The HBOS Collapse - Who was to blame?

[trousers]

http://www.telegraph.co.uk/finance/newsbysector/epic/hbos/9971610/Dont-blame-the-HBOS-bankers-blame-the-politicians-who-cosied-up-to-them.html

 

Don’t blame the HBOS bankers, blame the politicians who cosied up to them

 

Today's indictment by the Parliamentary Commission on Banking Standards of the men who brought HBOS to its knees should extend well beyond them.

 

It has been almost five years since the crash, and still the guilty men are being tracked down and subjected to what seems like a never-ending trial for financial war crimes. Today, it is the turn of the trio accused of sinking HBOS: Sir James Crosby, Lord Stevenson and Andy Hornby. They are up on charges of vanity, arrogance, recklessness – and enough of it to destroy a bank.

So today, a country that loves to hate bankers will be given three new world-class villains – a peer, a knight and a commoner – still prowling around Britain with their licence to bank unrevoked. And herein lies the danger. There will be a temptation to believe that, were it not for these wicked men, HBOS would have been fine. That the crash was caused by the greed and incompetence of a handful of bankers – and if they’d been better people, we would have no recession. There is so much venom dripping from the report that it almost looks as if the suspects are being framed.

Not so long ago, politicians were infatuated with bankers. Indeed, there is suspiciously little in the report about how Lord Stevenson and Sir James came by their fancy titles. The answer, of which the Labour members of the commission are all too aware, is that Gordon Brown pretty much governed in coalition with the banks. His appetite for tax revenue was every bit as great as theirs for profit. The financial services sector paid two fifths of all corporation tax collected – and every bonus it handed out was split 60/40 with Brown and Blair.

 

Take Sir James, today denounced as the “architect of the strategy that set the course for disaster”. In 2006, he was asked to become the architect of something rather different: a government strategy on identity fraud. The next year, he was made deputy chairman of the Financial Services Authority, and a co-architect of banking regulation. The year after that, he was appointed by Alistair Darling to rewrite the rules on mortgage lending. This fit a pattern. If there was a problem – on skills, or the NHS – a senior banker was called in to publish a mammoth report. In many important regards, Britain had become a bankocracy.

 

Of course, heaven has no rage like love turned into hatred, and so it is with Labour and the bankers. Its MPs helped to strip Fred Goodwin of his knighthood because they saw in his very title conclusive proof of their former collusion.

 

Financial greed is always dangerous, but when paired with political vanity it becomes lethal. By working hand-in-glove with the financial sector, Labour ran a form of crony capitalism – and allowed the banks to have loans of up to 35 times their assets. Brown’s government was so dazzled by the tax haul, so swept up in the party spirit, that it left the teenagers with the car keys and a case of tequila. The crash was inevitable.

 

This is the real, scandalous truth about the financial crisis. If the HBOS trio really were as wicked as the commission suggests, why didn’t the regulator shop them? Today’s report takes us close to the answer. The FSA, it says, was not so much the dog that didn’t bark, as the dog that was barking up the wrong tree. It focused on small savers and tended not to bother the financiers – who were regarded, by Brown, as untouchable.

 

[Ex Lion Tamer]

Of course Labour was in power at the time so it bears some of the blame, but this article conveniently ignores the fact that the Tories were not opposing this stuff and would probably have deregulated further given the chance.

 

The problem was that Labour went along with the prevailing culture of neo-liberalism which went right back to Thatcher. And it did so because it felt it had to move to the right in order to get elected and stay there.

[Whitey Grandad]

Yup, they were all in it together. Labour's obsession with the City to the exclusion of all the other sectors of the economy was always bound to end in tears.

[saintfully]

Yep, those bankers have nothing to answer for at all...

 

Its absolutely not the fault of the people who committed the crimes, just the fault of the people who failed to stop them!

[Whitey Grandad]

Yep, those bankers have nothing to answer for at all...

 

Its absolutely not the fault of the people who committed the crimes, just the fault of the people who failed to stop them!

Nobody committed any crime, it was all legal. The whole collapse started in America after Clinton had persuaded the banks to give mortgages to poor people who couldn't keep up the payments when times got tough. Was he wrong?

