Of Lloyds TSB, HBoS, and how lenders raise money – a note for parliamentary candidates

My previous post referred to SNP candidate Calum Cashley and his assertions on the question of bank finance and I apologise for returning to this – but it’s Jeff’s fault for reasons explained here

The story so far is that Mr Cashley asserted – in challenging the grounds for the takeover of HBoS by Lloyds TSB, a line he continues to promote – that Lloyds TSB was not in as good a financial position as the media think.  Now given the recent proposed capitalisation from the UK government effectively through underwriting share issues there are grounds to suggest that circumstances have changed, and following the statements from the head of the FSA on HBOS’s capital position there are reasons to suggest that the proposed takover – arranged initially to avoid nationalisation and another Northern Rock or Bradford and Bingley – would now be taking place in a very different situation and should be reviewed.  These grounds suggest that the proposed overruling of competition law, for one thing, could be reviewed – given there is no longer an emergency to secure HBoS capitalisation.  This though is not based on any query as to Lloyds TSB’s stability.  Indeed one could ask if Lloyds TSB was not committed to taking over HBoS would Lloyds TSB require the government capitalisation?  This is something that has not been made clear in the material I’ve read to date?  And Lloyds TSB may be able to do a Barclays alone and raise the money on the market.  But Mr Cashley implied that all was not well with Lloyds TSB with a throwaway line

"We now know that Lloyds TSB was not in any better position than HBoS"

When I asked for support for this somewhat startling assertion he referred, among other things, to the following

"Lloyds TSB had to follow HBoS in securitisation in June:

queried whether securitisation was indicative of financial ill health – drawing the analogy with debt factoring carried out regularly by small businesses.

This prompted a reply from Calum Cashley, patronising in tone. This implied that I knew nothing about securitisation and indicated that "Any decent Scottish conveyancing lawyer " (or perhaps someone with the conveyancing expertise of Mr Cashley) could explain it to me. Mr Cashley explained to me his understanding of the concept.  This involved a suggestion that securitisation involved "remortgaging on a grand scale in the Scottish style ".  It included a brief description of the Scottish law of standard securities – exhibiting that for at least one SNP candidate a little knowledge is a dangerous thing while showing Calum Cashley confusing the positions of debtor and creditor (see my ETA amendment for explanation).  TO be fair to Mr Cashley he did make reference to, at he described as another method, which involved tranfser of assets to a special purpose vehicle – but his context indicated that (a) this was not what he understood securitisation to be; and (b) was not what he understood securitisation to be in the banking context. 

Reading the reply of this parliamentary candidate I was somewhat bemused at the patronising tone (especially when contrasted with some of his political bedfellows whose good grace and good humour characterise their blogs and responses to commenters (eg Will, Jeff, Richard Thomson, and others).  Anyway, I replied – the full terms of my reply are here – and explained that securitisation in the context of bank finance did not usually involve "remortgaging on a grand scale" as Mr Cashley suggested (particularly when he referred to mortgaging in the Scottish style) but the transfer – typically through sale  – of an income stream to a third party (which is what happens in debt factoring, as – funnily enough – I had suggested in an earlier comment) in this case a special purpose vehicle. 

I was, given Mr Cashley’s past form in dealing with comments that do not support his position or query his understanding of an area – see here for the tale of Mr Cashley and his failure to understand which piece of planning legislation applied to the call in of the Trumpton application, unsurprised to find that my comment was not posted on his site.  However, as I had posted a reply here I let Mr Cashley know, and funnily enough this reply was moderated and approved.

Well, the great man replied

"How rare for you.

I’ve approved all of the comments you left here"

Well, I must take Mr Cashley at his word – my reply of 8 pm last Tuesday evening has vanished into the internet ether.  Perhaps his e-mail filter bounces those which criticse his view, or show up his lack of understanding.  In any event to give it a second chance I reposted the comment last Thursday evening at 5 pm to take Mr Cashley at his word.  However,  I still await the comment being moderated and published and his response.  As it’s now Tuesday evening – one week after first submitting the comment and it remains stubbornly locked in Mr Cahsley’s inbox with no perceptive reply – I won’t hold my breath.


About loveandgarbage

I watch the telly and read when not doing law stuff and plugging my decade and a half old unwatched Edinburgh fringe show.
This entry was posted in credit crunch, Uncategorized. Bookmark the permalink.

2 Responses to Of Lloyds TSB, HBoS, and how lenders raise money – a note for parliamentary candidates

  1. Anonymous says:

    I’ve just posted the following on the same thread on Calum Cashley’s blog. Let’s see if he approves it!
    Mr Cashley
    Scott thinks not. And you certainly haven’t approved two comments of mine which corrected demonstrably false statements you’ve made on this blog.

  2. Anonymous says:

    My critical post of yesterday still hasn’t appeared on Mr Cashley’s blog. But today, within minutes, he approved a bland test comment which I made.
    I think that tells us all we really needed to know.

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