Suppose you're running a business and it is time to prepare some accounts. Things are looking a bit TIGHT, so here's a trick: borrow a load of CASH from a friend of yours and give it back after the accounts are done. That way, if suppliers look at your balance sheet, they'll see that you have plenty of money to keep paying your bills and so will carry on giving you credit.
There's only ONE small snag – it's TOTALLY a fraud.
So how did the Government get away with doing EXACTLY THAT for those banks that we own: RBS and HBoS?
It's not even as though they WEREN'T drawing up accounts, because right in between the Bank of England suddenly going all "The Bank that Likes to Say Yes" and the money getting swiftly bunged back, Lloyds TSB were persuaded to buy the "strangely having plenty of cash on fluffy foot" HBOS group. So they MUST have prepared some accounts – it's the LAW you have to when you do a MERGER.
So you can understand that the Lloyds shareholders may be feeling a tiny bit deceived, not to mention slightly cross now that THEIR bank has gone swiftly down the plughole too.
Shouldn't someone ought to have at least MENTIONED it? Shouldn't the auditors have said: aye aye, what're all these piles of cash and an IOU to King Mervyn doing tucked down the back of the boardroom sofa?
This looks EXTREMELY DODGY – on the one fluffy foot, the Government were reassuring us that the British Banks were terribly well placed to weather the economic tsunami and that this was a terrifically good deal for the Lloyds shareholders, a once in a lifetime opportunity to buy a lovely bank. And all the while the OTHER fluffy foot was busily shoving more and more bundles of used tenners into the dyke in the hope that no one would notice!
Oh, and another thing: don't we also have some kind of TREATY OBLIGATION to ask the European Union if it's okay with them before we hand out megabucks in STATE AID to AILING INDUSTRIES? Aren't they going to be slightly cross with us? Fortunately it's not like the British EU Commissioner was in charge of Trade and Industry at all…
Well, I do hope this doesn't mess up any important new job she might be up for.