Why isn’t the Conservative Party calling for this?

reply: I do ask for this in Parliament and will continue to do so.

Now if we could theme them on an anti-NuLabour, anti-Keynesian basis, we will be home and dry at the next election.

Alas, it is an ill wind that blows nobody any good at times like these. So can I direct Redwoodians to this bit in the NYT. I don’t know if the same is happening in the UK. Read at the end what happened to the debt of Terrible Herbst. Who was the looser?

“Failed Banks Pose Test for Regulators”

http://www.nytimes.com/2009/02/14/business/economy/14assets.html?scp=1&sq=Failed%20Banks%20Pose%20Test%20for%20Regulators%20&st=Search

And a bit from Alice on Bank size,

http://ukhousebubble.blogspot.com/2009/02/just-how-big-are-uk-banks.html

What we should really be worrying about now is that not only does the latest news on HBOS reveal the staggering ignorance and ineptitude of this government but the questionable urgency with which this deal was forced through at the time, without ensuring that it would not result in putting yet another bank at risk.

Some of these banks are said to have a leverage of 25 to 30 times equity although I confess to not having bothered to check this out yet. Nevertheless it seems quite obvious that unless you can establish some co-relationship between equity and bad assets then an infusion of equity will not be the answer.

It must be clear to all concerned that any attempt to save the banks is not only a shot (or a series of shots) in the dark but is likely to be such an extraordinary financial burden that it should be avoided at all cost.

In attempting to save the banks the government is doing no more than socialising a problem that should have been rightfully left for those who took the risk: the shareholders.

Had the £37 billion been used to capitalise a new bank for example, which might then have leveraged itself and bought the good assets from the failing banks, the situation now would now have been quite different.

That of course always pre-supposes the government were intent on getting into the banking business in the first place.

It would be very interesting to hear a rational argument for rescuing the banks, as opposed to a major auto manufacturer, engineering company or house-builder, or should we just save them all? After all they all have creditors.

I understood from the paper yesterday that the City/Lloyds had all been expecting losses from HBOS of about £5 bn, and that the discrepancy between that and the actual figure is mostly caused by Lloyds increasing provisions against the HBOS corporate loan book.

Such a change is an inevitable result of the application of more prudent and demonstrably better Lloyds TSB Management.

Demonstrably better in view of the Paul Moore revelations that HBOS Management were warned but chose to ignore these problems in 2003/2004.

Surely LloydsTSB Management only agreed to take on HBOS on the basis that it was recapitalised by HMG, as we know it was, and there must also have been a provision for adjusting the purchase price for changes to valuation of working capital. LloydsTSB have been demonstrably better managers, they cannot have missed that trick.

What were the LloydsTSB Management and their big Institutional Shareholders up to if such simple safeguards were not taken, were they clunked?

Two questions come to mind.

A. Who was on the HBOS board in 2002/5 with the skills and experience to support Paul Moore, the creative tension between Prudent Accountants and Marketers is not new. That is what experienced non-execs are for.

B. What has happened to LloydsTSB’s judgement or is this just another scare story got up by the BBC and their acolytes?

Similarly, the emphasis in the bonuses for bankers scandal has shifted. Villainise those at the very top – but pay “the tellers”. Given the perilous financial situation of the banks there is the clear implication that votes are being bought.

As an SME businessman, I note that the reported value of these bonuses is £1.2 billion. Given that the proposed value of additional bank finance through the government schemes (my application has been submitted and is yet unprocessed since the day it was announced) is £1.3 billion, it would appear that the rescue of small SMEs is only marginally more important that the futile attempt to bribe portions of the electorate.

It all presents a unique twist to the line from Burns:

“We were bought and sold for English gold”.