happen to Halifax mortgage holders like myself. We've had every cut staggered by a month so no complaints about that, but will the group now look to increase rates ahead of Bank of England announcements to grab revenue like Northern Rock?

When it comes to a mortgage book of homeowners who are actually paying, that will always be worth something to someone, so hopefully Lloyds will stick with what they bought into.

~33 a good summary
Robert, I'm puzzled is there a consistent narritive arc to this banking story or are you in the business of peddling the latest myth.
When the story first broke the issue was that inter bank lending had frozen as banks no longer trusted each other as there was a fear that some banks would default, as the quality of their loan books was doubtful and the value of their assets were suspect.
So we can conclude that this problem was clear at least 12 if not 18 months ago to those in the banking community. Today we find that indeed some banks HBoS etc had indeed over valued their assets and the quality of their loan book and as a result they have had to increase their provisions for bad debt and right down the value of assets they hold. As a result you say the bankers are chastened.If the bankers have been chastened how many exactly have been sacked without compensation? How many have been sacked as culpable for signing off on dodgy loans ? How many of their CFO's have been investigated for misrepresenting the company accounts? What you don't explain is what measures have been taken to investigate how the auditors of these banks managed to sign off the accounts with assets at inflated values and totally inadequate bad debt provisions?
Also if LLoyds have had to increase their bad debt provisions by 9.8 billion in six months how does this reconcile with the government(us) providing them with bad debt insurance in which i understood we the tax payer were going to pick up the bulk of the tab? Can we have some analysis please

You comment, "Lloyds results show there is a £223bn gap between Lloyds loans and advances and its customer deposits." I maybe wrong, but am I the only one who thinks £223bn IS significant? Lets just hope the only ones who don't get to hear about this are Lloyds banks own current and deposit account customers, (they'd be queuing for miles!)The last line of defence is The Government, lets hope that won't crumble then.

It's just breathtaking that Lloyds insisted you point out in your 10:16 update that "they had done due diligence, even if it wasn't as much as they'd liked, given time pressures." So they actually wanted you to emphasise to the world, via your blog, that they don't know how to do due diligence and that they'd been a bunch of dummies?
I'm going to have to re-calibrate my own personal undertanding of what constitutes "sensible standards."

Um, that gap of £223bn between assets and liabilities, someone tell me it's not actually real or meant to mean anything. (What real value bank notes, printed like confetti?)

As a former employee of many years with HBOS, it was a good company to work for, those who worked on the front line were as dedicated as any but gradually the figures men took over, quantity became more paramount than quality, the volume of sales increasing so fast that admin staff who in my humble opinion were second to none could not cope, the only way to keep up was to trim how things were processed. I feel sorry for the Lloyds company, a more prudent company who again because of expediency needss have been landed with a dud one.

It makes you wish that the guy who ran the corporate sector in HBOS could be put on trial for high treason against this country, given how the taxpayers have been screwed by the some of his and others decision making, maybe that kind of punitive action could sober people up and decision making could go back to sound economic principles. The moderator may not like this but I bet a few Lloyds shareholders are wishing the same.

Robert

Lloyds has asked you to point out that it did do due diligence. As a shareholder in Lloyds I would ask you to reply that at best it was a back of the fag packet job.

The sums that are emerging are colossal, larger than the economy of a great many countries, and you cannot help but believe that the political imperative behind this was the motive for Sir Victor Blank and Eric Daniels, hitherto both respected bankers, to act so blatantly out of character. They not only bought a dud on our behalf, but they did it with their eyes wide open. I cannot believe that some of the potential losses were not sitting there like pirhanas ready to bite their proverbial backsides, which they did.

Gordon and Alastair looked the other way when competition should have been an issue, and so did the Tories and the much vaunted Vince Cable. The Europeans did what they always do - acted with all the impetus of a dodo, but are now waking up, which dodos dont usually do.

