By Andrew Newton on 02 Mar, 2009 - 11:28 UTC

Banking giant HSBC is closing down the business of a US acquisition that has lost twice as much as it cost to buy in the first place.

HSBC bought the subprime lender Household International in 2003. At the time Household was subject to litigation in 50 US states over allegations of predatory lending - making loans available to people who did not understand their commitment - while HSBC had and still maintains a broadly positive reputation for prudence and responsibility.

Analysts thought that the deal would be problematic as a result of this action, but seemed reassured when the 50 states reached a $484 million settlement with Household on 16 December 2002.

While I am sure lax lending was present elsewhere in the group, the Household acquisition took HSBC full into the front line of the problems that have subsequently rocked the global economy.

One day it would be interesting to get an insider view on why such a reputable group threw in their lot with a business as flawed as Household.

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