Richard Shelby the Republican Senator on the Senate Banking Committee in the United States said yesterday to the effect that no one was too big to go down following the collapse of Lehman Brothers, but is it the job of government to intervene and prop up failing companies?

The Northern Rock fiasco as it is now being described in the financial world of the city of London showed how wrong government intervention is when the proper due diligence is not done, and how costly a mistake it can be for the tax payer. The mortgage books of Northern Rock it turned out way after the government had taken over the company contained an “overstated” value of the assets and in fact the government had acquired a rather weaker set of assets than first thought.

In the United States serious questions are being asked about how much the government can keep underwriting and propping up failing companies. The Wall Street Journal said recently  on the car industry in Detroit “If we bail out Detroit, where do we stop? The newspaper industry is in financial trouble because more readers and advertisers are turning to the Internet."

Senator Richard Shelby one of the first politicians in the United States to ask the sobering question in his opposition of the US government bailout of insurance giant AIG where do you stop and where do you draw the line?

If todays news is to believed that HBOS and Lloyds TSB are to merge, then this is the only option for the banks, but government intervention is to be opposed at all costs. HBOS shares took a massive battering in the markets yesterday but that should not mean the government with public money should prop them up. Indeed leading economists here in London are already saying that by the government showing its intention to bailout large corporations if they are in trouble then this sends out the signal that failure will be rewarded by government backed funds and assistance. Senator Shelby was right where do we stop?