How convenient that the £10 billion loss suffered by HBOS was not revealed a week earlier. It would have provided explosive ammunition for the Treasury Select Committee when it interrogated bank bosses this week. Some of those bankers might not have emerged alive.

It is hard to decide who comes out of this looking worst: the HBOS bankers who agreed to loans that turned sour; their bosses, who overvalued them in the bank's books; Lloyds bosses, who bought HBOS on the basis of those valuations; or Gordon Brown, who presided over the pair's shotgun wedding. It is easier to decide who the biggest losers are. Investors in Lloyds TSB have seen the value of their shares fall by three quarters since the bank agreed to take over HBOS. Some of that fall reflects the decline in Lloyds' own business but Lloyds still managed to make a profit of £1.3billion last year.

What makes the shareholders weep is that their bank trod a careful, conservative path for years, resisting the lure of investment banking or the excitement of foreign adventures. It was the sort of careful, almost boring, institution that everyone now sees as the model of the future.

Eric Daniels, Lloyds' chief executive, was under pressure to step on the gas but he stood firm. At least until he and his chairman, Sir Victor Blank, agreed to rescue HBOS. They still insist that they got a fantastic deal, one that would not have been allowed in normal circumstance because it would give the combined group such a dominant share of the British banking market. So keen were they to do the deal that Lloyds did much less digging into HBOS's figures than it would usually.

Lloyds was forced to admit that some of the jump in HBOS's losses reflected the application of Lloyds' more conservative approach to assessing problem loans. Most of the problems have nothing to do with the sort of complex financial instruments that triggered the credit crisis. They relate to ordinary loans made to British companies by the HBOS unit led by Peter Cummings. Many were made to construction companies and entrepreneurs who now cannot pay them back.

The suspicion is that Sir Victor cooked up the deal with Mr Brown and persuaded a reluctant Mr Daniels to go along with it. Mr Daniels insists that he was enthusiastic. Either way, Sir Victor and Mr Daniels should probably stay clear of dark alleyways when their shareholders are around.

Taxpayers may well feel shortchanged too. Arguably, the State put money into HBOS on the basis of inflated figures. The Government is sitting on billions of pounds of losses on its stake in the combined company but it could have been much worse. The taxpayer had to bail HBOS out one way or another. By encouraging Lloyds to buy it, Mr Brown shared the costs with Lloyds' shareholders.

Of course, the sorry saga is not over yet. As the economy continues to deteriorate, there are likely to be further losses on the HBOS loans. Lloyds may yet need more help from the taxpayer.

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