I see no future for Mr Daniels for he is tainted goods. Brown will go for much worse things like trying to give legitimacy to bust economics. I agree that the sum of the parts argument should eventually make the combined bank, minus about 30,000 or so employees, a going concern, with the staff who are to be sacked the going that we should be concerned about. What a tawdry tale that does nobody any good.

Guys,

I hate to sound smug but I have been banging on for months now that everyone should be buying shares in Lloyds while they are on their knees because the facts were evident.

1. The government were never going to nationalise the bank after NR
2. The size of the market this giant will dominate going forward
3. Much of the credit crunch was over egged by the banks and the governemtn for political reasons.

Today I am in clover...

If you were a client of a charitable organisation that had Gordon brown as a volunteer would you elect to be helped by him?

I think only a banker would accept help from that quarter; anyone else would end up being mugged.

I think it is about time that all the banks came clean as to how much toxic debt is on their books and the government came clean as to how much of that debt the taxpayer is due to fund and over what period. The figure of GBP 1.227 trillion has been mentioned.

I fear the bubble is now being reinflated and so I want to know how much more the UK taxpayer will have to fund when it bursts again.

I have had enough of all this as have most people. This has to go political from now. Why should it wait for the political class to have their holidays? This is looking more and more like a stitch up with the taxpayer carrying the can. There will be blood on the floor before this is finished.

33* The problems were not caused by borrowing or lending but by incredibly reckless borrowing and lending sustained only by the belief that a nirvahna of never ending asset appreciation and cheap money had arrived.

Financial terrorists could not have done more damage.
We need more investigation no matter how painful.

#51: the £223bn is not the gap between assets and liabilities. It is the gap between lending and deposits - a gap that is filled by short-term borrowing from the wholesale markets and the Government.

So this is not a black hole in the balance sheet, though it does make Lloyds heavily dependent on funds which are not guaranteed to remain available. Like taking out an overdraft to buy a car - the car is a long-term asset which can't easily be sold on, but the overdraft might be withdrawn after a year.

Actually thinking about it Halifax have been ripping people off
They keep renewing repayment mortgages at unfavourable terms
Such as top-loading interest so capital is not paid and changing
terms of mortgage on the sly such as extending the length again

"This is an old fashioned failure to kick the tires properly"...

Time to change your spell-checker from US to UK. That should be "tyres". Looks like you did not do your own due diligence.....

There is anecdotal evidence that the Halifax is still offering 100% mortgages, in a different way from how previously set up but as following example:
First time buyer pays £99 deposit plus solicitors fees, but shared equity with housebuilder 25% of property value to be repaid either on sale or after 10 years. So assuming said person stays in house for 10 years and value of said house rises 100% - lets keep it simple original price £100,000, then value in 10 years £200,000 but owes house builder £50,000 - aren't we just going to see a repeat of where we are now.
Groundhog day perhaps.

The money go round keeps going around and around. Move some here to make things look better and take some from somewhere else that had it last time.

Figures due out then move some in. Figures out then move it out again.

It is the same money which is gradually depleted on the money go round so just print some more or get the taxpayer to guarantee what's been depleted in the process.

What a model eh? No doubt designed by the man Gordon himself.

The exit strategy to all of this if there is one yet will bring us all back to earth with a tumultuous thump.

And what about pension black holes? That's the other story.

"24. At 10:47am on 05 Aug 2009, writingsonthewall wrote:

They have both utilised the asset guarantee scheme "

Er, no they haven't. In fact, Barclays share price began to recover rapidly after they confirmed that they would not take part in the scheme.

As for the share price being watered down would the share holders have preferred goverment ownership - somehow I think not. It is amazing that if Barclays had gone to the market with a share issuance in October last year that there is a good chance that few shares would actually have been bought. As it was, the middle east was willing to invest, this ensured that government ownership did not happen (and save taxpayer money in that case) and I think you will now find that the share price is back above the level it was a year ago.

