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[Afro Droid]

BBC NEWS | Business | Lloyds shares tumble after update

Fucking excellent. I look forward to writing them many, many letters beginning: "As a new share-holder..." in a coupl'a weeks time. Bastards.

[Neil]

You already can, the government have a 43% stake in them.

[Afro Droid]

Already!?

[Neil]

Originally Posted by Afro Droid

Already!?

Umm...they've had a stake for ages. The only reason Lloyds took over HBOS and saved their skin was because the government agreed to throw some money into the deal (hence their 43% stake). And funnily enough it's writing down some more of HBOS's dodgy assets that caused their share slump today. The share price will pick up again in the next few weeks though.

[pogofish]

Hang on?

I thought Lloyds itself was doing OK but the Halifax/HBOS side had the loss - Which they must have known about & prepared for when they took over the bankrupt company?

How is this even news?

[Le Stu]

I'd like to wish them all the best, as I'm moving to Smile

And if anyone can enlighten me as to why we don't just let them fold, presumably allowing an orderly liquidation of assets and debts, I'd be all ears!

[Cloud]

Originally Posted by pogofish

Hang on?

I thought Lloyds itself was doing OK but the Halifax/HBOS side had the loss - Which they must have known about & prepared for when they took over the bankrupt company?

How is this even news?

I think it was a bigger than expected loss, causing the fall.

And yeah, the Lloyds TSB side made a profit, just not enough to cover the extra loss.

[Stichman]

Originally Posted by pogofish

Hang on?

I thought Lloyds itself was doing OK but the Halifax/HBOS side had the loss - Which they must have known about & prepared for when they took over the bankrupt company?

How is this even news?

I think it's something like at least £1 billion more than what they had prepared for/were expecting

[Neil]

Originally Posted by Le Stu

And if anyone can enlighten me as to why we don't just let them fold, presumably allowing an orderly liquidation of assets and debts, I'd be all ears!

Because, if you believe the government at least, it would have resulted in a complete failure of the banking system and would have triggered a run on most of the high street banks ala Northern Rock. RBS and HBOS would certainly have gone under and the general atmosphere of panic would have probably led the same happening to Lloyds and Barclays as well.

No banks means no mortgages, credit cards, loans or savings. As most businesses rely on at least some lending from banks then they would have gone under as well. This is actually happening anyway, but on a smaller scale, as the banks tighten up their belts.

The compensation schemes currently in place to give people back their savings back if a bank goes under wouldn't be able to compensate everyone in a massive banking failure like this either, so lots of people would lose their savings, investments etc. So the end result is probably becoming unemployed, having no savings and the government becoming bankrupt.

Have a look at Iceland now to get some idea of what it would have been like if the banks hadn't been bailed out.

[Le Stu]

Originally Posted by Neil

Because, if you believe the government at least, it would have resulted in a complete failure of the banking system and would have triggered a run on most of the high street banks ala Northern Rock. RBS and HBOS would certainly have gone under and the general atmosphere of panic would have probably led the same happening to Lloyds and Barclays as well.

No banks means no mortgages, credit cards, loans or savings. As most businesses rely on at least some lending from banks then they would have gone under as well. This is actually happening anyway, but on a smaller scale, as the banks tighten up their belts.

The compensation schemes currently in place to give people back their savings back if a bank goes under wouldn't be able to compensate everyone in a massive banking failure like this either, so lots of people would lose their savings, investments etc. So the end result is probably becoming unemployed, having no savings and the government becoming bankrupt.

Have a look at Iceland now to get some idea of what it would have been like if the banks hadn't been bailed out.

Excellent points. I must admit, I would have been personally completely screwed if they hadn't done this. No cash handy for food or tokens for the meter etc. My employer is also almost certainly dependant on credit, not to mention our government!

But not all of the banks would have failed. The smaller building societies and maybe one or two of the banks (like The Co-operative which is why I'm moving my humble pile there) don't rely on fractional reserve lending and didn't let their own lending standards slip during the boom. Of course there's no guarantee of their survival either but they're much better placed than the big boys. And, of course, they would see some spectacular growth in their business in the wake of a so-called financial collapse. How to get your cash out when the ATM networks are dead is another matter... but I think it would be surprising just how fast free market solutions would appear.

With the price of complete nationalisation estimated at £5 trillion, I wonder if all our government has done is buy us time while setting up an even bigger crisis in the near future, that of a run on Sterling and hyper-inflation in our time:

The bond bubble is an accident waiting to happen - Telegraph