Tag Archives: Treasury Select committee

HBOS: An accident waiting to happen.

There will be a lot of analysis and debate about HBOS and the findings of the Banking Standards Commission – mostly by journos with economics degress who will produce excellent but very technical (and sometimes incomprehensible) remedies and causes for the collapse of what used to be the UK’s 5th largest bank. I  was managing a Building Society Head Office is my twenties and have been observing the gradual mutation of the Building Society/Banks for over 30 years. (both from the inside and the outside). I have also spoken to several ex-HBOS managers. Here is it in plain English:

The Banking Standards Commission wants the three men responsible for the demise of HBOS  to be prevented from ever again working in the financial services industry and it has told them off!  What a punishment! These incompetents should be standing shoulder-to shoulder in the dock and made to answer questions.

Terminal stupidity is not a defense in Law, so they should be prosecuted.

Here are the three main players:

Sir James Crosby is a mathematician and Actuary who landed at the Halifax to run its insurance arm – a business in which many would argue, they should not have been participating in the first place. Five years later, in 1999, he became CEO of Halifax plc.  Ironically, in 2008, the then Chancellor,  Alistair Darling appointed Sir James to head up a Working Group of mortgage industry experts to advise the Government on how to improve the functioning of the mortgage market.

Andy Hornby was appointed Chief Executive of Halifax Retail in 1999 and finally HBOS Group CEO in 2006 – after the merger wit the Bank of Scotland. He was not a banker as most of his training was at Asda. Currently (and appropriately) he is Chief Executive of  Coral, the bookies.

Lord Stevenson was appointed Chairman of HBOS in 2001 – the time of the Halifax/Bank of Scotland merger. He was yet another non-banker who clearly demonstrated at his appearance before the  Treasury Select Committee  of the House of Commons in February 2009, that he had absolutely no idea of what had happened and the best that he could offer was “Sorry.”

Before its collapse, HBOS was lending at such a ridiculous rate that some of us could already see what was going to happen three years before the final implosion.

For instance, they were using their own valuers to value-up properties so that they could lend 100% (and above). “Lend, lend, lend” and “Sell, sell, sell” were their slogans. If a mortgage case was not up to scratch, the application would be fiddled-with until it was.  If a mortgage did not meet in-branch criteria, the prospective borrower was often sent (by the branch) to a mortgage broker whose lending criteria were more generous…..and so on. At the time, you could also walk into a branch, open a current account and be granted an immediate £10,000 overdraft!

In the final weeks of the lending orgy, when management finally realised that the whole house of cards was about to collapse, Halifax branches were being phoned on almost an hourly basis, in order to see how much money was coming in through the front door in deposits! That’s how desperate management became.

They were out of cash.

At the other end of the business – incompetent HBOS “bankers” were making increasingly risky investment decisions with HBOS investors’ cash until they lost most of their bets.

This was a fine old  Building Society playing at being a bank!

But why was all this going on? It has been pretty-well established that the management was technically incompetent…but there is another factor which contributed to all this silliness. It was the Government’s promise to safeguard investors’ cash. These executives thought that they were operating in a totally risk-free environment! They could not lose! If they screwed-up (which they did), the government would step in and bail-out HBOS and its depositors out with a pile of taxpayers’ cash – and that is exactly what happened.

The present Coalition government has clearly demonstrated its “Do Nothing” policy in respect of anything at all to do with banking. The odd fine here and there, is purely cosmetic and hardly makes a difference to the operation of either the institution of banking or of its individual members.

It will be interesting to see whether this report by the Banking Standards Commission will generate any government action or whether it will join all the other reports in the poubelle of soon-forgotten examples of  banking-industry fraud and monumental incompetence.

…and on Haiti Earthquake Day


Feminist Hilary

U.S. Secretary of State Hillary Rodham Clinton is in Oman today and this morning she spoke to civil leaders at a Town Hall meeting in Muscat.

She said that women can be a major power in the Middle East peace process as well as urging regional leaders to encourage and embrace the rising expectations and aspirations  of Oman’s rapidly rising  youth population.

The Secretary of State went on to cite the example of women in Northern Ireland taking the initiative to meet and be instrumental in the resolution of the “troubles”. She suggested that Arab and Israeli women could provide a similar peace impetus.

“Women played a major role in pushing the politicians to find some solutions,” she said. “It was very clear that there just couldn’t be a divide when people on both sides were suffering in the same way.”

However, she did stress that such an initiative would be long and difficult.

She said that if Arab nations were to succeed in the 21st century they should embrace the aspirations of women and youth.

Tomorrow, Ms Clinton visits Qatar on  before returning to Washington.


Treasury Select Committee Muppets

Yesterday’s “grilling”of Barclays boss Bob Diamond was embarrassing to watch. In the real world people such as the members of the Treasury Select Committee would never be around the same table as Mr Diamond because in commerce, they would not be good enough. The quality of question was  appalling and the committee members all showed that what was more on their mind that anything else was the fact that Bob Diamond had a far more successful career that they – and they didn’t like it.

