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The questions for the former bank bosses

Robert Peston | 09:05 UK time, Tuesday, 10 February 2009

Here's the good news for the former bosses of Royal Bank of Scotland and HBOS who are being grilled this morning by the Treasury Select Committee.

There's so much really bad financial stuff happening in the world that perhaps their past mistakes won't be quite as humiliating for them as would otherwise be the case.

For example UBS, the former pride of Swiss banking, has just disclosed that its losses in 2008 were around £12bn - that's about 50% more than the eyewatering losses made by Royal Bank last year, during the last disastrous phase of Sir Fred Goodwin's reign.

And in Russia regional banks are talking to the government about how to reassure overseas banks that they can repay around $400bn of debts over the next few years.

Yuk.

To paraphrase Ed Balls, this financial mess is global and as bad as we've seen for 100 years (although to nitpick, the Governor of the Bank of England thinks it's the worst banking crisis since just before World War One, so not quite a century).

So what should the MPs ask the erstwhile heads of HBOS and Royal Bank about the extreme local difficulties they succeeded in engineering for themselves?

If I had one question for each bank, these would be them:

For Andy Hornby, former chief executive of HBOS, I would ask how on earth he allowed the bank to abandon tried and tested banking risk controls. What I mean by that is that he gave licence to his team to take stakes in big companies as well as lending to them.

That went against all traditional banking practice, because it meant that the banks' judgement about the credit-worthiness of companies wanting to borrow vast sums was clouded by the enticing prospect of making fat profits on shares held in those borrowers.

Or to put it another way, good banking judgement was overwhelmed by at least one of those seven deadly sins.

In the early 1990s, when I was banking editor of the Financial Times, it was regarded as almost a scandal when the so-called clearing banks held shares in corporate customers. Over the past few years, at HBOS and at other banks, this dangerous mixing of lending and investing became commonplace - with disastrous consequences.

So the question to Mr Hornby - who is not a banker by training and yet went on to run one of our biggest banks - is why he didn't spot this danger (among many other dangers - such as the bank's excessive reliance on unreliable sources of funding, inlcluding sales of mortgage-backed bonds).

As for Sir Fred Goodwin, who for years was the supremely confident CEO of Royal Bank, the big question is why, oh why, did he buy the bulk of the toxic giant Dutch bank ABN right at the top of the market.

This deal would have bankrupted RBS, were it not for the generosity of taxpayers. And he can't claim there were no serious voices arguing against this takeover. There were many asking the question whether this was a deal too far.

Doubtless he and Hornby and their respective chairmen will say sorry this morning. But they need to do more.

They need to give a convincing narrative of how they made their egregious errors, so that we can all learn from their mistakes - and make new mistakes next time, rather than repeating these particularly disastrous howlers.

Comments

Page 1 of 3

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    Please please do something to correct the impression that the problem in the banking industry is big bonuses, and if the politicians can somehow stop big bonuses then the bonus problem will be solved.

    You have to think about why big bonuses are paid in the first place. Individual bankers generate huge quantities of revenue, and if they walk out the door they take the revenue with them. We - the taxpayer - own bank now, and our interests will not be served if the revenue generators walk out the door and take the business with them. The general impression appears to be that big bonuses exist because bankers are greedy and like paying themselves lots of money. As if people in other industries wouldn't pay themselves lavishly if they could! The difference between banking and other industries is the sums involved and the extent to which those sums are attributable to individuals. Other industries with the same dynamics also pay their stars lavishly - think of the media and the film industry.

    Please do no confuse this with a "defense" of big bonuses - I'd love it if bankers were paid less. That would amount to an increase in productivity - more output at less cost. I would also love it if footballers were paid less - that would mean we'd have to pay less to attend games and to watch the games on television. But what popular opinion appears to be pressing for now is the equivalent of nationalising Manchester United and imposing a £500,000 annual salary cap. What do you think do you think would happen to Man U if we did that?

