Capitalism breaks

[northwind]

So, capitalism broke today... Don't know if you noticed. HBOS, One of the country's stronger financial institutions and the UK's biggest mortgage provide just got driven into a likely merger (which will be approved, riding roughshod over all monopolies and mergers practice) by nothing more than the stock market in all its glory.

The company is exactly as solid financially as it was last month, and stronger than it was 6 months ago, but suddenly people are talking about whether or not it'll survive- and not because the company's making a loss or not secure or underfunded, or even because of panic-withdrawals like Northern Rock, but purely because the shares dropped in value. The FSA still consider its funding solid, and it has no capital shortfall and less exposure to the credit crunch than most large financial institutions.

Of course, the shares largely dropped in value due to shareowner panic selling, premeditated short-selling, and wider market speculation, wiping billions of pounds of value out overnight for no practical reason whatsoever. By any real assessment, the company was in no danger at all, and was in fact stronger than its competition, but the imaginary value of its shares outweighs the real value of the company. It's as though someone's stuck a £1000 sticker on a £10000 car in a showroom, and then the shop's happily sold it to them without noticing the big £10000 sticker behind it.

So, this is what happens when the lunatics take over the asylum. Isn't it bracing! We all live in this system and it's run by... nobody. And now it can't even be counted upon to look after itself, never mind anyone or anything else. The idea that the market will take care of itself and run in its own best interests always looked ridiculous to most people, but now it's proven to be such- it's a shepherd who'll kill his flock to make it easier to shear.

Maybe I'm a bit biased :D I'm not going to lose my job over it, at least not in a hurry, but a lot of people are.

[Pedrosa]

Oh if only I had a large lump of readies under the mattress right now! All those juicey bargain shares to be had and no reason to expect a long term involvement for a handsome return...sighs.

[Ed]

When I was the company solicitor at Birmingham Midshires, the Treasurer was one Dan Watkins. He is now HBOS's Treasury Director. He was a practical and likeable bloke. I can only speak as I found. I simply cannot believe that he would have done anything to place his bank in jeopardy. He was honest and trustworthy, risk-adverse, and a strategist. I got on well with him. i used to write occasional letters for him mainly to swap counterparties who were being awkward. Unlike others there, I had the greatest respect for him. He was one of the few senior managers who weren't full of bullsh!t.

I've been thinking of him today and how he must be feeling, watching his bank being wiped out.

[Warthog]

DO you reckon it is capitalism's fault, or the fault of a sensationalist media and a majority population of dumb sheep?

[CoolGirl]

DO you reckon it is capitalism's fault, or the fault of a sensationalist media and a majority population of dumb sheep?

Greedy shareholders. Only they could approve the risk of sub-prime lending in order to reap the potential profit. Most of them have forgotten the 'your investment may go down' bit.

But then consumers were happy to buy things they couldn't afford on credit they couldn't pay back.

Which is worse?

[Pedrosa]

Sadly there are many people who have the cash to invest but are extremely ignorant of many basic economic principles. Hence knee jerk reactions which do nothing but completely undermine the market and exagerate any blip.

The mortgage situation in the U.S was though a very dangerous risk to take and I cannot believe that it was allowed to go on at the levels talked about.

[the_lone_wolf]

the OP has deeper meaning if you play this youtube video whilst reading...

http://uk.youtube.com/watch?v=WWsFntAmE3k

:D

[rob13]

I might nip into Halifax tomorrow and see if I can get hold of some shares, especially if they get taken over tonight.

[Lozzo]

I have a close friend who sells, arranges and collects on sub-prime loans. When times get tough like they are about to, he swops jobs to become a debt collector and repo-man. He's worth quite a bit for a 35 year old maried guy, owns his 3 bed semi outright, has a fair few flash bikes, toys etc, all bought and paid for. His wife underwrites large loans for a major car leasing company, she doesn't do so bad either.

When he starts reposessing cars I may go to work with him.

