And there goes HBOS

After the allegations of short selling and the wild fluctuations in share price it appears that unlike Northern Rock HBOS will be bought by Lloyds TSB - 'how marvellous', cry the marketeers. 'Once again the market comes through to pick up the slack just as it should have done for Northern Rock if the nannying government hadn't stuck their oar in'.

Okay here are my thoughts on this - we find ourselves in the position that we can't let any bank fail because it's all a house of cards. Northern Rock was of course nationalised, Fannie Mae and Freddie Mac were taken over, AIG had a fat chunk of cash from the Federal Reserve, Lehman Brothers are looking to be bought by Barclays, and now this. So why is this, could it be a combination that banks are all tied to one another and they're getting bigger?

Case in point right now the government has had to overrule competition law in this country to allow Lloyds to acquire HBOS. Heck I'm not even using their full names here - HBOS is a combination of the Halifax and Bank of Scotland and it's Lloyds TSB. Actually no let's do this in a more full matter.

Halifax plc bought Clerical Medical then bought Birmingham Midshires, and started up Intelligent Finance.

The Bank of Scotland merged with the Union Bank of Scotland, bought what is now known as Capital Bank before finally merging with the Halifax.

As HBOS they also handle the insurance for Sainsbury's (as well as their banking), the AA, Shelia's Wheels, and esure.

Lloyds bought the Cheltenham and Gloucester, merged with the Trustees Saving Bank, and then bought Scottish Widows and Black Horse.

So dealing with just the UK we're going to have one bank that comprises all that lot.

With the other banks Barclays are looking at the Lehman Brothers, which doesn't affect us directly, but they also bought out the Woolwich. The Alliance and Leicester are set to be bought by Santander who already own Abbey. HSBC of course acquired the Midland Bank. The NatWest (itself a merger of the National Provincial and Westminster banks who then merged with the Legal and General) is owned by the Royal Bank of Scotland and handle Churchill, and Direct Line; and also deal with Tesco's, MINT and, the One account.

And I'm not even looking at their international affairs. Why are they so large, to make money silly (or should that be silly money?). The larger they are they more efficiencies they can find, we've already talk about the number of job losses in this recent merger after all you don't need two Lloyds TSHBOS's on the same High Street. Also the larger they are the more money they get in and the more they can invest and borrow. It all makes sense and everyone's happy, well until they get greedy and things start to go wrong.

At this point I'd like to point out that the likelihoods of any of those in the top tiers of the bank who made or authorised the decisions that led to any collapse being affected in any way range from slim to nought. If the government allows the bank to fail then anyone with £32k or less have their money protected, said money coming from the FSA (FSCS to be precise) this money is derived from levys placed on the banks who, of course, acquire this money in fees from their customer; so the money to pay you back comes from your pocket. On the other hand the government can bail them out with loans from the Bank of England, said money being drawn from, well us again. Of course it is a loan so it needs to be paid back with interest, said interest being acquired from the customers of the bank.

To put it bluntly the money to pay you back if the bank collapses comes from you, the money to stop the bank collapsing comes from you. At no point does anyone seem to ask the directors of said bank to repay those big fat bonuses or a portion of their wages. For them it's a no-risk situation and that's exactly the same position that all these short-termist stockbrokers who are de facto running the economy of this (and pretty much every) country.

What can we do about it? Pretty much nothing without tearing the entire system apart and nothing that isn't already being done or hasn't already been proposed by the government. Trouble is this is a long time coming, if you plot the values for the Dow Jones from the 1920's you get this:
Now it may be just me but things seem to have got a bit silly from the 80's onwards. This may be one heck of a long bubble, but it doesn't make it any less of one and we know what happens to bubbles.