[View From The Top]

Yup, they were all in it together. Labour's obsession with the City to the exclusion of all the other sectors of the economy was always bound to end in tears.

 

Yeah, cause it's only them lefties that suck the City's co.ck!

[CB Saint]

why are these three any more guilty that those who ran Northern Rock, or Bradfordand Bingley, or Lloyds or RBS - I have no idea whether they deserve the level of criticism they are getting, however, it does feel like these three are being singled out.

 

As a side note, if I were sat in the chair facing an MP commitee, I would have a massive issue being hectored by a bunch of expense embezzling narcissists, irrespective of what I had done.

[Depressed of Shirley]

Interesting that this report came out criticising the FSA, 4 days after it ceased to exist.

 

No cover up here at all.

[CHAPEL END CHARLIE]

I once had a few HBOS shares that dated all the way back to the Halifax's takeover of the old Leeds Building Society. Holding this stock was an exciting ride to put it mildly. At one time there were verging on £2000's worth - but that which goes up must come down - and by the end when Lloyds took them over you might as well used the lot as fire lighters for all the good they were.

 

An expensive lesson for me then, but one that doesn't really matter much anymore to be frank. Others however with much larger stakes (not all of whom were wealthy financial institutions by any means) must have taken a real beating as a result of the disastrous decision making of those charged with the running this bank.

 

I wouldn't trust Crosby and his mates to run a Whelk store.

[saintfully]

Nobody committed any crime, it was all legal. The whole collapse started in America after Clinton had persuaded the banks to give mortgages to poor people who couldn't keep up the payments when times got tough. Was he wrong?

 

Yeah, he was as wrong as George Bush was for expanding the programme, as wrong as Tony Blair and Gordon Brown for allowing UK banks implicitly to support it, as wrong as the Tory opposition for supporting/not calling Labour out on it until too late, as wrong as the punters who took out loans beyond their means and as wrong as the bankers themselves who dreamt up the model in the first place. Etc. Etc.

 

If you can't see that blame has to be shared around, then you're probably the kind of idiot who thinks that running a small business makes you uber-qualified to comment on international economics.

 

As for the comment regarding it all being legal and not a crime.. so was taking a shed load of meow-meow until ~1 year ago but we didn't encourage that, nor having kids for the purposes of child benefit, nor lots of other things that the blunt instrument of the law is incapable of/slow to tackle. Crimes can be moral as well as legal ... IMHO of course.

[Bearsy]

any idea how this affects Game of Thrones season 3 yo?

[saintfully]

any idea how this affects Game of Thrones season 3 yo?

 

Positively.

 

Less cash = less clothes = more t.its.

 

Bring-it.

[Hockey_saint]

I know who was to blame!!!.....the coalition government assured me! (so it must be true!).....people on benefits!

[Whitey Grandad]

Yeah, he was as wrong as George Bush was for expanding the programme, as wrong as Tony Blair and Gordon Brown for allowing UK banks implicitly to support it, as wrong as the Tory opposition for supporting/not calling Labour out on it until too late, as wrong as the punters who took out loans beyond their means and as wrong as the bankers themselves who dreamt up the model in the first place. Etc. Etc.

 

If you can't see that blame has to be shared around, then you're probably the kind of idiot who thinks that running a small business makes you uber-qualified to comment on international economics.

 

As for the comment regarding it all being legal and not a crime.. so was taking a shed load of meow-meow until ~1 year ago but we didn't encourage that, nor having kids for the purposes of child benefit, nor lots of other things that the blunt instrument of the law is incapable of/slow to tackle. Crimes can be moral as well as legal ... IMHO of course.

Now now, did I say that it was all down to one person? My question was to raise a serious debating point, not to stir up prejudices.

[saintfully]

Now now, did I say that it was all down to one person? My question was to raise a serious debating point, not to stir up prejudices.

 

What exactly was the serious point you wanted to debate? Whether poor people should be housed? (Yes). Whether it should be down to loan-sharks to do it? (No). Whether there is a role for the state to house people when the free-market fails? (Yes). Or was it whether the free-market economic model based on consumer credit was a good one...?

 

Up until yesterday I thought that last question had been answered and everyone knew it had been a 30 year experiment that failed. Now it seems that isn't the case and actually financial deregulation and free-flowing consumer credit was/is the answer to the UK's economic woes. Who knew??

