Banking inquisition continued

Eric Daniels', CEO of Lloyds, testimony yesterday was interesting, particularly in light of the new information about FSA concerns regarding HBOS. Lloyds was encouraged by the government to take over HBOS in September as GB wanted to avoid another Northen Rock style bail-out. (Remember that Lloyds had wanted to buy Northern Rock in 2007 but its proposal was rejected by the Bank of England as Mervyn King was worried that such a deal would fly in the face of EU law. Such fears had been quashed by September 2008 when banks were folding in abundance and any deal which would save taxpayers from picking up the tab was felt to be very desirable, and certainly worth waiving laws for.) GB was under time pressure as any delay could see HBOS fold so Daniels said that Lloyds committed 5000 man hours of due diligence into the deal, compared with 15,000-20,000 hours which they would have spent in normal circumstances. He did not say whether he had been informed by the FSA of its previous concerns about regulation at HBOS. He did say that if Lloyds had not bought HBOS, it would not have needed to resort to government finance.
This raises a few questions. Was GB acting prudently to encourage this merger which in the end resulted in the government taking a 43% stake in Lloyds? Would taxpayers have lost less money if the government had given a short-term guarantee to HBOS to give Lloyds sufficient time to perform its due diligence? If Lloyds had taken over Northern Rock in 2007 , would it still have needed government finance in 2008? What advice, if any, did the FSA give Lloyds?