How can that be bad?

When people speak of a "healthy return", whey should pause to consider what this really means.

If the productive side of the economy, that is agriculture, industry, raw materials, remains stagnant, then a "healthy return" for the financial sector can only come from $crewing cheap foreign labour somewhere, or from doing the same to the productive side. Looking at the British economy as a whole, this would be rather like a dragon eating its own tail.

Actually though, this is exactly what has been happening to the British economy since finance defeated industry in Churchill's disastrous budget of 1925.

As Robert has suggested so often before, FINANCE SHOULD BE BORING!

The present banking and financial system is like a cancerous growth feeding off the British and global economies. I am still a shareholder in LBG, but I would happily lose the lot if we could find the courage and political will to organise our economy on more rational lines.

Maybe it's just my perspective as a programmer, but this level of incompetent lending by HBOS seems to me to be on a scale that is too vast, with a level of risk that is too stupid, that I can't see a collective group of humans actually doing it.

It strikes me to be much more like the behaviour of a neural network. As lending on higher risk loans generated profits, it would have been trained to lean further towards those higher risk loans. Has anyone done or read any analysis on how automated systems fared at predicting the crunch, or what they would have advised a lender to do? Also has anyone found out how heavily computer predictions of how banks should lend are relied upon in the industry?

Having said all this, placing such reliance on a neural network would be just as stupid as the act of lending it manually.

Robert

I am puzzled as I am logged in as "excellentcatblogger" yet my post #5 I am relegated to the ubiqituous "you"!

If taxpayers are to profit when Lloyds and RBS are eventually privatised, the margin will surely have to be collosal. Previous privatisations of BP, BT etc have proven to be champagne celebrations for the merchant/investment banks that orchestrate the sales.

Will the government of the day (probably sometime in 2025) force these parasityes to work to a low commission rate? Yep, thought not.

I know it sounds more personal and sensational and is a reporting technique he loves to use, but I wish Robert Peston would not keep banging on about "taxpayers'" money all the time, regarding the financing of the banks etc. Once the goverment has charged us income tax it belongs to them to do as they will. When we pay Tesco for groceries or Eon our electricity bill, the money belongs to them not us. We do not own a percentage of the banks, the State does. We did not lend the money to the government, we paid it to the government for services they provide to us. I am not aware of any increase in income tax over the time that the banks have gone down the shute. In fact the government is getting a lot less total tax as a result of job losses. How the government shuffles the money around is up to them. If they charge us an extra tax rate of tax to pay for the bank crisis we might have cause to complain.

Is it not the case that Brown is playing the long game here ? Surely with his insane desire to be PM he is not going to relinquish it so easily. We have all been bombarded with the 'fact' that a healthy banking system is the start and finish of our lives.
In the dark days of last year when Northern Rock, RBS, LLoyds, Halifax et al were being rescued is it not possible that there was an implicit understanding that favours must be returned ? Labour bail out the banks at the expense of taxpayers, they take the immediate criticism, but in the months leading up to the election 'good' news WILL be forthcoming, and all this current bad news will be forgotton. Nationalised banks become profitable and start lending lots more to small businesses, banking shares rise so the taxpayers are now sitting on paper profits. Well done Labour !
If I am to be even more cynical, then the feel good factor could be further enhanced by house prices steadily 'rising'. The main house price surveys are carried out by the Land Registry, the Halifax (LLoyds) and the Nationwide. Nationwide have been given the opportunity to buy up several 'failing ' societies , so I suspect that the 'favour returned' scenario will prevail. Of course in the short term, surveys showing rises are a self fulfilling prophecy, just long enough for an election run up maybe ?
In two years time when we will are reflecting on what has happened. The remaining banks will be highly profitable again,huge bank bonuses will be paid, the rich will continue to get richer. Back to the same old.
And we will all be eternally grateful that even though our standard of living has gone down the drain, at least the banks have been saved, we have not died of swine of flu and that Brown saved the world.

