Prior to the financial crisis, Lloyds Bank was on course to make an £807m profit on the year which was still an 80% fall from the year before but at least it was a profit. Its own toxic debts were over £30bn but were small compared to others.
Then came the greedy and uninspired decision to takeover the ailing HBOS group which was hurtling down the toilet at a rate of knots - no warning signs there then. It was clear, that while the idea sounded good with Lloyds taking advantage of the economic furore to grab 28% of the UK mortgage market and a much larger group, when the deal neared closing that the Lloyds team was not as keen on the idea as they first thought. So at the very last possible moment, the PM himself stepped in and made sure that all parties knew that this deal had to go ahead.
This waived competition law, it waived due diligence and it waived common sense - it simply had to happen. It was a political thing over ruling business sense.
The full extent of the stupidity arrived yesterday as the newly created Lloyds Banking Group announced that it had set aside £260bn of toxic debt for the taxpayer to shoulder as a liability, to be insured at a premium of £16bn of which 83% of the debts came from HBOS. To boot 65% of the ownership of the group now lies in taxpayer hands.
It is a stupid story that epitomises the bad business of banking and the ludicrous policies of a failed Government. A perfectly good bank has been ruined by a perfectly bad one.
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