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There were real doubts among Lloyds TSB shareholders about its merger with HBOS last year, a union to which the Prime Minister played marriage broker. Sir Victor Blank, chairman of Lloyds, dismissed those fears. Quite how right the shareholders were and quite how optimistic Sir Victor was is now apparent. The shares, down again today, have lost 80 per cent of their value since the takeover. But the risk should have been clear to the FSA, the financial services watchdog.
It was obvious to many observers that HBOS was guilty of the worst banking practices that led to the credit crunch: the Bank of Scotland was laden with toxic debt while Halifax, after shedding its status as a building society, had embraced the kind of irresponsible lending that helped to overheat the housing market. The group as a whole was heavily reliant on the wholesale money markets for its lending, which led to the inevitable fallout when banks stopped lending to each other. In other words, it had problems both in the source of its money and how it was lending it. But, as Anthony Hilton points out today, the FSA had ignored HBOS's concerns about the potential risk of its money supply drying up.
Now Lord Turner, chairman of the FSA, has said that HBOS could have been rescued without involving Lloyds and throwing a good bank after a bad one. Last year, HBOS lost £10 billion; Lloyds TSB made £1 billion profit. But the deal had political advantages in that it seemed to lessen taxpayer responsibility for rescuing HBOS; hence Gordon Brown's involvement. Today, however, Treasury minister Stephen Timms distanced Mr Brown from the deal.
The real question now concerns the FSA's responsibility for what happened, both for ignoring HBOS's wider concerns about liquidity and for its acquiescence in a merger about which there were grounds for concern because of the bank's retail practices. And the FSA is a creature of Mr Brown's making; there may be a political price for its failure.
Inevitably, the condition of the merged Lloyds Banking Group has led to renewed calls for its outright nationalisation. But at the very least, those banks which are, like the Lloyds group, partly state-owned, will have to heed public indignation that they can even consider awarding bonuses this year.
Given that the Government is a major shareholder in several banks, it should act like one. Mr Timms today intimated that ministers may restrict bonuses by banks in public control; in the present climate that is precisely what they should do.
Just the ticket
THE move away from manned ticket offices to ticket-dispensing machines is popular with rail operators to precisely the same extent that it is unpopular with passengers. Machines often do not work: they certainly cannot give advice about ways of negotiating the complexities of the ticketing system. Passengers, moreover, find unmanned stations less safe. But for the operators, machines save money.
That is no doubt why National Express is planning to reduce ticket opening hours at King's Cross, which now works round the clock, seven days a week. It is a remarkable move for such a busy station. But, as we report today, the company is preparing to pay for the East Coast franchise, costing £1.3 billion.
Reduced ticket office opening hours are also being planned by other operators, including South West Trains and First Capital Connect. The companies should think again. Passengers value the presence of station staff in ticket offices. Certainly, the busiest stations should not suffer.
Fiery return
THE MONUMENT is one of the finest memorials ever to a manmade disaster, that of the Great Fire of London. Its restoration and re-opening today allows us to appreciate the splendour of this grand London landmark. And walking up it will provide a work-out all of its own.