As a very small time shareholder in Halifax plc and then HBOS I often wondered what was the role of all those non-executive directors listed in the annual reports.

now i know; they took their fees and did b....... all for the shareholders who they were supposed to represent. Meanwhile Hornby and the other top men laughed all the way to the bank - presumably not HBOS for who with any insight on what was going on would put their [ hard earned] savings there.

Frankly I'm having a hard time believing anything any bank is saying. After the explosion last year, I don't see any more honesty or transparency than before.

As the previous poster stated nothing has ever been declared of the off balance sheet debt, and no government figures to explain the nation's obligations re bad debt insurance.

The merger should never have taken place. End of story.

Banks kept so much undisclosed, I doubt we will ever have a full picture.

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

I have just seen the following

https://news.bbc.co.uk/1/hi/business/8184746.stm

In view of the problems with HBOS detailed above I am rather reminded of that famous comment from the Profumo trial.

"Well they would say that wouldn't they".

I imagine HBOS talking the market up is more in hope than expectation.

'Sir Victor Blank: The crony with a gift for disaster'

https://www.dailymail.co.uk/debate/article-1146069/PETER-OBORNE-Lloyds-TSB-boss-Victor-Blank--crony-gift-disaster.html

It's sometimes insightful (or do I mean inciteful?) to look back at old stories.

The UK's National "Wealth" is deemed to be about 7 trillion pounds half of which is property related. Likewise probably about half of this is domestic property (i.e. housing). So, we have £1-2tr in housing "assets" - roughly the same as our annual GDP. When the value of these houses increase, we as individuals feel wealthier, and likewise the Gvt counts this as an increase in our National Wealth.

However, during the 1980s and 1990s "..most of the increase in personal sector wealth was due to positive changes in the value of assets already held rather than an increase in the quantity of assets." (The UK Financial System by Buckle & Thompson - 2004).

There is not more stuff that makes us wealthier in real terms, just an on paper increase in notional price. What does this mean? Well, neither us nor the Gvt can actually benefit from this increase in value. To do this we would have to sell the property and either downsize, rent, or go abroad. Naturally we can't all do this at once, as the value of the properties would plummet (more sellers than buyers).

The only real beneficiaries then, are the banks who profit from the loans we are taking out. This profit looks good in the short-term, and some of it makes it into the Treasury's hands as tax revenues.

If as individuals we owe more in debt on our house than it is worth in reality, then we are deemed to be in negative equity. Given that as taxpayers we are underwriting the inflated value of assets that the country holds, then surely the UK itself is now in negative equity. The advice was there more than 80 years ago, but we’ve failed to heed it ever since:

"Soddy wrote that real wealth [assets] was subject to the inescapable entropy law of thermodynamics and would rot, rust, or wear out with age, while money and debt – as accounting devices invented by humans – were subject only to the laws of mathematics."

https://www.adbusters.org/share/1/1667

Robert,

For some reason you didn't mention the EU interest in this banking behemoth. The EU Competition Commission will break the company up in exchange for the state aid it has received so its unlikely to be able to capitalise on its uniquely powerful market position you alluded to. Doesn't that make this one of the worst deals in history only just behind AOL Time Warner? Ironically the government now talks about wanting increased competition in banking (e.g. new entrants) but the merger of Lloyds and HBOS was their idea.

45 Modest Mark

You have misunderstood my post.
When I referred to it being banks fault for not lending to businesses, I was referring to Govt spin attempts to transfer blame from themselves, not blaming the banks.

I fully understand how lending risk is priced, both in recessions and booms, could post further but would be lost on people who complain about having to pay back what they have borrowed, as per the first poster.

Govts may have been passive on lending since the 80s, but not many have claimed to end Boom and Bust and presided over the biggest since the 30's depression. Then blamed everyone else for it.

There is no doubt that most taxpayers want to know where the exit strategy is to all of these taxpayer guarantees and loans.

