Gordon Brown has spent months now condemning the "irresponsible" bankers, blaming them in part for our recession woes. But it seems that one of those very bankers may one of the PM's favourite advisers. Having conducted a review of ID cards for the Government (that surprise, surprise said they were a good thing), Sir James was hired by Chancellor Alistair Darling to see how we could ressurect the ailing mortgage market.
Amazingly, Sir James suggested - and even more amazingly Darling agreed - that a way out of the crisis is to find ways of using securitisation to help boost lending.
Mervyn King was rightly worried that the solution risked sounding just like the very thing that got us into the mess in the first place.
But what has not been much remarked on is the fact that Sir James was the chief exec of HBOS until 2006 - and oversaw its rapid and disastrous expansion based on wholesale markets.
Sir James left HBOS to become, wait for it, deputy chairman of the FSA - the very body that should be in charge of monitoring risking lending. HBOS was left in such a dire state by the collapse of the wholesale markets that it had to be swallowed whole by LloydsTSB.
Yet today's news from the Treasury Select Committee is the most damaging threat of all of to Mr Brown and Mr Darling's judgement in relying on Sir James.
Former head of risk at HBOS Paul Moore alleges (under Parliamentary privilege allowed to the Committee) that Sir James sacked him after he tried to blow the whistle on the fact that the bank was expanding too fast and that its sales culture was overshadowing its risk management.
The TSC today heard that Sir James then personally appointed a new head of risk with no experience in risk management. Mr Moore claims that he was "summarily dismissed" and that Sir James wrote - contrary to HBOS policy - at the time "the decision was mine and mine alone".
Former HBOS chairman Lord Stevenson today said a nine-month probe into Mr Moore's claims concluded there was no truth in the claim that he was sacked for trying to blow the whistle. But his claims are potential dynamite - for both HBOS, Sir James and Gordon Brown.
A great piece of analysis and journalism from Mr Waugh. If you haven't already bookmarked his blog, do it now.
24 comments:
But surely all these bankers up in front of the Star Camber have an excellent defence?
They believed Gordon Brown had abolished boom and bust!
The Penguin
This guys name was mentioned at today's hearing. 4 years ago while he was chairman, he sacked the risk assessment person because he warned the board about excessive risk. The chap later won a unfair dismissal case, by an out of court settlement. Oh! yes it also contained the obligatory gagging order.
Will Peston and Co at the BBC report this - will they invite their viewers to draw the inevitable conclusion??
Hmm, don't much like the concept of sacking someone who you don't agree with and appointing someone who will be your yes-man.
Particularly by the very top man in the organisation. Megalomaniac or serious big time arse covering methinks.
"Amazingly, Sir James suggested - and even more amazingly Darling agreed - that a way out of the crisis is to find ways of using securitisation to help boost lending."
You have to be fucking joking!!!!!????????????
Its bad enough that the govt's response to a crisis that was created by a rapid expansion in unfudned debt (i.e., not funded by savings) is to try to generate even more unfunded debt, but to actually contemplate another orgy of securitised debt on top is plain fucking stupid. Even for Brown/Mandy/Darling.
Any talk of this being a short recession is now officially utter shit. Expect a long protracted depression marked by stagflation and misery for an increasing proportion of the population as the govt relentlessly refuses to allow market prices to adjust in line with market forces as they insist on being seen to do sthg - anything - regardless of how damaging is. At present I still have a job but I have two brothers who have lost theirs and a third in a low paid one which is also close to folding (a chippy in the building trade). Cameron may be clueless aswell but at leqast the Tories may be more amenable to free market policy suggestions on this porblem than Gordon "The World Saviour" Brown.
trevorsden said... “Will Peston and Co at the BBC report this?”
I doubt it. It’s way too boring. [yawn]
Strictly one for the anoraks.
Simon Gardner said...
... It’s way too boring. [yawn]
Well, what do you know? A "yawn" added to a comment.
Come on Dolly, try to change your style once in a while.
We're all doomed.
"Come on Dolly, try to change your style once in a while."