    In your position as business editor of the BBC, couldn't you do something to explain this to the nation? Your discussion on the Today programme this morning did nothing to correct the impression that all we need to do is bring about the end of bonuses, and everything will be OK. In your post below, you write that demand for talent is thin on the ground. How long do you think that's going to last? Do you really think that, for example, well connected corporate bankers won't be able to leave RBS and set up their own M&A practise? That star analysts and traders won't be able to find work at other firms?

  • Comment number 3.

    Perhaps the question that should be asked is about risk management. The banks:-

    must have known their exposure to the housing market;

    must have known that the market was overheating;

    must have known that self-assessment mortgages were reducing the quality of their mortage book.

    How come they did nothing about it - and also bought large quantities of Mortgage backed securities?

    Allowing banks to invest in and lend to companies is a question for the FSA/Brown.

    Taking over another company is a risk - he may not have known it was the top of the market. Shares have not been overvalued in this particular fiasco - unlike previous ones.

    So houses were overvalued and shares weren't - house prices have reduced by 20% and shares 40% - explain.

  • Comment number 4.

    I'll try this one again here.

    I thought legal action could be taken against directors of companies if they were found 'Not to have acted in the best interest of the company'.

    I delieve this was enhanced/brought in after the Maxwell scandal and to prevent directors from - well ripping off the company.

    Is there not any scope here for getting something back from these misunderstood scoundrels?


  • Comment number 5.

    Sorry...?

    Talk is cheap.

    MAKE THEM GIVE THEIR MILLIONS BACK!

    Return the bonuses. That will hurt!

  • Comment number 6.

    The real question is
    Why aren't we putting them on trial and making them return the money they stole.

  • Comment number 7.

    Of course they will say sorry.

    So that's all right then.

    Well, no, it isn't all right.

    And if they say "lessons have been learned" they should be put before the firing squad.

    How many times have we heard that lame offering from failed senior managers?

    These highly paid managers were not put in place to "learn" things at shareholders' and taxpayers' expense.

    There are no excuses for these guys.

  • Comment number 8.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 9.

    I am sure it will be another great pantomime performance as the Select Committee lays into the hapless duo, giving them a severe seeing to on behalf of the nation. Sure mistakes were made but to lay the whole sorry episode at the door of the these two individuals is simplistic. We have to take into account the media's not insubstantial role in the undermining of the public's confidence in our banking system. The highly inflamatory coverage of the Northern Rock demise just set the ball rolling with other journos, short-sellers and analysts picking off bank after bank.

    We have had the "talking heads" warble on and on about "financial tsunamis" and "holocausts" and have been told again again that the banks are not lending to each other. (This is not what the banks are telling us). We must not loose sight of some of the other issues such as the criminal behaviour of the rating agencies and the rediculous attitude of the accounting profession wrt to mark-to-market accounting. Sure, give these two a good public flogging, but lets not pretend that they were solely to blame for this mess. If we really want to learn from the mistakes that were made we should cast the net much much wider.

  • Comment number 10.

    Why did they buy American Mortgages ?

    Are they going to sue the American Banks and Ratings Agencies for misrepresenting the Bonds they were selling ?

    And finally why do they believe they should be entitled to help themselves to Shareholders funds (both Public and Private) whilst the Bank, they are employed by, is lossmaking ?

  • Comment number 11.


    I see Ed Balls has put his mouth in it again.

    As ever gaffe prone as David Milliband.

    Both always seem to be aiming at undermining the PM and any confidence in the markets.

    One wonders if Ed Balls should be grilled by the same 'kangaroo court' committee that tried to shift blame (for Northern Rock) on to you Robert?

    As for the Bankers, how about a 'credit crunch' recipe:

    'skin and peel a few Bankers;
    'season and lightly oil;
    'skewer gently and roast slowly;
    'over an environmentally unfriendly barbecue.

    'Leave to cool and serve with a healthy dash of cynicsm, along with politicians and estate agents, to the newly unemployed.'

