Is Gordon Brown telling Lloyds to weaken its lending standards? Speaking on Sky, the prime minister just said: “We’ve also insisted on assurances from the new company [Lloyds/HBOS] about their mortgage lending in the market place so they will not reduce it. They say they will expand it and it will remain a very high share of lending in the market place and I think that was the right thing to do as well.”

Lloyds of course was in a position to take over HBOS because it had been more prudent and conservative through the boom, while HBOS by comparison let its hair down.

What assurance could Lloyds have given Mr Brown? Did they promise to renew all those questionable mortgages — such as buy-to-let and self-cert — that now look like financial madness?  When their mortgages come up, will they help out all the subprime borrowers with rapidly falling equity that HBOS threw money at? If not, Mr Brown’s promise makes no sense.

UPDATE: So Gordon Brown misspoke, it appears. His spokesman explained that “there was not any sort of deal. He was referring to what the bank themselves said.” Hmm.

September 18, 2008 1:11pm in Credit Crunch, Gordon Brown, UK economy, UK politics | Comment