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Cameron attacks lack of scrutiny over HBOS

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Published Date: 17 March 2009
By Gerri Peev
political correspondent
DAVID Cameron, the Conservative leader, yesterday said politicians and bankers failed to ask what impact the ill-fated take-over of HBOS would have on Lloyds.
And he called for Lloyds and ministers to be scrutinised over the process that led to the decision to merge the banks.

But Mr Cameron has previously given his backing to the deal, and said it would have been "opportunistic" to jump on a bandwagon
with the SNP, calling for HBOS to stay independent.

Speaking in Westminster, he said: "With hindsight, the questions everyone should have been asking were just how bad is the situation with HBOS and what will be the effect on Lloyds?

"I can't remember anyone in political and banking circles being worried this would drag a perfectly good bank into de facto nationalisation."

The Tory leader said he had made the decision to back the deal "based on what we were being told by the government".

He added: "We need to know more about the process of due diligence that Lloyds went through and indeed what the government and Treasury ministers went through in recommending the scheme."

Mr Cameron reiterated his belief that "the wisdom of this politically inspired merger now looks like a bad deal".

While he has previously admitted regret over the deal, yesterday's remarks were his strongest condemnation yet.

The Conservatives have faced criticism that they have not been active enough in pulling apart Gordon Brown's economic strategy or offering an alternative. Mr Cameron also signalled moves to cut public spending, by pledging to freeze the BBC licence fee for a year. He declined to rule out future tax rises.

The Tory leader admitted progress on winning support in Scotland was "slower" than he would have liked, but insisted people were beginning to realise Alex Salmond was "not all he was cracked up to be".







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1

Forward not Back,

17/03/2009 00:02:31
Cameron is useless.
2

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17/03/2009 00:06:05
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17/03/2009 00:06:22
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17/03/2009 00:06:51
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17/03/2009 00:13:21
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6

Brian Hill,

17/03/2009 00:30:19
'We failed to ask right questions over HBOS'

Of course you didn't, you were too busy trying to stick it to the Scottish Financial sector in order to weaken the SNP's case for Independence to care about the business consequences of this 'shotgun' marriage.

So now you are reaping the 'rewards', enjoy!

As for the poll, it runs in the face of every current trend in Scottish and UK politics and therefore has a major credibility gap.

June 4th will be the first real electoral test for Labour and as things stand right now they will haemorrhage votes all over the UK.
7

redcliffe62,

17/03/2009 00:59:26
if a pollie says we did not ask questions it is a start, even if motives for admitting at this time are contrived. salmond does it, cameron does it, the numpty labour party continue totaL denial and even when caught have never made a mistake, such as wisnae me wendy and her gang of miscreants.
cameron cannot be arrogant to win, and harshly i am sorry but it is true, losing a kid softens his image. not that image should be a factor but it is. hence the scotsman's attempts to doll brown up as a man of competence on fashion matters.
will spud admit iceland, ireland and norway are not as badly off as britain. will brown admit he supported torture, iraq, and screwing up the scottish banks? we will wait.
cheney and brown, the 2 -i- c's who should have remained in that role both look like cadavers; one has walked and the other remains a dead man walking.
8

Julian.,

edinburgh 17/03/2009 01:01:30
#6 Cynicus in exile,

Exactly. David Cameron says Lloyds was a "perfectly good bank". Well I'm sorry but perfectly good banks don't have to be propped up with billions of taxpayers money. And this money was requested by Lloyds 2 months before the takeover officially went through.

If Lloyds were asking for this in anticipation of HBOS losses then why did they press ahead in the following weeks with the takeover...defies logic.
9

New Town Resident,

17/03/2009 08:32:59
#2,3 and 4. The Irish Republic, currently contracting twice as rapidly as the UK, remains a useful "compare and contrast" don't you think?

In today's FT their finance minister Brian Lenihan is quoted;

"There is a problem in all small countries with too many incestuous relationships"

and

" The price (of euro membership)is the higher exchange rate against sterling. The damage is coming through the real economy".

