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British regulators have finally published their report into HBOS, the bank formed from the merger of Halifax with Bank of Scotland, more than seven years after its collapse. The 600-odd pages contain much detail on events and personalities. But there are general lessons for all businesses. Avoid the diversifier’s fallacy. Beware the winner’s curse. Fear adverse selection.
The Greek crisis is not simply the result of Athens’ inept public administration but also of an extensive carry trade on eurozone convergence by northern European banks, notably in France and Germany, which obtained short-term profits by matching northern eurozone liabilities with southern eurozone assets. For every foolish borrower there is usually a foolish lender.
John contrasts Timothy Geithner’s firefighting approach to financial crises with the analysis of their political origins of Calomiris and Haber in Fragile by Design
If I had a million pounds for every time I have heard a possible reform opposed because “it wouldn’t have prevented Northern Rock or Lehman Brothers going bust”, I might now have enough money to bail out a bank.
Ambiguity is often attractive to politicians and costly to taxpayers.
The suggestion that we might partially turn back the clock has been described as a call for “Hovis banking”, referring to an advertisement that plays on nostalgia. The commercial succeeds because we believe the bread our grandparents ate, before innovations in technology and marketing, was nicer and more wholesome. Perhaps that is true in banking as in baking.