Is HBOS Too Big to Fail?

Shares of UK bank HBOS have been hit hard of late and are bouncing around Wednesday on speculation of a possible deal with Lloyds TSB.

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The stock was up as much as 11 percent and down as much as 50 percent as reports came in about a possible deal. The bank says it is well capitalized, but HBOS has 20 percent of the mortgage market in the UK.

At a time when home prices are depressed and credit is tightening, there is speculation that the government won't risk another shock to the housing market.