Bank profits... state ownership... dividends etc..

[youngsyr]

rich1231 said:

Don't underestimate "Ego" in the deal.

What, because all it takes to make it to CEO of a very large bank is a big ego?

I don't buy that, I've seen lots of business owners and directors over-extend themselves and a lot of them have had very ambitious plans, but in none of those cases was their ego the motivation. They were just very passionate about what they were doing, believed in their ability to pull it off and underestimated the potential downsides.

Similarly I don't buy that everyone else apart from the board of Lloyds TSB knew about the state of HBOS. Firstly HBOS was a very well-known listed company, so the share price should have given some indication as to what people thought of it.

Secondly, you don't get to be CEO of a very large bank by being a mug. These guys have a lot of contacts in the industry as well as a huge amount of experience.

It's for those reasons that I would imagine that the whole situation was a gamble that didn't come off. What's more we don't know the full details of what the exact terms of the gamble were, so to my mind it's difficult to judge them simply because we now know that it failed.

[fido]

youngsyr said:

Similarly I don't buy that everyone else apart from the board of Lloyds TSB knew about the state of HBOS. Firstly HBOS was a very well-known listed company, so the share price should have given some indication as to what people thought of it.

I don't think many HBOS people knew the extent of their bad debts so LTSB execs would have not known - though the fact that they didn't know the extent of losses should have been enough to stop any merger. I think the FSA would have had a much better clue about corporate and retail writedowns as they had already dealt with a few basket cases e.g. NRK.

An acquaintance of mine who got fired just after the crunch was rehired after the merger (though he didn't actaully do much work as such) .. when i asked how things were going he explained with great surprise that writedowns in his area were twice as bad as they expected .. extrapolate that across the bank and we're talking 10-20bn!

youngsyr said:

Secondly, you don't get to be CEO of a very large bank by being a mug. These guys have a lot of contacts in the industry as well as a huge amount of experience.

Unfortunately most if not all of their experiences were in good times. Exhibit A: Dick Fuld.

Edited by fido on Thursday 12th August 11:09

[youngsyr]

There are a few key assumptions in your post though - most importantly that the FSA's insider knowledge of NRK allowed them to form an accurate picture of a completely separate bank (HBOS) when no-one else could, but also that your friend's department was typical of every department across the bank.