Now we know the truth about HBOS: it was nothing to do with casino banking
WE’VE had the report out today about how and why Halifax Bank Of Scotland fell over. You can read it in all its glory here. And the important takeaway point to be made about it is that it was nothing at all to do with speculation, investment banking, weird derivatives, high speed trading or any of the other things that people fulminate against. It was, very simply, a bank going bust in the way that banks have always gone bust. Lending too much money to people who didn’t pay it all back.
And I’m afraid that that really is it. Entirely naff all to do with casino banking.
And that means that all of the things that people want to do to rein in casino banking aren’t going to stop such a thing from happening again. You know the sort of stuff I mean. This Robin Hood Tax for example: HBOS wouldn’t have been paying much of this because they simply didn’t have an investment bank of any size. They just weren’t taking part in the public markets: it wasn’t a story of CDOs, CDS, swaps, foreign exchange, equities and all that malarky which is what we call investment banking. Nope, they were doing straight commercial banking. Take money in from depositors and lend it out again to people who actually want to do something. Buy a house, build a company, all those things that we’d in fact rather like the banking system to finance. The problem is they lent too much of this money to the wrong sort of people. People who didn’t, for whatever reason, pay it all back. Thus the bank went tits up.
And that really is it. Banks have been going bust like this ever since the first banks were ever invented. As the Parliamentary Committee itself says:
“This was a traditional bank failure pure and simple. It was a case of a bank pursuing traditional banking activities and pursuing them badly.”
Entirely bugger all to do with anything other than failing to do basic banking right. Thus all of this manouevering to make sure that banks only do basic banking ain’t gonna stop this happening again.