The question from John Mann, Labour MP for Bassetlaw ” Why is it easier for a camel to pass through the eye of a needle  than for a rich man to enter the kingdom of heaven?” produced a bemused silence from everyone, especially the smiling  Bob Diamond who is used to a slightly more focused line of questioning. “I’m stuck on that one,” he replied.

The rest of us were just plain embarrassed, especially when the Chairman of the Treasury Select Committee,   Andrew Tyrie ( Conservative member for Chichester)  added helpfully: “People have been stuck on that for 2,000 years.”

At that point, Bob Diamond must have been imagining that someone had slipped Mescalin into his Highland Spring.

We really must look at recruiting Members of Parliament who are not quite as thick and not so intimidated by someone who earns in a year what they would earn in 10 lifetimes.

What happened to the Politics of Envy? Still there, it seems.


Eric Illsley MP

The good news for the self-confessed “tealeaf”  MP is that he can remain an MP and draw his salary for 11 months, even when banged-up.  Work that system, Eric!

An MP’s salary is a lot of snout.

How many MPs are still thinking “There, but for the Grace of God……”



The celebrities and opportunist politicians are but a distant memory. A year on and Haiti looks more-or-less the same as it did an hour after the earthquake, except that over 1 million people are living in tents and thousands are dying of cholera or malnutrition (that’s a nice word for starvation).

The £5 billion pledged has not materialised and you cannot feed and clothe people on promises.

Let’s not beat around the bush. Since Cuba has matured from dangerous Commie State to Interesting Tourist Spot, Haiti is no longer of any strategic importance. Its agricultural economy does not produce enough to feed its population. It populated by poor black people.

Remember Hurricane Katrina in 2005? Which group was left to fend for itself  for just that little bit too long? Who suffered the most because of the American Government’s intransigence. Yes. Poor black people.

Imagine if there had been  a hurricane or earthquake in Miami a year ago. By now even the golf courses would have been rebuilt.

We should all be ashamed of ourselves.

Diamond is forever

” These stiffs earn £65K. Wooooo! I’m so scared!!”

Barclays boss, Bob Diamond,  was today “grilled” by the Treasury Select Committee  and once again showed that he is slicker than frozen catshit on wet ice.

He, of course was not the ideal banker to be interviewed on certain topics, especially as Barclays did not source any funds from the British government during the banking crisis. Instead, they borrowed cash primarily from the Qatar Investment Authority (QIA) which was an existing Barclays shareholder.  Barclays had also held talks with  the Libyan Investment Authority and Russia’s VTB and Sberbank banking groups.

At the inquiry Diamond said (quite rightly), “No bank should ever be a burden on the taxpayer.” As someone who had run  Barclays Capital for 14 years, prior to being given the reins to the Barclays Retail operation, he had known where to source money when times became tough for Barclays in 2008.  He’d done it without any UK-focused sentimentality, whereas the rest of the industry ran to the Treasury for handouts. His exact quote: “Banks should be allowed to fail…It’s not okay for taxpayers to have to bail out banks.”

He was quite right. If a bank failed, it would be bought by another bank. Hopefully one with a competent Board and management.

Inevitably, that old chestnut, the banker bonus  reared its ugly head during rather tense exchanges but realistically, Diamond knows that he can earn what he damn-well pleases. Perhaps he wasn’t the ideal banker to defend bonuses. He has foregone his bonus for the last two years but there is little doubt that he can easily afford to do so. In 2007, he earned £21 million.

Barclays is not a government charity basket-case,  unlike the Royal Bank of Scotland whose CEO, Stephen Hester is set for a £2.5 million bonus. (As the government owns 83% of RBS shares, that will, in effect make Hester the UK’s highest paid Civil Servant).

Diamond expressed his belief in the Retail-Investment banking model, saying that the arrangement provided stability and was a “great starting position”. Many MPs believe that banks should be broken up  so that a clear distinction can be drawn between Retail (personal banking) and Investment (so-called Casino banking). In reality, they have always been separate operations and really only come together for accounting purposes.

It has taken the government a long time to come to the conclusion that they are totally impotent as far as banker bonuses are concerned and that they have effectively been told by the banks to “butt-out“.  As a concession though, the banks are expected to say that they are committed to lend more to small businesses. It remains to be seen whether this happens.

The banking industry claims that it is lending, whereas the business sector says that banks are not lending enough and when they do lend, it is at exorbitant interest rates with  borrowers having to jump through a series of bank-designed fiery hoops before banks do deign to lend.

However, Diamond said that demand for commercial loans had subsided.

Once again, Diamond demonstrated that our MPs, who are a motley crew of ex-lawyers, academics, union men and local councillors are no match for the denizens which swim the murky waters of the world’s banking system



Vince Cable

Have you noticed how quiet Vince Cable is these days? He used to be the most vocal politician on the subject of both “Casino Banking” and the banker bonus. It seems that after being told never again to crap in the Coalition’s cosy little nest, he has had his wrist slapped and been muzzled.