While I take the First Minister point in response Cable's comments about bail outs, that you have to also include the revenue side, I simply don't think its credible that the SNP would have been putting money aside against a possible banking crisis. Surely the temptation would have been to go a vote buying spree as did Fianna Fail?
10

New Town Resident,

17/03/2009 08:37:11
#9. Surely the key is that the large institutional shareholders wanted the deal? Small individual Lloyds shareholders certainly didn't. This is becaus ehe institutions had shares in both banks so they thought a combo was the best way out for them?

The largest institutional shareholder in both banks is said to be Standard Life (don't know this for a fact but am simply relying on the press here). Anyway Standard Life were certainly a major cheer leader for this deal.

11

Marian,

17/03/2009 08:42:19
Gordon Brown has created yet another monster with the amalgamation of HBOS with Lloyds. No bank should be allowed to get so big that a failure of the bank could bring down the nation's economy. Banks should be limited in size so that a failure would merely affect a very small section of the economy.
12

Doh,

17/03/2009 09:50:40


Pity that the Tories privatised the National Girobank.

Now that there is demands for it to be re-established, it will bring the Tories short-sighted privatisation and de-regulation policies to prominence.

Thatcher was a disaster.
13

Fairfax,

17/03/2009 11:35:34
Julian (9): "Exactly. David Cameron says Lloyds was a "perfectly good bank". Well I'm sorry but perfectly good banks don't have to be propped up with billions of taxpayers money."

They do if they've been pressured to subsume a failing bank with some £100 billion of wholesale credit market legacy debt. Lloyds had remained almost untouched by expansion fuelled by wholesale credit, and was indeed a sound bank before its ill-starred HBOS takeover.

"If Lloyds were asking for this in anticipation of HBOS losses then why did they press ahead in the following weeks with the takeover...defies logic."

It certainly does, and many Lloyds staff were extremely skeptical. However, there were presumably informal conversations with Government in camera, offering to support the deal as needed. In my view, the priority for Brown's administration at that time was to avoid the nationalization of HBOS at almost any cost. It's therefore ironic that the Government-encouraged Lloyds deal brought Brown yet more bad press, since he had not understood Scottish anti-English sentiment would be roused by the takeover. Since RBS and Lloyds-HBOS have now been de facto nationalized, all Brown has managed to achieve was the demise of Lloyds, which might have come through this relatively unscathed without the HBOS debacle. Cameron is therefore right to challenge him on this one.
14

Fairfax,

17/03/2009 12:01:02
Doh (14): "Pity that the Tories privatised the National Girobank."

Why? Girobank offered new facilities, but other banks copied it. What need was there for it in 1990?

"Now that there is demands for it to be re-established,"

What's the point? We already have roughly half the banking system de facto nationalised. Are we going to recreate Girobank to compete with our other (essentially) state-owned banks?
15

Doh,

17/03/2009 12:44:41


#16

A Post Office Bank would offer an alternative to the private banks - which are exploiting their customers and shareholders.

A Post Office Bank - would be able to offer banking services in many areas where there is no nearby bank.

A Post Office Bank would also help support the Post Office network - which has been drastically reduced by the Tories and Labour. Although some post office services are in decline - newer services could be developed - such as banking, parcel collection etc.

The banks should not be nationalised when they lose money and privatised when they make money.

A Post Office Bank would be in public ownership and not subject to short-selling and speculation.
16

Fairfax,

17/03/2009 12:52:20
Peter (17): "OK Fairfax, fair go but why is Cameron only chirping up now?"

I suspect it's simply that the opposition's best strategy is often to let the Government make its mistakes and criticize later. Consider also what might have happened if he had publicly opposed the Lloyds takeover: we might now see Cameron being blamed for nationalization of HBOS, with resultant bad press.

"He says he trusted this Government over the deal when nearly every commentator in the financial press has being saying this was a stitch up and numpty deal for Lloyds from early doors."

The two aren't inconsistent. It's not illegal for the Government to encourage a takeover in camera. Had the takeover worked, it would have seemed an excellent decision now.

"As early as October the FT was saying that Peston had been set up by the Treasury (either with or with out his knowledge) to undermine HBOS's trading position."

As I recall, some FT articles mentioned the possibility; the FT did not take that view in its leader columns. In any case, HBOS had already undermined its trading position, its shares having reduced by roughly £2 every quarter over the previous year. All Peston did was was make its imminent fall well-known.