[northwind]

Lets be totally clear here, today's situation is nothing to do with sub-prime lending or overexposure to bad debt. That's what's set up the possibility for what's happening now, but HBOS had already taken the hit for its involvement in sub-prime US markets, and now it's less exposed than most UK banks. Its overall risk exposure has been falling for the last year, and its available capital has, I think, never been higher. In the real world, the company's still as strong as it was 6 months ago, less exposed to bad risks, and in no danger whatsoever of going out of business. We'd even survive a Northern Rock-style savings run, better than any other UK bank could (we have greater percentage of disposable assets and a huge cash pool) There was speculation in the press that we'd have trouble refinancing $200 million worth of loans this year, which is madness, we have cash assets around 15 times that big let alone disposable assets and guarantees!

HBOS has actually been taking a beating for doing all of these pragmatic things- Andy Hornby got mauled in the press for issuing pessimistic market predictions right at the start of the current economic problems, hurting the bank then, and then he got mauled again when he was proved right for not somehow preventing it all. Our rights issue was designed to raise a war chest to enable us to survive panic withdrawals or large market upheavals, and it still would, but that's not where the threat is (worth mentioning that our share issue drove the market price down further, despite adding to the value of the company and helping to safeguard it against the current economic problems- again, the stock market punishing right action)

I think some people have the impression that the company has taken risks, been caught out, and is now paying the price- in fact that already happened, 6 months ago, now it's just paying the price for being a juicy undervalued target in a circle of sharks.

Communist? I work for a bank :D But isn't it ironic that it's the lack of market regulation that sets up situations like this- but the current market situation is also being used as the excuse to override some of the few marketplace protection regulations we have (monopolies and mergers commission). The fact is, we have real valuable assets being undermined by market trading. The economy's going to be hugely damaged by either outcome of this situation- with likely major job losses and also loss of market choice for consumers. All because the shares are worth less than the true value of the asset, and because there are no effective controls out there.

[Biker Biggles]

So who will be next Northy?Bradford and Bingly?Or will the sharks go for one of the really big players?
And what about the persistant rumours around HBOS in that there has been insider dealing creating rumours of "problems" to drive down the share prices and fortunes made on short betting?
Personally Id like to see those responsible for the current debacle relieved of their vast fortunes and made to go out and work for their living.I must be a Marxist Leninist or something even worse.

[northwind]

The thing back in March with us was a bit different... But shows exactly how ****ed the system is. Trash and cash- spread a malicious rumour, wipe 3 billion off the value of a company in an hour. And it's almost impossible to prove, which is why the FSA investigation was called off. Of course, they know who did it- you just look at who profited. But that's not enough. It's not even a zero-sum game, it's a net-loss game, people trading a relatively small personal profit for a massive widespread loss.

B&B are looking a bit wobbly, but I'm no stock market expert, I haven't a clue what'll happen next.

[chakraist]

I have a close friend who sells, arranges and collects on sub-prime loans. When times get tough like they are about to, he swops jobs to become a debt collector and repo-man. He's worth quite a bit for a 35 year old maried guy, owns his 3 bed semi outright, has a fair few flash bikes, toys etc, all bought and paid for. His wife underwrites large loans for a major car leasing company, she doesn't do so bad either.

When he starts reposessing cars I may go to work with him.

You ever seen the film repo man? Looks awesome.

[gettin2dizzy]

Capitalism breaks? I'd say that this is simply part of the capitalism process.

The strongest in the pact wins, and Lloyds; who have stood sternly against trading in sub-prime, have just aquired a huge amount of business for a criminal price.

They played their cards right, and they ultimately took the long-term win. I don't know about you, but it's given me more trust in Lloyds.

[Ed]

Capitalism breaks? I'd say that this is simply part of the capitalism process.

The strongest in the pact wins, and Lloyds; who have stood sternly against trading in sub-prime, have just aquired a huge amount of business for a criminal price.

They played their cards right, and they ultimately took the long-term win. I don't know about you, but it's given me more trust in Lloyds.