How many of these toxic assets are held by us and what will happen to them?

How much interest is being paid on government loans.

How will the pension black holes be filled and at what cost?

Just how much will the ordinary person have to pay and for how long?

Who is in control and making the decisions?

These are just a few that I can think of but there will be many more.

Until these questions can be answered what goes on in the financial world has little relevance to the ordinary person's day to day life.

Private Pension black hole is a mere accounting convention that will be 90% repaired by economic recovery. The state pension black hole is a quite legitimate ponzi scheme that as it has no end and there are always new entrants should never collapse, I mean car tax doesn't go on roads,does it?

The UK net asset worth is approx 7 trillion, so a couple of hundred billion in a dynamic market that could well see that asset/ liability gap disappear in 5 years is neither here nor there.

The Pound v US dollar is over 1.70 at the mo which is where I hope it stops,no higher please, but we can live with a further 10% appreciation v the Euro to bring it to the high 70's without too much damage to trade.

House prices will trickle up until sellers are tempted back in, then prices will drop a bit, then rise a bit, more sellers, price drop a bit etc for the next year to 18 months, flat pricing overall and then a steady but very unspectacular rise, then a mini boom, then a mini panic then back to a slow rise.

BREAKING NEWS: No kids seen in Slough with distended bellies, malnourished or Kwashiokor symptoms, Not a single pensioner found dead and frozen in the gutters. Mass exodus of population evacuating the country in direction of Costa del Sol, Persons seen buying large flat screen t.v's, Many thousands of 09 reg cars spotted on roads. Houses still standing in all parts of the country. Restaurants crazily staying open, along with antique shops, Nail salons and Harrods.
Somebody should tell them.

Robert

This is nautonier!

My posts on No's 8 and 25 have been posted with 'you' as the username.

There must be a problem with the web-site?

44 writingsonthewall

Fair point, but I do think people are beleiving the hype.

Two points on your post:
1 Govt didn't benefit. I think they did, as most politicians don't look to serve the country only themselves. By fuelling the boom they got reelected twice, most politicians become power crazed and want to stay in office forever no matter what. Sounds familiar?
2 Bankers Benefited. Yes I think they filled their boots while they could. But what do we expect them to do their not charitable institutions. If you leave a load of kids in an unsupervised sweetshop, they will stuff themselves full of sweets until their sick. Sounds familiar?
I'm just surprised that people expect private institutions to be run properly unsupervised, that's why they need effective regulation.
And the reponsible person for the UK Regulatory system is?

57. At 12:12pm on 05 Aug 2009, inoncom wrote:

"#51: the £223bn is not the gap between assets and liabilities. It is the gap between lending and deposits - a gap that is filled by short-term borrowing"

Very true - but wasn't it the rise in the LIBOR which brought down Northern Rock? Which way do you think it's heading now that there are 'better offers' in the lending market - like Gilts.

The Government is now in comeptition with the other borrowers (thats us) and soon rates will begin to rise. The LIBOR has long since been detached from the BoE rate and this was evident when NR sank.

The whole thing is ticking time bomb, based on that good old accepted ponzi of fractional reserve lending.
If I were a Lloyds shareholder I would be concerned that such a large gap is expected to be filled by short-term lending on the money markets.

...but then I'm not and investor - and for good reason too.

Robert

You are missing the real story. Joe public is paying big time for this mess. Assuming Joe public can even get a loan, look at the available rates. Do you actually talk to the public? or do you rely on your banker friends to provide you the (one sided) story?

35. At 10:56am on 05 Aug 2009, writingsonthewall wrote:

Sorry, we don't elect bankers in this country and there isn't a mainstream party which is about to change the behaviour of the banks any time soon.

Therefore the election will NOT solve ANY of the problems we have at the moment - even if it makes the public feel like it's done something."