"HBOS's CEO had no banking qualifications"

It depends how narrowly banking qualifications are interpreted. He had a very strong finance background from his Harvard MBA, although much good it did him.

"Why was confidential bid information leaked to Peston so he could reveal the Bank of China were looking at HBOS and blow the Chinese out of the market?"

I cannot see how the Bank of China would want to buy HBOS, and that seems sufficient explanation for me. The BofC withdrew simply because it was a bad deal.

"The BoS core High Street banking business in Scotland and the UK is highly profitable, why were BoS management not invited to buy the bank out with the £70 billion on offer to Lloyds to do the same thing in effect?"

They simply didn't hav
17

Fairfax,

17/03/2009 12:58:51
"The BoS core High Street banking business in Scotland and the UK is highly profitable, why were BoS management not invited to buy the bank out with the £70 billion on offer to Lloyds to do the same thing in effect?"

The key was to find a partner with the capital to rescue HBOS from its debts. Even if a profitable component had been separated from HBOS, those debts would remain.

"There is only one reason that Cameron colluded in this defacto nationalisation of UK banks - to save the Union."

Cameron's collusion was not needed, since Brown has a majority. In any case, what would have been the alternative to de facto nationalization? A bankruptcy would have probably triggered systemic collapse here and elsewhere, given the size of HBOS and RBS.
18

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17/03/2009 13:00:18
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19

Fairfax,

17/03/2009 13:04:07
Doh (18): "The banks should not be nationalised when they lose money and privatised when they make money."

The only reason for nationalizing them is because their failure might have caused our entire financial system to collapse. Privatizing them if/when they return to profitability will help repay our public debt.

"A Post Office Bank would be in public ownership and not subject to short-selling and speculation."

That's true. It also won't be able to raise money via equity. In any case, why do we need more banks when our current ones are failing? If we need to provide banking services via post offices, why not do it via RBS, say?
20

Doh,

17/03/2009 13:37:29
#22 Fairfax

We dont need more banks - we need a choice of banks.
A nationalised bank supported by a large network of post office branches would provide competition to the
private (ha ha) banks.

A Post Bank can be developed to offer services that the privatised banks do not at the moment.

Not just in terms of location but also services to low and no income families - that basically dont get catered for by the greedy.

Also our laws on usury need updated - with some "credit" firms abled to charge over 1000% interest rates.

The banks have failed in more ways than one.

If you are suggesting keeping RBS in public ownership - then I would agree - with the proviso that it is mutualised - a form of ownership that provides stability and common sense.

One of the problems with the finance sector is that fund managers and institutional shareholders are beahving like the union barons of old.

These fatcats have block votes and dont represent the views of their members.


21

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17/03/2009 13:58:58
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17/03/2009 14:06:46
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23

Fairfax,

17/03/2009 14:16:28
Big bad Wullie (25): "It's therefore ironic that the Government-encouraged Lloyds deal brought Brown yet more bad press, since he had not understood Scottish anti-English sentiment would be roused by the takeover."
.......................................................

"Are you able to direct us to a link to this sentiment you mention or does it just exist in the Anglo Saxon sub conscious guilt complex from which you so patently suffer?"

It's an opinion, and I may be incorrect. Perhaps you might explain how the very vocal Scottish opposition to Lloyds was devoid of anti-English feeling. However, although I'm English I'm not Anglo-Saxon.
24

Active Sassenach,

Luton, England 17/03/2009 14:25:05
The postings are a better debate than the article. This is Cameron's "second house" on trusting the Government. The Tories got their fingers burnt trusting the Government over the Iraq war so why were they still trusting it on the financial and banking crisis?

I am intrigued by post 24 above as I cannot imagine why the post would have been removed from 17 if all it contained was what is in 24. However, I have noticed that if anyone questions Peston's role in the breaking of the story on Lloyds/HBOS, their postings are removed - not just from The Scotsman. I am happy to allege that Peston put getting the scoop above the public interest when he broke the story - especially since the Lloyds/HBOS merger has turned out not to be in the public interest after all.