[Depressed of Shirley]

If you want to blame someone for the whole mess, then that blame needs to be shared between the people who decided to lend at any costs without checking whether there was a cat in hells chance of the loan being repaid, and the public money financed regualtory watchdog, set up to look out for, and stop, exactly these types of practices.

 

The incentive for the bank bosses was to lend as much as possible, because that made the bank look more profitable, and the share price rise. Of course, after they had the bonuses, not only did the profit disappear from the balance sheet, but it was replaced by write offs that made them insolvent.

 

Both parties were incompetent, and it annoys me that the relevant people at both the bank and the FSA just walk away into other highly paid jobs, when they should have been unemployable following this fiasco.

[Whitey Grandad]

What exactly was the serious point you wanted to debate? Whether poor people should be housed? (Yes). Whether it should be down to loan-sharks to do it? (No). Whether there is a role for the state to house people when the free-market fails? (Yes). Or was it whether the free-market economic model based on consumer credit was a good one...?

 

Up until yesterday I thought that last question had been answered and everyone knew it had been a 30 year experiment that failed. Now it seems that isn't the case and actually financial deregulation and free-flowing consumer credit was/is the answer to the UK's economic woes. Who knew??

I asked the question because many on here have been advocating building houses and lending them to the poor, which is what Clinton encouraged. We have limited finances available to stimulate the economy and putting them into the property market is not necessarily a brilliant idea.

 

Economists will be debating for decades the causes of the credit crunch and will will not come to an agreed answer. To blame any one sector of the economy is very simplistic but there are enough candidates for everybody to find a target for their personal prejudices.

 

(Incidentally, a major part of the problem in America was that american mortgage rates can only be negotiated downwards)

[saintfully]

I asked the question because many on here have been advocating building houses and lending them to the poor, which is what Clinton encouraged. We have limited finances available to stimulate the economy and putting them into the property market is not necessarily a brilliant idea.

 

Economists will be debating for decades the causes of the credit crunch and will will not come to an agreed answer. To blame any one sector of the economy is very simplistic but there are enough candidates for everybody to find a target for their personal prejudices.

 

(Incidentally, a major part of the problem in America was that american mortgage rates can only be negotiated downwards)

 

1) I don't think anyone with a brain is advocating building houses and lending them to the poor - of those without a brain, Mr Osbourne is suggesting that any house (new-build or otherwise) can be bought via state-backed private lending, whereby the only body not liable for more than 5% of the houses value are the banks, despite them holding ultimate ownership! I find this remarkable - especially since the proposal is that the state ends up on the hook for £130 billion!

 

The plan that has been suggested is that the state builds homes and then leases them to the poor but retains ownership (and liability). The principal reasons why this has been proposed is that a) the private sector has been shown to be woefully incapable of building enough private housing (despite the undoubted demand = market failure) because they are sitting on massively over-valued landbanks, b) because, in general, its better to have people not living in over-priced sh.it holes run by slum-landlords, and c) it allows for an immediate stimulus for the economy.

 

2) Prejudice is, as the word suggests, about pre-existing opinion, and not about opinion based on current evidence. I suggest it is foolish to listen to your prejudice as opposed to looking at the evidence. Thus, if I see a moronic comment/proposal based on prejudice rather than fact/opinion, I'm happy to call it out.

 

3) American mortgage rates can only be negotiated downwards? Interesting, I didn't know that - it makes the decisions of the banks, in that new context, seem even more pernicious to me!

[trousers]

Sky News Newsdesk ‏@SkyNewsBreak29m

Financial reporting regulator says it is considering probing the KPMG audit of HBOS in run up to the bank's failure

[bridge too far]

Sky News Newsdesk ‏@SkyNewsBreak29m

Financial reporting regulator says it is considering probing the KPMG audit of HBOS in run up to the bank's failure

 

http://www.bbc.co.uk/news/business-22087201

 

KPMG not doing very well ATM! Isn't KPMG one of the big 5 charged with public audit, following the government's decision to close the Audit Commission? I'm filled with confidence - not

[PhilippineSaint]

Was it me because I defaulted on a Halifax Mortgage?

 

 

And there not getting it back