Britannia Radio

In the midst of the multiple tragedies that the crisis has caused and 
will cause this is the unnecessary one.  The only things in this 
dreadful tale that are not mentioned are two.  Firstly when Lloyds 
was  - or should have been - checking on the health of HBOS Sir 
Victor Blank was continually being urged by by Brown-Darling to get a 
move on!  Secondly, before the idea was even mooted an earlier target 
for Lloyds was the acquisition of Northern Rock.  This would have 
made a great deal of sense since the immediate problems had been 
stabilised.

But as it's turned out Lloyds cost their shareholders (many of them 
pension funds) their bank and Brown is exposed as totally cavalier 
and incompetent, and has cost us all dearly.

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SUNDAY TIMES 8.3.09
The deal that made a good bank bad

When the tall and imposing figure of Sir Victor Blank, chairman of 
Lloyds TSB, sidled up to Gordon Brown at a party last September, 
their chat was to result in the destruction of one of Britain's 
oldest and proudest banks. Michael Fallon, a Tory member of the 
Commons Treasury committee, yesterday called it the "most expensive 
cocktail party in history". It coincided with Lehman Brothers filing 
for bankruptcy and the entire banking system teetering on the brink 
of collapse. Any sensible chairman would have concluded that it was a 
good time to batten down the hatches.

Sir Victor thought differently. This was a chance to snaffle HBOS, 
his stricken rival, at a knockdown price. But he could not do it 
unless the prime minister agreed to waive competition rules. Mr 
Brown, faced with the possibility of having to nationalise HBOS, was 
only too pleased for Lloyds to take it off his hands.

This weekend's taxpayer-funded bailout of Lloyds Banking Group shows 
how much these two men have to answer for. A bank that before 
September was described as too staid is now 65% owned by the 
taxpayer. This rises to 77% if the £15.6 billion fee it has incurred 
for putting £260 billion of its bad assets into the government's 
insurance scheme is included.
This was a rotten deal. In the midst of a financial hurricane it has 
become apparent that Lloyds had no idea what it was getting into. 
Eric Daniels, the chief executive, has admitted to carrying out three 
to five times less due diligence than would normally be the case. The 
news that HBOS had lost an astonishing £10.8 billion last year was 
apparently a shock to the Lloyds board.

As recently as January Sir Victor was offering public assurances that 
"everything is out there". Everything was not. As Roger Lawson, of 
the UK Shareholders' Association, put it: "Shareholders are angry and 
they would like to see the whole board, Blank included, go because 
it's been a total disaster." Investors saw Lloyds as a safe, plodding 
bank, a far cry from its frisky rivals. At a stroke, a good bank 
turned bad and shareholders have seen their investments plunge as 
Lloyds has been forced into the arms of the taxpayer.

Sir Victor and Mr Daniels should go. They may argue that in years to 
come the cocktail party deal will give Lloyds a dominant position in 
the UK market. But that is a hollow boast. Without the taxpayer 
bailout, Lloyds would not survive to take part in the next economic 
upturn, whenever that comes. It is a crippled organisation, dependent 
on state support. The only thing keeping the two men in their jobs is 
the fact that the government, as the biggest shareholder, wants them 
there. They are in it together.

There was, of course, one other person in that conversation last 
September. For a man who cannot bring himself to say sorry, Mr Brown 
has been anxious to play down his role in broking the Lloyds-HBOS 
deal - with good reason. He knows it could be as toxic to his 
reputation as some of the bank's bad assets.

This time the mud looks like sticking. As one disgruntled investor 
put it: "This is Brown's doing, pure and simple. This time Macavity 
has been caught in flagrante."

He is right. Between them Sir Victor and Mr Brown have made a bad 
banking crisis worse by fatally contaminating one of Britain's few 
good banks. Mr Brown was the foster parent. People should remember 
this the next time either of them claims to have acted competently 
during this crisis. Sir Victor should go now; the electorate can 
decide on Mr Brown's fate when he deigns to call an election.