"He (Cameron) added: "We need to know more about the process of due diligence that Lloyds went through and indeed what the government and Treasury ministers went through in recommending the scheme."

Sadly Mr Cameron, the due diligence was probably halted by Peston's scoop and he should be the subject of your ire.
25

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17/03/2009 15:17:12
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26

Fairfax,

17/03/2009 16:22:17
Big Bad (29): "However suspect chaps like your self only seem to want to find one thing in all these debates and that is anti-English sentiment, agent provocateur is what you are and nothing else."

I honestly find it hard to interpret the Scottish reaction to the Lloyds-HBOS takeover as not indicating that a fairly general anti-English feeling exists in Scotland. Still, as I said, it's an opinion.

"And that is that chaps like your self, wherever you think you are, and like so many imperialists before you think of Britian, the UK, as England. We critcise the UK so therefore we must be anti English."

On the contrary: I too wish the UK to end as soon as possible. It is, however, my view that a substantial minority of Scots exhibit anti-English feelings to some degree. Indeed, it is difficult to live, or even visit Scotland, and to not observe this minority component.

"Why do you not see your self as Anglo Saxon. English, Anglo, whats your problem?"

It's genetic precision. According to the genotyping technology of 23AndMe.com, I would probably be described as Celtic, like much of the population of England.

"Perhaps you are descended from Roman lineage who also crushed and ruled England?"

England did not exist at the time of the Western Roman Empire. You can learn more here:

http://www.amazon.co.uk/Origins-British-Genetic-Detective-Story/dp/1845294823/ref=sr_1_1?ie=UTF8&s=books&qid=1237307136&sr=1-1


27

Scottish Toryboy is back,

17/03/2009 18:32:29
#34: is it since your shell shock that you've taken to Nationalism with a fervour that would please Hitler?
28

Los Angeles,

17/03/2009 19:34:29
"you've taken to Nationalism with a fervour that would please Hitler?" (Tory Boy)

His comments have been deleted, but for the record:

That was unfettered imperialism, backed up with a superbly well trained and vast army, masses of weapons, and financial clout to back up ambitions.
29

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17/03/2009 20:48:55
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30

Fairfax,

17/03/2009 21:13:17
Wullies Brother (37): "Fairfax since you now just nit pick and have posts deleted you have lost any point you thought you had made."

I never ask for posts to be deleted. In my view, Britain has become too keen on censorship. In any case, really my only substantive point above was that Cameron's criticism was valid: it would have been better to have left HBOS alone, rather than ruin Lloyds in a desperate wish to avoid nationalizing HBOS. It seems to me that there's little in that sentiment to disagree with.
31

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17/03/2009 21:30:00
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32

Liberal for life,

Dunblane 17/03/2009 22:03:24
Cameron is a typical Tory - in denial when it comes to accepting responsibility for their actions over decades of mis-rule. So heres the facts of the matter-

The financial crisis - it’s a disaster that has its roots in Thatcherism !

"Lib Dem Shadow Chancellor Vince Cable is widely regarded as the most acute and effective critic of the government’s handling of the current economic crisis. However he recently turned his fire on the Tories—”They have been completely caught flat- footed by this crisis”, he said. They didn’t anticipate it. Many of the problems we have originate from the [Margaret] Thatcher years. If you take for example the way in which they demutualised building societies, which became banks, that was a real Thatcher policy and those institutions have been at the heart of the crisis of irresponsible lending. It originated in the Tory years”.

So there you have it, in a nutshell, from our Uncle Vince.
33

james 1st,

hamilton nz 17/03/2009 22:29:33
so salmond was correct, the merger should not have taken place, but i dont suppose cameron will acknowledge this nor brown for that matter
34

Willie Mor,

24/05/2009 15:41:37
Cameron will be a disaster for Scotland.

As Prime Minister his interest in Scotland will be that of a Colonial Govenor, with all that that will entail.

Indeed, in relation to the previously troubled Northern Ireland, Cameron has already declared that unless the elected Sinn Fein MP's swear an allegiance to the Queen then they will be disbarred from recieving any Westminster expenses.

Yes, I think we all know what kind of prime Minister this Tory Toff will be when he gets his hands on power.

Consenual politics with the colonials - I don't think so.

 

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