Simple Simon can't be Draper. Unless he's discovered how to use spellcheck...
The suggestion that to sell mortgage paper in the securities market shows Crosby's poor knowledge of banking.
He started out at Scottish Amicable, a pension fund, moved to Rothschild's where he was in fund management, and was clearly so good at picking stocks he got put in charge of IT.
From there he fluked the job in 1999 of MD at Halifax, a bank not known for the calibre of its staff and basically just a plain vanilla morthahe bank. On the merger with HBOS the next year he made it to MD or the combined bank and then had a less that 5 year stint running HBOS.
So to be frank he spent less about 6 years in banking, but all of that at board level and away from the day to day banking decisions.
To consult his opinion is pointless. About as good as any 26 year old graduate banker, better than the Labour MP's on today's selct committee, but there are 1000's in the City who could give better advice.
Alex. Seconded in every respect.
Lola
Even the typos?
And of course, the HBOS Head of Risk was not only right, but obviously so. HBOS was horribly exposed to the collapse of a big bank - (Lehmans, as it happens, in 2008) - and this needed to be stress-tested: see this comment of October 2007.
Of couse, somehow "no-one foresaw this" - well anyway, not Brown, & not the bankers ...
"What Did Gordon Brown See in Sir James Crosby?"
Somebody who would tell him what he wanted to hear...
OK - difficult question first - put in the correct order the following - "Mafia and Scottish"
Remind me, how much is the FSA paying its chiefs in bonuses this year? And has anyone heard Gordon or anyone else condemning them for paying themselves bonuses for egregious failure?
It is just one large cartel of backscratchers. Be a friend to Gordo, get rich.
Is he Scottish?
The Penguin
Andy Hornby just said that he did not receive a single penny in cash by way of bonus.
Then went on to say he had lost more money in bonus than he had been paid in salary.
Arithmetic not his strong point.
Just goes to show that for all the supposed fierce intellect of Gordon Brown that it is nullified by a) an overweening belief in socialism (whereas the world has seen it proved time and again to be a terrible failed experiment, due to it having no understanding of human motivation) and b) that he likes tolerant sycophants on the make such as Robinson, Draper, Balls, Vadera et al, who in turn like bullying others.
Thus he made the ghastly mistake over splitting the BoE functions into three – so no one was responsible; and the pension grab, which was either malevolent or incompetent, and a thousand subsequent decisions since. First it was the fault of the US, now the bankers. Never ever the lunatic mismanagement since 2001. Only this weekend has been exposed the loss of the Overseas currency allowances to compensate the FO for fluctuations – yet another example of the Treasury’s desperate search for cash to fund this vile, incompetent and corrupt (vide the Home Secretary) administration
What did Gordon Brown see in James(Flog a pol)Crosby?
What do you expect from a nerd who thought Geoffrey(Orion Trust, TansTec, banned substances)Robinson was God's gift to The City.
With Lab its always financial scandal. Tories do Totty.
Crosby flouts his Rothschild connection. That would be Jacob not Evelyn(late Sir E). Not that
the moron that is Gordon would know the difference.
Peston this morning on BBC- lets wait until FSA has investigated its own actions in this regard- hmmm, let me guess, previous management did nothing wrong will be result of the investigation, obviously. What a joke.
On the other hand and not jokingly- what risk manager said was clearly true in retrospect and Crosby was, in retrospect, completely incompetent in running HBOS, never mind sacking the guy! So we have someone who was responsible for blowing up one of the main banks in charge of FSA and advising Brown, great...
Of course at the time, he and others (Bank of England, IMF, Lloyds) did warn of risks but were being shouted down by the rush to make money.
That is the nature of markets- get too excited, turn and get too depressed, then turn and become optimistic again.
Game Over Player 1:
http://news.bbc.co.uk/1/hi/business/7883409.stm
The Good Guys 1 FSA 0
The Penguin said...
"Is he Scottish?"
No, Crosby, Steals, Cash & Runs:
"Southern Man" (1971)
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