There was nothing wrong with HBOS. A sad day when this sort of ruthless speculation can destroy a bank. Not just the plc but all the jobs that are going to follow.

As for Lloyds - if HBOS does have a lot of junk on its balance sheet, well Lloyds have just acquired it. The funding problems - if any - aren't going to disappear simply because it's called a different name.

Finally, the compettion aspects. The Government has effectively said that if you're big enough (and the Government is desperate enough) you can ignore the competion laws. In other words, we'll disapply the law when it suits us. An unfortunate precedent, maybe. One day this will come to bite them in the bum.

And what about the EU? Has the EU Commission sanctioned the competition aspects of this deal? I don't suppose that they will be very pleased.

[gettin2dizzy]

There was nothing wrong with HBOS. A sad day when this sort of ruthless speculation can destroy a bank. Not just the plc but all the jobs that are going to follow.

As for Lloyds - if HBOS does have a lot of junk on its balance sheet, well Lloyds have just acquired it. The funding problems - if any - aren't going to disappear simply because it's called a different name.

Finally, the compettion aspects. The Government has effectively said that if you're big enough (and the Government is desperate enough) you can ignore the competion laws. In other words, we'll disapply the law when it suits us. An unfortunate precedent, maybe. One day this will come to bite them in the bum.

And what about the EU? Has the EU Commission sanctioned the competition aspects of this deal? I don't suppose that they will be very pleased.
HBOS accounts are pretty opaque, whilst Lloyds has been opposed to the sub-prime from day one (A CEO who has earnt his wage perhaps? He must be alone!).

I think this was the best outcome, irrelevant of the competition-law abuse by ol' GB. Nationalising the banks is a far worse state of affairs which only increases the insecurities felt by share holders. By allowing a successful take over, which proves banks CAN stand on their own two feet is exactly what the market has needed. I already feel cheated by bailing out Northern Rock, who in comparison to HBOS is just a local branch!

I do feel for those who have lost their jobs though, especially in such a bad economic climate. But to have 40,000 lose their jobs is preferable to the collapse of many more banks, the jobs that go with it, and the bringing down on it's knees of an economy inevitably relied upon to support these new found unemployed.

[Alpinestarhero]

So reading your initial post northy, am I right in thinking there is a little bit of media-fueled panic contributing to the problems with various economies? I'm not so clued up on finance, but I'm keeping an eye on everything thats going on and trying my best to read past the media hype/panic

I thought it was a good idea that Lloyds TSB brought out HBOS, what with all that palava last year with NR. It keeps everything settled, and I suppose if things recover, HBOS could break away into its own independant bank again? Mind you, thats not likely.

Matt

[Flamin_Squirrel]

Greedy shareholders. Only they could approve the risk of sub-prime lending in order to reap the potential profit. Most of them have forgotten the 'your investment may go down' bit.

But then consumers were happy to buy things they couldn't afford on credit they couldn't pay back.

Which is worse?

Greedy shareholders? I'm assuming you have a pension? If so, you're a 'greedy' shareholder too.

Funny how everyone's happy to see the value of their retirement fund going up no questions asked when things are going well, but so quick to blame everyone else when it isn't.

[carty]

I reckon all of this market turmoil is brought about by kids working in Canary Wharf who think they know what they're doing.....and don't.

'Look at me, I'm going to be a bigshot banker'. I know a word that rhymes with banker!

[MiniMatt]

It is definititely odd, I'm with Northy on this one, the regulatory system allowed an apparently perfectly healthy business to somehow collapse without actually being in any danger of collapse. I can't say as I understand how though, being a geek I can only count up to "F".

Don't think we can blame media sensationalism for this one either, I could see that was potentially something to do with Northern Rock - although even then there was a pretty consistent "your savings are safe" message from the media. But the more you say "don't panic" the more people do I suppose. I remember speaking to the office cleaner at the time, bless her socks, not the brightest of people she proudly told me how she'd withdrawn all her savings because the "banks could collapse any moment" - to which I replied "please don't tell me it's under your mattress"... she got that "how did you know?" look...

