Household HSBC Watch

We saw this on September 16th: “Investment banks must move quickly to strengthen their balance sheets and address their lack of funding if they are to come out of the current financial crisis unscathed, a senior banker at HSBC has warned.” A warning from HSBC? Acting like a global authority HSBC fails to remember that their own subprime units — HSBC Finance and Decision One Mortgage — facilitated, financed, or bought subprime loans at a fast pace. Unfortunately HSBC slammed on the brakes too late. The net result was that HSBC in the United States was one of the largest subprime financing operations. Tainted paper went into the system, SIV’s were effected, and bonds were sold.

Now HSBC acts as if they had no part in the basic problem. HSBC wants you to forget about HSBC Finance - formerly Household International. In reality HSBC would like to forget about it too. HSBC Holdings Plc, Wells Fargo & Co. and JPMorgan Chase & Co. are among the potential bidders for Morgan Stanley. Certainly it is convenient to be big enough to help create the problem, while bidding on the losers that trusted in your products.

If the United States is intelligent the Fed and SEC would identify the biggest subprime lenders. Identify those with the poorest lending standards. Identify the source of the original problem. Identify those with the largest number of foreclosures. Hold offenders responsible for the accident. Finally - and most importantly - forbid the offenders from profiting, buying, or reaping any rewards. Block them from bidding on the likes of Morgan Stanley, Goldman, Wachovia and others.