The scariest news I heard today . . .

Since I was sick of Weird Al--Collin's new favorite CD--I was flipping through the radio stations on the way to work and I ran across an NPR news station and paused to hear what I thought was the scariest news of the day. Lloyds of London, a huge bank in the UK is buying out the Bank of Scotland (HBOS) making it the largest holder of mortgages in the UK, holding a full 1/3 of all UK home loans. Now, I don't have anything against mergers or acquisitions, in fact they play an important part in contemporary business strategy. So we does this one freak me out? Well, we don't seem to be learning from our mistakes.

Why did Fannie and Freddie pose such a significant risk to the economy? They own almost all US mortgages. Now Lloyds finds themselves in a similar situation. To paraphrase the reporter, she said that "under normal times the UK government would never have signed off on this merger, but these aren't normal times." She continued on to report that the government in the UK even stepped in to help the parties come together, to help the deal go through. It is seen as a short-term fix to a problem, but to me it screams of a long-term problem in the future of gigantic proportions. Really, don't these guys read the news? You want to insulate your economy from giants collapsing? Don't let your giants get too big. Sure, help HBOS find a buyer, but don't set up a bigger collapse.

US tax payers will be bearing the burden of Fannie, Freddie, Lehman and others for years to come. I guess our friends in the UK just feel like they are missing out.

Here is a summary of the transaction from Bloomsberg:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aACIIha0JBvE