It does seem that HBOS shares were driven low, I can understand that shares in all banks are falling but there doesn't appear to be any rational as to why HBOS shares were driven lower at a faster rate than any other bank. Unless someone would profit from that...

It's as though market economics and school playground gossip are actually far closer bedfellows than I'd previously assumed.

[Grinch]

Huh?

Is this speculation here not the cause of such problems but on a larger scale?

[gettin2dizzy]

It does seem that HBOS shares were driven low, I can understand that shares in all banks are falling but there doesn't appear to be any rational as to why HBOS shares were driven lower at a faster rate than any other bank. Unless someone would profit from that...

Truth of the matter is that we will never know. The trail was so complex HBOS themselves weren't even sure how exposed they were! This was a precautionary measure which may well have saved 1/3rd of mortgage owners in the country from suffering. Seems sensible to me.

I don't blame shareholders for getting out at all, it's their money on the line! Whilst 'everyone' reacting does cause a collapse, any economist would remind you; you're not 'everyone'. Ever seen an economist vote? ... Exactly.

[Ed]

BBC News page has a ticker saying that Gordon Brown says that we must clean up the financial system.

What an admission of failure. He created the current system when he was Chancellor. It's always been too complex what with the FSA, BofE and the Treasury all having a finger in the pie.

And his system has been found wanting.

[Biker Biggles]

I think the whole edifice,the international "system" has been found wanting.The American "system" is currently collapsing even more spectacularly than ours and that is regarded as more rigorously policed.I dont want to attack or defend Gordon Brown's record but I would suggest that the problem is structural to the economy and the result of decades of policy failure by governments of both parties.
No one can escape the consequences of this failure,but I would expect that those countries that still have an industrial infrastructure might be better placed to survive and produce their way out of the mess.Hard times for all,but very hard times for those who can produce nothing that others want to buy.

[MiniMatt]

BBC News page has a ticker saying that Gordon Brown says that we must clean up the financial system.

What an admission of failure. He created the current system when he was Chancellor. It's always been too complex what with the FSA, BofE and the Treasury all having a finger in the pie.

And his system has been found wanting.

Much as I hate to defend the one who has stood by and watched a succession of home secretaries go nuclear on the concepts of democracy, equality and liberty I'd have to point out that it's not exactly just British financial institutions going pear. Unless we are blaming Gordon with the global financial tits up, British institutions are so far doing ok, so far we've only spent billions on Northern Rock and created a monopolistic giant. Compared to the US who have spent tens of billions (near a hundred billion now) bailing out mammoth global institutions. Barclay's is lined up to buy the juicy bits of Lehman Bros and I think I heard that HSBC are pawing over the fire sale ashes of AIG? (or was it Wash Mutual?) Both "British" companies - as far as any global mega corp can claim to be tied to one nation at least.

[SoulKiss]

Much as I hate to defend the one who has stood by and watched a succession of home secretaries go nuclear on the concepts of democracy, equality and liberty I'd have to point out that it's not exactly just British financial institutions going pear. Unless we are blaming Gordon with the global financial tits up, British institutions are so far doing ok, so far we've only spent billions on Northern Rock and created a monopolistic giant. Compared to the US who have spent tens of billions (near a hundred billion now) bailing out mammoth global institutions. Barclay's is lined up to buy the juicy bits of Lehman Bros and I think I heard that HSBC are pawing over the fire sale ashes of AIG? (or was it Wash Mutual?) Both "British" companies - as far as any global mega corp can claim to be tied to one nation at least.

HSBC, the Hong-Kong and Shanghai Banking Corporation, British ????

