Household HSBC Watch

HSBC bought a failure in 2003 when the bank bought Household International. Why couldn’t HSBC turn the failure in to a profit center? Because real bankers do not understand finance companies. London was far removed from a branch manager trying to collect from a customer. Simply said, when HSBC bought William F. Aldinger’s failed Household International Aldinger forgot to tell HSBC about the nasty end of the business. If anyone thinks the repo man who comes for someone’s car in the middle of the night does not have a knife in his boot and a gun in his tow truck they are very mislead. Branch managers that I know carry guns while going to someone’s property to collect or apply pressure to pay.

Subprime loans are often in subprime areas. Thieves steal the copper wiring and plumbing from the homes, and they steal tools belonging to the maintenance workers when repairs are made. Again it becomes a protection and self-preservation way of life. Even if a personal guarantee is attached to a business loan, Alt-A mortgage, or investment property, the business can go bankrupt or the property can burn down. HSBC bought a failed, high pressure, morally bankrupt ugly business and thought they were buying a jewel. Such was not the case.

Household International is like furniture and appliance rental businesses. The advertising looks slick, the furniture looks nice, and it fills a need. What you do not see are the attempts to reposses the furniture, dirty cockroach infested furniture, and a huge guy who is only on the scene to offer protection to the other workers. You do not see the fumigation rooms behind the rental business, nor the roach bombs going off in the delivery trucks. You do not see the houses that have been abandoned and the furniture removed in the middle of the night.

HSBC needs to get a grip on reality. The finance company business is so far removed from blue-blooded English bankers with banks aboard the Cunard Line cruise ships that the two business could be on different planets. A failure is a failure regardless of how much money you throw at it. William Aldinger took over $36 million from HSBC, and HSBC paid $15 billion for Household International. The addition of Household eventually translated to subprime loan-loss provisions of $17.2 billion in 2007 and $10.6 billion in 2006 for HSBC.

Who is the idiot that thought the deal would pay every month, and who is the idiot that moved in the middle of the night and took the goods with him? A better question is this: What was Sir John Bond’s cut and how did Bond and Aldinger know the exterminator was coming?