Well, let's all vote for a party that is actually committed to taking on the banks, this is what we can all do to bring about real change in this country. I quote here from the Green Party's website -

"Here are just some ways the Green New Deal tackles the most pressing problems we face today:

- A new architecture for the financial system so that it serves the ‘real' economy, this includes breaking up the big banks so they are no longer ‘too big to fail' and a massive clampdown on tax avoidance to generate £10 billion in revenue."

https://www.greenparty.org.uk/policies.html

67 littleholt

Your post sounds so far fetched I'm inclined to belive this could be true.
If only Brown was that clever, I might have some respect for him.
Hope it's not true, but great post.

23. At 10:46am on 05 Aug 2009, jolo13 wrote:
I just wondered if, after site maintenance, we can now use the £ sign.. It is beyond belief that the BBC blog shows a $ sign and not the £....

You find this beyond belief, what abot the guy who writes the blog who has no interest or experience in business, but just banking and things that happen in his own little world. Is show the BBC for what it is. A London based old boys network!!!

#62 YAM750

Yeah, you pick 'a year ago' - I'll pick a year and a half ago (when the crunch actually began for the markets) when the share price was 719p compared to the 302p it is today.

So Barclays haven't used the scheme (yet) but have left their options open - and ultimately have sold a large stake to the middle east as opposed to the Government. Which is better? the devil you know, or the devil you don't? The bottom line for shareholders is that they got screwed over again.

Also remember that Barclays got lucky with the ABN Amro deal because they would have been sucked up like RBS if their intial bid had gone through. That's all been forgotten and written up as 'skill' - but in reality it wasn't skill at all - merely luck.

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

BTW Robert,

Are these losses based on asset write downs where the BANKS CHOOSE THEIR OWN VALUATION - or real write downs where the market value is used?

I am very puzzled because if they are based on the prefferred accounting method then the losses are much worse than they appear.

However I suspect the banks think if the losses come out gradually then we won't notice how bad they are and the entire system won't collapse.

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

WISE UP, WISE UP!

I've heard two individuals use the the phrase 'VARIABLE COMPENSATION' instead of the words remuneration and 'BONUSES' over the last couple of days.

One of them was John Varley and the other was Robert Half, a banking recruiter/headhunter, on Radio 4.

Is this just a cynical attempt to take some of the emotion out of the charged atmosphere about banking now in the public arena?....probably!

It's a bit like the government switching to using the word migrant instead of immigrant (less emotive).

'Supine politicians, arrogant, greedy banks and why they could trigger another crash'

https://www.dailymail.co.uk/debate/article-1204109/Supine-politicians-arrogant-greedy-banks-trigger-crash.html

The scale of these losses is mind boggling. Could a whole navy load of drunk sailors on shore leave manage to spend their way through so much cash ?

It would be interesting to see WHERE these dodgy loans and investments have been made, and what is being done to recover them.

I can name several "luxury flat developments" that remain stubbonly unsold (because of inflated prices) , at least one "prestigious (=expensive) shopping centre developments", that was obviously a white elephant from the start, at least one "major hotel to meet the enormous demand" that remains largely unoccupied.

Is this the sort of thing where our dosh has gone?

As the taxpayer is now bailinbg out these schemes may be they should be requisitioned for social use?

Yet another example which begs the question, “what on earth were our so called regulatory authorities doing” and underlines the fact that the government has so little power to effect the banks.
I am self employed and was hoping to get some help this year from my bank RBS. Just had a letter explaining that to have a £2500 overdraft facility continued I will be due to pay £150 and thereafter interest to be charged at 7.1% Makes you wonder, would it have been better to let them all fall and fight for survival like the rest of us!

79. islider55

Fair comment,

I would point out that
1) On an individual basis MP's get paid no matter whether they're in power or not - but I agree as a party there is always the thirst for power.

2) Your explanation compares bankers to children - and that says it all for me - maybe we should let the children run the banking system as they might actually do a better job.