Actually, checking my facts out (http://http://en.wikipedia.org/wiki/Hsbc) - it IS !!!!!! :cool:

[gettin2dizzy]

Someone is making a LOT of money out of this crash. It's not like it could have been orchestrated, or at least encouraged at all ;)

[Pedrosa]

BBC News page has a ticker saying that Gordon Brown says that we must clean up the financial system.

What an admission of failure. He created the current system when he was Chancellor. It's always been too complex what with the FSA, BofE and the Treasury all having a finger in the pie.

And his system has been found wanting.


I have to object there. The basis of the present system lies with it's roots right in the heart of Thatcherism. A philosophy that promoted self greed at the risk of all else and others. An attitude that has up to the last few days allowed a lot of questionable human beings to strut around in the City of London and the like. Waving in the face of good hard working people, their easilly gotten gains.

I feel sure internationally recognised and applied regulations will be introduced in order to prevent short term traders and the like fuelling the instability or perceived instability of solid companies by causing amateur investors to go rushing to bail out.

[SoulKiss]

I have to object there. The basis of the present system lies with it's roots right in the heart of Thatcherism. A philosophy that promoted self greed at the risk of all else and others. An attitude that has up to the last few days allowed a lot of questionable human beings to strut around in the City of London and the like. Waving in the face of good hard working people, their easilly gotten gains.

I feel sure internationally recognised and applied regulations will be introduced in order to prevent short term traders and the like fuelling the instability or perceived instability of solid companies by causing amateur investors to go rushing to bail out.

I KNEW Thatcher was behind this :)

[Flamin_Squirrel]

I have to object there. The basis of the present system lies with it's roots right in the heart of Thatcherism.

I don't know where people get that idea from. The welfare state concept is practically a baby - less than 100 years old. Like a toddler that threw a tantrum, it ended up with a smacked **** for making unrealistic demands on those that provided for it.

I could well be wrong, but the way I see it, she put things back more to where they were. As such I don't see how she could be blamed for us becoming a nation of selfish gits. Especially as it's a problem that's only got worse under 'caring' Labour.

[Biker Biggles]

Not much to do with the welfare state I think.
What the Thatcher and subsequent governments did was encourage the transfer of power from industrial production to commercial,City based organisations like banking and financial services.Previously these had been important but not totally dominant in our economy.That appeared fine as long as the money kept flowing in and we had "family silver"to sell off and credit was easy.
Now all that has changed which is what makes our present position so dire.We have very little industrial base to produce our way out of this,which is how we got ourselves out of the 1929 crash and the post war rubble.

[Pedrosa]

I don't know where people get that idea from. The welfare state concept is practically a baby - less than 100 years old. Like a toddler that threw a tantrum, it ended up with a smacked **** for making unrealistic demands on those that provided for it.

I could well be wrong, but the way I see it, she put things back more to where they were. As such I don't see how she could be blamed for us becoming a nation of selfish gits. Especially as it's a problem that's only got worse under 'caring' Labour.

It might help if you replied to a point that was actually made. I made no reference at all to the Welfare State. There was a whole philosophy that was thrust at an eager yet largely uneducated populace. Things like buying your own house was the most sensible and risk free venture one could engage in....simply not true although it can have it's benefits.

Also the enticement of people to buy shares in companies that were previously owned by the state. Therefore asking the people to absorb any risk more directly. Dont get me wrong many people did well from both of the above situations.

But I was previously alluding more to the brokers ,dealers and traders who actually provide no real contribution but simply play with the money of others. Things go wrong,yeah they lose their job...small comparison to what investors can lose.

But I allude also to the snotty nosed irks that drive the porsches and pay a fiver for a coke as they have no real sense of value, they just like to earn it and flash it around. A shallow and superficial generation that all stemmed from the Thatcher years. Disagree by all means but check it out first.Check out the attitudes,it is the kids from the Thatcher years,(born of parents who simply wanted more and more and lost sight of other priorities...like family responsibility)

It is easilly recognisable where the rot began and the USA worked in a similar way,so much so that GWB is now getting hammered for allowing financial institutions to run amok largely unmonitored,all for the sake of greed.

