Sept. 25 (Bloomberg) -- Hedge funds that bet on a decline in British mortgage lender HBOS Plc are ``bank robbers'' and ``asset strippers,'' according to the Archbishop of York John Sentamu, the Church of England's second-ranking cleric.

``To a bystander like me, those who made 190 million pounds ($353 million) deliberately underselling the shares of HBOS, in spite of its very strong capital base, and drove it into the bosom of Lloyds TSB Bank, are clearly bank robbers and asset strippers,'' Sentamu told an audience of bankers at Drapers' Hall in the City of London last night, according to his Web site.

Sentamu's speech came as the Archbishop of Canterbury Rowan Williams, the Anglican church's highest-ranking cleric, urged the British government to adopt more radical regulations, in addition to the temporary ban on short-sales of financial stocks in an article published yesterday on the Spectator magazine's Web site.

``The question is not how to choose between total control and total deregulation, but how to identify the points and practices where social risk becomes unacceptably high,'' Williams wrote. ``The banning of short-selling is an example of just such a judgment. Governments should not lose their nerve as they look to identify a few more targets.''

The archbishop cited Karl Marx, the revolutionary who wrote the ``Communist Manifesto'' and ``Das Kapital'' and is buried in London, on capitalism.

`Marx was Right'

``Marx long ago observed the way in which unbridled capitalism became a kind of mythology, ascribing reality, power and agency to things that had no life in themselves,'' Williams wrote. ``He was right about that, if about little else.''

The Financial Services Authority restricted short-sales last week, after politicians and some investors blamed them for a plunge in HBOS's market value before it agreed to a takeover by Lloyds TSB. Under the rules, no new short positions can be taken in U.K.-listed financial services companies. While existing short positions don't have to be closed, they can't be increased.

The archbishops are ``wrong'' on short-selling, the Association of Private Client Investment Managers and Stockbrokers said in an e-mailed statement today.

``Markets need both the views of people who think the share price is going to fall, as well as people believing the market will rise, in order that the markets can function efficiently,'' it said.

`Alice in Wonderland'

Paulson & Co., whose main hedge fund made a sixfold return last year betting on a collapse in U.S. subprime mortgages, is among hedge funds that this week disclosed bets on further drops in HBOS, the largest U.K. mortgage lender, after its 76 percent fall so far this year.

``We find ourselves in a market system which seems to have taken its rules of trade from Alice in Wonderland,'' Sentamu said in his speech. ``The share value of a bank is no longer dependent on the strength of its performance but rather on the willingness of the government to bail it out, or rather on whether the government has announced its intentions so to do.''

The church oversaw assets worth more than 5.67 billion pounds ($10 billion) at the end of 2007, including stock market, real estate and private equity investments, according to its Web site. The Church Commissioners, which manages the endowment, made a return of 9.4 percent in 2007, beating its benchmark of a 7 percent return for comparable funds, according to the site.

`Valid Issues'

CCLA Investment Management Ltd., which invests about 2 billion pounds for the Church of England, said it doesn't short shares, or lend out shares in its portfolio that could then be used for shorting.

``We took the view that HBOS and Bradford & Bingley were fundamentally much weaker than others, so we didn't have a weighting in those shares,'' James Bevan, chief investment officer, said today in London.

The archbishop ``raised valid issues about excess'' in expressing his opposition to ``geared positions with the sole intention of driving the price south,'' Bevan said.

In February, Williams was attacked by British newspapers, politicians and fellow clerics for saying it ``seems inevitable'' Britain would have to incorporate some elements of Islamic law. He later said that he was misconstrued.

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net

Last Updated: September 25, 2008 07:25 EDT