HBOS Implodes

The symbols of a community always have intrinsic value to the people in it, even though they benefit directly in no meaningful way. Such was the case with the residents of Brooklyn, who had taxes raised so that they could keep their baseball theirs, while Los Angeles citizens were outraged when the Dodgers were abandoned.

This is also the case with HBOS, which has a deep and intrinsic meaning to the people of Scotland, where Halifax Bank of Scotland is recognized as their bank. It’s no wonder that the collapse of HBOS was met there with the same shock as a loss in sudden death overtime. The credit crunch is no gentlemen’s game and HBOS won’t be back next season.

The credit crisis claimed another casualty Thursday when Lloyds TSB PLC announced a 12 billion pound (US$22 billion) deal to take over struggling HBOS PLC, Britain’s biggest mortgage lender and owner of major British banks including Halifax and the Bank of Scotland.

The Bank of Scotland is the UK’s oldest commercial bank. It was formed in 1695 by an act of the Scottish parliament, and Halifax was founded as the Halifax Permanent Benefit Building and Investment Society in 1853. Many considered it the true bank of Scotland, but HBOS emerged in its current form when the two merged in 2001.

The bank is Scotland’s oldest and has with stood revolutions, the great depression, two world wars, the cold war and a laundry list of other calamities. It has become a financial pillar of Scotland, but in the roil and rumble of the credit crunch, financial pillars are knocked over with the ease of a child throwing his toys to the floor.

Now Bear Stearns, Fannie Mae, Freddie Mac, Merrill Lynch, Lehman Brothers, AIG and HBOS all know the swift undercurrent with which the credit crunch can seize and strip a bank.

But unlike the others who succumbed to the greatest convulsion in financial markets, this penniless bank still has an intrinsic equity for the Scottish. The suddenness of its crash stunned them; the secrecy and lack of leadership in the bank betrayed them; and the resulting hyper drive of short selling just before the merger financially broke them. Now they must watch as their national pride is sold off to Britain.