[Biker Biggles]

So true.Thatchers children we call the twenty somethings at work.Absolutely self centered and very little concept of loyalty to anything or any group.Knife anyone (metaphorically) to get ahead and smile blandly while doing it as if it was normal behaviour.

[gettin2dizzy]

stuff
I'm glad you're back pedro :thumbsup:

Some part of me can't help but feel you've had involvement in this sector before... ;)

[The Basket]

Please don't call capitalists sharks.

Sharks are noble creatures that are the apex of evolution.

The City Boys are just in it for money and willing to destroy what they feed off.

They are more like a virus.

[northwind]

What an admission of failure. He created the current system when he was Chancellor. It's always been too complex what with the FSA, BofE and the Treasury all having a finger in the pie.


I'm not sure that holds any water Ed... The SIB was after all founded in 1985, and the Financial Services Act that made it what it is was passed in 1986. I don't think he invented the Bank of England either.

In fact, I don't think anyone really built the system we have- I certainly wouldn't blame Thatcher, though I'm sure she'd approve. It's more the opposite, sequential governments have allowed it to develop as it has, by choosing never to intervene or direct development. The basic idea being that the market loves profit and growth, and will act in its own self-interest, and profit and growth are also good for the country so industry's self interest is supposed to be in the country's best interest. Of course, now we're seeing the exact opposite, with a negative market spiralling downwards and seeking to profit from loss.

In this case the FSA did exactly what they were supposed to do, and confirmed that HBOS's position was under no threat, and that it was well funded and stable. It's just that the health of the company is no longer relevant.

Please don't call capitalists sharks.

Sharks are noble creatures that are the apex of evolution.

They are more like a virus.

Nice analogy- particularily since an aggressive virus kills its host and so destroys itself, when a less aggressive virus would just weaken the host and so survive for longer. The only difference is that a virus doesn't collude with other virii.

[anna]

I'd actually like to add that the FSA was only compiled after corporations were asked to govern themselves through the voluntary GISC and failed miserably to do so! The FSA is still a fairly new regulatory body and whilst doesnt get everything right all the time is a damn sight better then not having anything at all.

[gettin2dizzy]

In this case the FSA did exactly what they were supposed to do, and confirmed that HBOS's position was under no threat, and that it was well funded and stable. I
HBOS weren't stable at all. They were lending money they didn't have in a fashion like Northern Rock. Whilst they had huge assets; they weren't enough to support the frivolous lending in the case of an economic slump. Look at HSBC or Lloyds to see a bank that were acting in a sensible fashion.

[northwind]

Just not right mate... There's a difference between being stable and well funded, and being fully secured. As the FSA stated, HBOS could cover its maturing debts- it had sufficient disposable assets and redemption income that even if absolutely no wholesale lending was available next year- not very likely- it could cover the shortfall without a dramatic sale of assets. Fact.

[yorkie_chris]

So basically there was nothing "wrong" with the company.

Trial by media appears to have found HBOS guilty of being basically loan sharks, needing a "big boy" to bail them out.

Every sensible source seems to see them as a victim of scaremongering, due to which a lot of my mates stand to lose their jobs in what was last month a fairly sound company.

[northwind]

I wouldn't say nothing wrong... Like most of the industry, we were going to pay the price of over-reliance on wholesale lending. That would have meant job losses, probably selling off major assets if the current downturn continued for a couple of years (we could cover one year with disposable assets, but it'd take a couple of years to change our funding model enough to remove the reliance completely, so it would have meant some damaging asset sales in the meantime to fund that). I've been involved in some prep work for this already, some parts of the group were being set up up to make them practical to seperate off if need be, as a long-term fund raising measure- giving them systems independance etc so they could function solo.

We'd have taken a pounding for sure, and deservedly so. But still, yep, without outside intervention we would almost certainly not have gone to the wall. Maybe if the crash continues, but frankly the same applies to every other UK bank, including Lloyds. We're not even the most exposed UK bank!