The argument for regulation is a red herring, it's never worked before and it won't ever work in the future. They can't even decide who will be responsible at the moment (and that's both parties proposals) and even if you could decide the regulator would grow to such an enormous size it would cost the tax payer dearly. Added to this it needs to be filled with ex-bankers (as they know the tricks) - which makes it one big old boys club.

It's the same with the police force, they don't invest enough to eliminate crime completely because they can't justify it. It's managed on a 'catch the ones you can' basis - as is the financial regulator.

#78 nautonier

Now my username has been changed to 'you'.

My mum always said it's rude to address someone as 'you'...especially if they were not a servant!

82. magnetic_monopole

very good - and that might persuade me to vote green.....however....

Last night on Channel4 news there was an old time ex-Lloyds CEO who said that the reason NR, B&B etc got into trouble was because they had to find a niche to break into the market - which led them to riskier products (BTL & 125% mortgages)
He effectively said that many banks competing would face this problem - and without actually saying it - because the same regulatory system that's supposed to save us from destruction - makes entry into the market (as a bank) nigh impossible.

Simply breaking up the banks is not a solution. The only way you will ensure you stop a credit crunch is for lending to be run by the state - who can then use any profit to re-distribute in the Economy for social good.
i.e. Instead of lending profits going on Ferrarri's and Porsche's - they will go on Hospitals and Schools or improving energy efficiency.

The premise of the Government (every one since 1974) has been that if you make people rich they will spend responsibly. Clearly this has completely failed.

Finally tax avoidance is never going to be resolved until you simplify the system and root out all the MP's who benefit from the system themselves.
What no-one seems to realise is that the IR are well aware of many of the tax avoidance going on but require new legislation to catch it (it's technically evasion, not avoidance) - and strangely too many MP's don't want to change the law in this area - I wonder why....

Gordon and Alastair should be congratulated for their foresight in taking measures that led directly to clear recovery in the markets and to all-important rising house prices. This should soon rectify the fall in values of structured mortgage products, and enable equity release to restart and thus lead to sustained economic growth.

Quantitative Easing should be continued long-term as it has not weakened the markets and has been wholly beneficial. The banks would be on life-support again if it were withdrawn.

Full recovery and normalization should be well on-track by next May and Labour will receive its due rewards at the polls.

writingsonthewall

How many hours a day do you spend thinking about and posting on the subject of the credit crunch!? It can't be a healthy amount.

The blame game is a waste of time.Half the Scottish mafia including Brown and Darling are still in place controlling things having not even received a reprimand for past mis management of the banks.The reality is that in-spite of the Government huff and puff nothing much has changed.
What I would like to see is not a philosophical debate on banking between supposed banking gurus together with young econonomist fresh from university getting terribly excited because they have to re-write their economic models but a straight forward plan presented to us,in words of one syllabal that makes us feel better about the future of our economy and hard earned money.

"Lloyds blames HBOS for £4bn loss"

Is the headline on the BBC news site.

Well you don't say - so it wasn't anything to do with Lloyds was it (except there were losses directly attributable to Lloyds and not HBOS in the results)
Looks like Banks haven't learnt what the word HUMILITY means yet.

"Finally, Lloyds has asked me to point out - in case it's unclear - that it did conduct due diligence on HBOS, but not as much as would have been ideal if there weren't important deadlines to meet".

So, they would have been properly diligent and "prudent" in their dealings had another "spiv" not been holding a gun to their heads and forcing a "deadline" signature?

Name names, Robert; who was setting the deadlines and not allowing the process of "due diligence" to be completed?

I am fascinated to learn what interest the Government is charging for these loans to banks, does anyone know where this can be found?

The Lloyds stake is an equity one - so unless they're planning a dividend this is effectively 'interest free'

....which is odd seeing as the Government is being charged interest on the money it borrowed to take the stake (Gilt rates).

mmmmmm - is anyone else getting this yet?