Chronicles Of Depression 2.0: #213

Two about a thing most of you probably have never heard of: the Halifax Bank of Scotland (HBOS).

HBOS - Lloyds takeover: Relief turns to fear as staff fear 40,000 job losses

Work ground to a halt as employees, regardless of their seniority, switched their computers over to news web sites after being alerted in the calls from friends and family that Lloyds TSB had emerged as a surprise saviour.

There was an audible rumble up and down the eight storey building, near London's landmark Liverpool Street station, when the word spread that the rout of HBOS shares had been abruptly halted.

But:

As rumours spread throughout the building that the job losses could be as high as 40,000, with 1,000 branch closures, the mood of optimism evaporated completely. The emergency statement from Unite, the trade union, pleading for no compulsory redundancies only served to heighten the sense of fear permeating the company's offices.

And the second article:

If this fails, it will take down all Britain's banks

The wonder of financial crises is how events can move straight from impossible to inevitable, without ever passing through improbable.

Two weeks ago nobody would have imagined that, before the end of the month, the Bush Administration would have nationalised the world's biggest insurance company, that two of the four biggest global investment banks would be out of business and that the US Government would take responsibility for three quarters of the country's new mortgage loans.

Sadly, the events of the past two weeks may be only the prelude, not the climax, of this amazing crisis. Even the apparent rescue of Halifax Bank of Scotland may result in a bigger crisis, if the drowning HBOS drags down its rescuer, Lloyds TSB. If this happens, every big bank in Britain, except possibly HSBC, will have to be nationalised, Northern Rock-style.

Emphasis added by me.

This really bites my ass:

Two weeks ago nobody would have imagined that

Self-absorbed eejit. I've been imagining worse since January! Were you fucking reading?

More, and pay attention:

The same [nationalization] would become inevitable in the US if market speculators who have been richly rewarded by the US Government for taking down Fannie Mae, Lehman Brothers and AIG, turn their attention to the next group of stumbling financial institutions in the firing line: Washington Mutual, Wachovia, Bank of America, Morgan Stanley and Citibank. If any of these wounded giants collapses, the others will fall like dominoes and the entire US financial system will have to be nationalised. In a financial crisis, the impossible can become inevitable in one day, as we saw in Britain on Black Wednesday.

Emphasis added by me.

I want all of you to notice The Company That Has Not Yet Been Mentioned: Citibank (actually CitiGroup). You haven't been hearing anything about the largest financial corporation on the entire planet, have you? When you do, it will probably already be too late.

And as for nationalizing entire banking systems? Has anyone considered the ramifications of that to other countries? What will they think of that in Germany, France, and Japan?

Here is where the column begins to veer into the Insane Zone:

To understand what could still be done to prevent this crisis turning into a true disaster, we must look dispassionately at the unintended consequences on the markets of recent government actions. This means moving away from the moralistic slogans about “greed” or “bailing out reckless bankers”.

Emphasis added by me.

Oh no it doesn't, motherfucker! These bastards did their deeds willingly, wilfully, and brazenly. They were on the covers of newspapers, magazines, and profiled on TV as stars and celebrities and unimpeachable examples for children to grow up to be. They knew they were handling filthy, crooked mortgages -- liar loans -- that took advantage of people and whose terms were onerous and usurious and downright fraudulent. And these mortgages were based on home prices that had been inflated by the very dealers and brokers handling the mortgages. They knew all this filth they were handling, so they bundled it all up and sent it through the washer one, twice, thrice, by splitting them and renaming them and reselling them. They were outright criminals.

And from this point on, the guy tries to pin the blame on Paulson of the U.S. Treasury with the bizarre inversion that Paulson was actually encouraging short-selling speculators and robbing long-term investors. So I guess if Paulson had just let Freddie Mac, Fannie Mae, and A.I.G. drop dead, this guy would have said Paulson had actually looked after long-term investors?

And then he closes with:

As I write, the terms of the Lloyds-HBOS merger are unknown, but the key criterion for judging its effectiveness is clear enough - and it is exactly the opposite of the principle followed by Mr Paulson.

If the Lloyds-HBOS merger offers the enlarged bank some kind of firm government safety net - not just for depositors, but crucially also for shareholders - it will probably succeed and act as a firebreak against the financial crisis on this side of the Atlantic. If, however, the merger is presented as a “pure private sector solution”, with no government support for shareholders, market attacks against HBOS will soon be revived and redirected against the merged bank.

This will leave only one solution - nationalisation of the entire British banking system. The impossible will suddenly become inevitable.

Emphasis added by me.

You know what's "impossible" -- watching all these free market advocates suddenly advocating socialist solutions!

Isn't it amazing how government is the solution for them -- but for individual and especially hard-working and honest people who need help, those people are branded as leeches and parasites and looters?

When they cry for help, it's "a bailout." When everyday people asked for help, it's "a handout" or "welfare" or "socialism."

All prior Chronicles of Depression 2.0 posts. Read them before you must.