One thing I will say here is, don't believe everything you read from HBOS either just now- Andy Hornby's job until yesterday was to keep us viable as a standalone company, now his job is to make our shareholders accept the merger.

[gettin2dizzy]

Just not right mate... There's a difference between being stable and well funded, and being fully secured. As the FSA stated, HBOS could cover its maturing debts- it had sufficient disposable assets and redemption income that even if absolutely no wholesale lending was available next year- not very likely- it could cover the shortfall without a dramatic sale of assets. Fact.
I'm not convinced to be honest. HBOS HAD been lending money they didn't have, and their exposure to the sub-prime was even unknown to them through complete idiocy ( and is still unknown- mental!). Regardless of their share value; if they were suitably protected they wouldn't have had to let Lloyds by them for a pittance. And with regard to media intervention? Again, their own fault as they seeked profit over protection.

If they had concerned themselves with a realistic long term strategy they wouldn't have ever been in this situation. Just look at the 'boring' likes of HSBC and Lloyds who are reeling it in right now.

[ukgooner]

I'm not convinced to be honest. HBOS HAD been lending money they didn't have, and their exposure to the sub-prime was even unknown to them through complete idiocy ( and is still unknown- mental!). Regardless of their share value; if they were suitably protected they wouldn't have had to let Lloyds by them for a pittance. And with regard to media intervention? Again, their own fault as they seeked profit over protection.

If they had concerned themselves with a realistic long term strategy they wouldn't have ever been in this situation. Just look at the 'boring' likes of HSBC and Lloyds who are reeling it in right now.

What knowledge do you have of the HBOS funding model that makes you such an expert?

Maybe you should take a look at HSBC subprime loss and then compare it to HBOS subprime loss

http://www.guardian.co.uk/business/2008/may/12/hsbcholdingsbusiness.creditcrunch

[gettin2dizzy]

What knowledge do you have of the HBOS funding model that makes you such an expert?

Maybe you should take a look at HSBC subprime loss and then compare it to HBOS subprime loss

http://www.guardian.co.uk/business/2008/may/12/hsbcholdingsbusiness.creditcrunch

£3.2 billion is half of the HBOS loss.
THE Royal Bank of Scotland is poised to unveil the biggest loss in UK banking history after taking a hit of almost £6 billion from the credit crisis.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4449834.ece
HBOS have been loaning out money they have borrowed, and their demise is entirely their own fault. The CEO should be held accountable for the job losses that will emerge (40,000 my ar$e)

A drop in share price only makes the lender vulnerable IF he requires money to borrow himself. If a bank is adequately protected by their assets, the share price means sod all.

Whether speculators have forced this or not is irrelevant.

[ukgooner]

I rest my case.
HBOS = Halifax, Bank of Scotland
RBS = Royal Bank of Scotland / Natwest

[Ed]

When at BM, Dan (see post on page 1) used always to have battles with the credit people who wanted to lend money to anyone, whatever their credit record. it was the Treasury team's job to get the money made available from wherever, and part of mine to get it back when loans went wrong. Unfortunately the credit team won.

[gettin2dizzy]

I rest my case.
HBOS = Halifax, Bank of Scotland
RBS = Royal Bank of Scotland / Natwest
My bad. But I still stand by my point

[northwind]

£3.2 billion is half of the HBOS loss.


Leaving aside that you're talking about a different bank, 3.2 billion is not a lot of money in these terms. The rights issue funds more than covered that loss. I think your google-fu is weak on this one.

[Biker Biggles]

Surely all the banks are technically insolvent?Some more than others I agree but this is why we hear so much talk about "confidence".The reason they bailed out NR was because the alternative was a collapse in "confidence"and the reason the government rushed through the HBOS LLoyds affair and even changed the law to allow it was to prevent HBOS collapsing?They dont have the money to bail out HBOS so an alternative had to be found,fast.Any bank would go under if all its depositers and creditors wanted paying tomorrow,so they survive on this notion of confidence,meaning that doesnt happen.

