Saturday, March 07, 2009

OK, What Was The Point ?

So HBOS was in the doo-doo. It was "too big to fail".

So it would have to be nationalised like Northern Rock.

But wait ! There was a better answer. Why not steer it into the arms of a bigger, financially sound bank - like Lloyds. OK, that would create a "much too big to fail" bank and breach all kinds of competition rules - but what the hell ?

There were obvious risks. But HMG were putting on pressure. And the lure of all that market share was just too much for Eric Daniels and Victor Blank.

So they did it. And now Lloyds is in the doo-doo too. And is now controlled by HMG.

But rather than nationalise (sans compensation, no golden parachutes for directors etc) a la Northern Crock, Gordon and Co are doing all they can to prevent the failed banks from being nationalised. They're handing over our cash in exchange for non-voting shares, they're organising asset protection insurance schemes with a tiny taxpayer upside and potentially massive downside - all to prevent nationalisation.

I'm not a great believer in nationalising anything outside natural monopolies - rail and road infrastructure, water, electricity generation and supply, maybe some telecomms infrastructure.

But HBOS and RBS have manifestly failed. I fail to see how they could have done a worse job.

And if the banks were 'too big to fail', shouldn't we be thinking, both here and in the States, of breaking them up into units which could be allowed to fail - with appropriate protections for depositors ? Instead we're creating even bigger banks.



I suppose they're looking towards all those non-exec directorships from grateful bankers when they're kicked out of office.

16 comments:

Ross said...

Wasn't HBOS due to fail right before a Scottish bye-election? Saving it helped Labour defy expectations and hold on to the seat and isn't £xxx Billion worth spending to keep Mr Brown in power?

Mark said...

'I suppose they're looking towards all those non-exec directorships from grateful bankers when they're kicked out of office.'
What a totally unwarranted slur from Laban!
Off to the naughty step and repeat this mantra 3 times-
Globalisation benefits us all.
Immigration is good for the economy and enriches our society.
Prison doesn't work.

Anonymous said...

This sort of crap is what the government did to the British motor industry. Mergers forced 'at the point of a gun' resulting in BL.

Lloyds had its problem I've no doubt. But the merger with HBOS was the stupidest thing to have done.

Anonymous said...

Laban it is Labour who created these too big to fail banks. Or at least allowed it to happen on their watch.
Authoritarians always want mergers because they want to create a single power structure that is easier for them to control. As Labour did with other industries years ago, and wrecked them too.

HBOS was formed by the 2001 merger of Halifax plc and the Governor and Company of the Bank of Scotland. (then its headquaters moved to Scotland ofcourse, I wonder if the Scottish controlled Labour would have been so keen on the deal otherwise)

In 2000 NatWest was grabbed in a hostile takeover by RBS.

The list could go on and on, with smaller banking and insurance companies in the last 10-15 years.

Look how much Santander owns, if that goes tits up it'll bring down Europe.

This problem has been partly created by the governments around the world allowing mergers trying to create bigger banks to competive globally.

If i was running the show I would immediately try to demerge all these companies to how they were before that idiot Brown took over.

Anonymous said...

BL was clearly a mistake, squeezing the whole industry into one operation.

And why name it after Leyland for God's sake! Im sure their trucks & buses were OK but surely Jaguar, Rover or Triumph would have been sexier from the image standpoint.

paul ilc said...

Laban -- Can you possibly disable anonymous comments, please? It is so confusing otherwise!

Anonymous said...

Paul Ilc - "What have you got against me?"

Anonymous said...

and me

Anonymous said...

Me too!

Blogger has now forgotten I exist - twice!

Can't be bothered to register yet again - unless I absolutely have to.

Anonymous said...

I don't know why that should be happening of a sugden - I have changed nowt on t'blog

Anonymous said...

What we need is economic fission.

Split them all up.

There used to be a clear separation between different types of banks, thus protecting you and me from being screwed by investment bankers.

The Tories de-mutualised the building societies, which is main cause of this mess.

Investment banks should not be allowed to have any connection to banks which hold ordinary bank accounts.

I don't want my money being anywhere near an investment banker.

Anonymous said...

Electricity generation? Telecomms infrastructure?

Huh?

Can it be that our host is a socialist?

Or has he just forgotten how you had to wait six months to rent a telephone handset designed thirty years previously, and that came in any colour you wanted as long as it was black...

Martin said...

"Or has he just forgotten how you had to wait six months to rent a telephone handset designed thirty years previously, and that came in any colour you wanted as long as it was black..."

This is ideological cant, and manifestly untrue. British Telecom was privatised in, when, 1984? 1985? At that time, our phone was green.

The 'handsets designed 30 years previously' had certain advantages. They were simple to use - they weren't like cordless telephones that cut out on you in mid-sentence. They were built simply, unlike most mobile phones, which are megalencephalic contraptions so full of software that they either can't turn themselves on, or whose brains are fried by a power surge when charging.

And did premium rate telephone numbers exist in the era of socialism? Can't remember; don't think so. Well, somebody had to invent them - it was unlikely to be someone who would ever have to dial them. If you want an example of bad capitalism, the premium rate telephone number is it - you have to pay to contact someone with whom you do business, with the full collusion of your telephony provider. That's not capitalism, that's a racket.

Anonymous said...

EDF is a French state-owned company, and they pretty much control our electricity supply.

The French must be laughing at us.

And look at our private rail and bus companies...all crap.

Anonymous said...

GPO telephones...

As I remember pre-privatiasation, you could get the basic dial model, the 700 series, in various colours. There was a also a push-button version, more for office than home use. Of course there was also the trimphone, that link only shows a dial version but I'm pretty sure there was a push-button version as well.

We had a black 700 series which was actually regarded by visitors as a bit racy for a home phone, most people had the other colours. We hung onto our old black 300 series bakelite for some time after the 700 became the de facto standard. Im sure we werent the only ones either.(In fact Ive still got that old 300, the GPO guy didn't even want it back in the late 70s!)

So the story is a bit less Stalinist than our anon friend at 12:28 would have us believe.

Robert said...

if the banks were 'too big to fail', shouldn't we be thinking, both here and in the States, of breaking them up into units which could be allowed to fail - with appropriate protections for depositors ? Instead we're creating even bigger banks.

Laban, you have been heard.

Or, someone stole your idea.

http://news.sky.com/skynews/Home/Business/Shotgun-Weddings-Bank-Merges-Should-Not-Be-Forced-Too-Large-Banks-Cripple-System-When-Fail---Report/Article/200903215238073?lpos=Business_Third_UK_News_Article_Teaser_Region__1&lid=ARTICLE_15238073_Shotgun_Weddings%3A_Bank_Merges_Should_Not_Be_Forced_Too_Large_Banks_Cripple_System_When_Fail_-_Report