[Biker Biggles]

Well when I mentioned Bradford and Bingly earlier in this thread I promise I didnt have any "inside" information.Looks like my gut instinct was right though.

[Ed]

Well when I mentioned Bradford and Bingly earlier in this thread I promise I didnt have any "inside" information.Looks like my gut instinct was right though.

Indeed so.

I'm incandescent that we are bailing out this failed bank. Why the hell should we. I have nothing to do with B&B, no mortgage, no savings, not a shareholder. So why should my money be used to rescue it?

If I ran my business in a reckless and foolhardy way, who'd come and save my skin? Nobody. And I'm damn sure that the Inland Revenue would then be after me with a bankruptcy petition, just to administer the kiss of death.

[SoulKiss]

And as most of the lending they did was buy-to-let I have even less sympathy.

Again, why are we bailing them out?

[gettin2dizzy]

- Bunch - of - bar - stards -

[454697819]

banks lend to each other, the more banks go under the less in the slush fund, and the economy freezes....

I am annoyed Lloyts tsb are buying up the other bank... that just seems greedy..

[Grinch]

Of course its greedy, that capitalism for you.

[454697819]

Of course its greedy, that capitalism for you.

ok granted.. but I meant that they already have TSB... now HBOS? Lloydstsbifax??

plus I dont want rebranded debit cards an all...

[Biker Biggles]

In true British tradition I see the profitable bits of the B&B will go to----

Wait for it---The Spanish Bank of Santander.

When will we realise that decades of selling the family silver to pay for our profligate lifestyles has been the cause of this demise,not the solution to it.

[northwind]

I've got no problem with the idea of bailing out a company that can be saved, like Northern Rock, where most analysts agree it can be made profitable again and will be an asset in time. But buying only the poisoned assets which will most likely always be a liability, and allowing the profitable assets to be bought by another company, is very different.

I think to be fair, the impact of losing a major mortgage lender would be massive, and very hard to predict. People are saying "Why save the bank?" Well, mortgages are already hard enough to get, losing a lender would make that worse, which would have a knock-on impact on the housing market, both for re-sale and new builds- not good at all. And the impact on people who already have a mortgage with them is really hard to predict, who knows what would happen to that loan book.

[gettin2dizzy]

I wonder if the taxpayer can profit hugely like the bankers did, now that we 'own' the branches. ;)

[Demonz]

I thought the financial services are footing the biggest bill for this and covering peoples lost cash. Overall the industry does need a shake up. I am happy to take a short term hit on housing if it means overall service will improve for the long term. Someone more efficient will move into this market as soon as space is made from the dinosaurs.

[northwind]

I wonder if the taxpayer can profit hugely like the bankers did, now that we 'own' the branches. ;)

It seems like we will on Northern Rock- though no doubt as soon as it becomes viable/profitable again some future administration will sell it off for a song. But on B&B, doesn't look likely, we're just buying the s**t.

[gettin2dizzy]

*whispers*


None of this missing 'money' really exists... But the bankers have sneaked off with what was left of the capital. So they're loaded, and we're paying off a debt that's bigger than the existing capital we have left. They won (again), we lost.

[gettin2dizzy]

It seems like we will on Northern Rock- though no doubt as soon as it becomes viable/profitable again some future administration will sell it off for a song. But on B&B, doesn't look likely, we're just buying the s**t.

We'll just sell it abroad. Like ALL of our assets.

Your electricity bill will be in Euros next ;)

[Biker Biggles]

Actually while Im in predicting the future mode heres another one.
Your leccy bill will be in Euros when the "Masters of the Universe" have milked everything from the government coffers.The pound will collapse and we will be forced to join the Euro,very much on Europes own terms.

[The Basket]

Hmmm....communism wins by default.

Damn..who would have thunk it....

Seems as though banks are no good with money. And I thought that is what they did....bah....ah well...

Greed is good.