  • Comment number 12.

    my understanding was that if a trade makes a profit, you are liable for tax
    even if the money is reinvested and makes a loss

    so if you trade to make a billion profit and then lose a billion aren't you still liable for the tax on the original profit

  • Comment number 13.

    As I keep saying, the only way to inject demand back into the economy is to reverse decades of below Inflation pay rises given to the Public Sector.

    Give them all a forty percent pay rise, and the consumer economy can start ticking over again.

    Otherwise, we all face a long slide into Depression and poverty.

    Has the Gov't made any effort to establish/encourage new Export businesses in Britain ?

    If not why not ? (That is the long term solution).

    Has the Gov't made any attempt to address the undervaluation of certain foreign currencies ? (That permit the UK to be flooded with cheap Imports).

  • Comment number 14.

    I took out an endowment mortgage to provide for myself in future, not to provide for the Bankers...

    As we know, the Banking world was booming, but returns on endowment policies were pathetic.

    Why did the Bankers think it was appropriate to reward themselves excessively, instead of passing the profits to customers with profits related policies, such as endowment mortgages ?

  • Comment number 15.

    How does a lawyer with no finance qualifications get to be head of one of the largest banks in the UK? Is this a man we can trust? Would you trust a lawyer to do brain surgery? then Why, oh why? do we trust lawyers to run a bank???

    "That thought-out approach has characterised Varley?s rise through Barclays. The only son of a Coventry solicitor, he qualified as a lawyer in London before joining Barclays as a merchant banker in 1982. Since then he has worked in every corner of the organisation, recently as finance director, an extraordinary feat for someone with no accounting qualifications."

  • Comment number 16.

    Why is RBS acting against the interests of British taxpayers?

    Cabinet minister Ed Balls, a former economic adviser to Gordon Brown, says the current global recession is "the most serious for over 100 years" and "more extreme and more serious than that of the 1930s", he said these were "seismic events that are going to change the political landscape".

    Meanwhile, that well known taxpayer owned bank, RBS, is busy exporting jobs to Asia. These are not fat cat bankers but modestly paid backroom clerical jobs.

    When unemployment is soaring it is crazy to throw British workers on to the dole to send the money to Asia!! Less money in our country = less tax revenues, even more unemployed and a worse balance of trade.

    Is there any way at all this makes sense for Britain??

  • Comment number 17.

    Allowing retail banks to borrow money is the real culprit here. A banker wants to lend, that's how he makes profit, that's his business. When cheap money floods an economy, asset prices rise and corporate profits increase, giving the false impression that all is well. The retail banks then borrow more money, so they can lend more money, and the artificial cycle continues.

    It was Bill Clinton's administration which in 1999 abolished the Glass-Steagall Act of 1933. This allowed retail banks to borrow for the first time. Tony Blair's government then copied this approach, allowing British retail banks to begin borrowing in 2001. The BoE failed to control the money multiplier, causing massive asset price inflation..........and the worst recession since World War One.

  • Comment number 18.

    2:

    The Bank Shareholders, whom have lost between 100 and 85 percent of the value of their investments, would not consider that there are any STARS in the Banking Industry !

    Destroying other peoples Companies and then expecting to be paid a bonus for it, would be a joke, if it wasn't so staggeringly arrogant.

    Let these so called STARS go.

    Let them take their Toxic derivatives, and fraudulent confidence tricks with them.

    The Shareholders will be better off in the long run without them.

  • Comment number 19.

    Robert

    As we keep being told you've all seen it coming, why did you not ask those questions a couple of years ago when many news headlines were going on about the levels of debts

  • Comment number 20.

    How much will that committee is going to cost, as nothing will change should we put the money somewhere else?

  • Comment number 21.

    If I recall Barlays and RBS were making take-over bids for Dutch ABN. Look at the trouble Barclays would have been in trouble if it had won. They were both daft as it was way over valued buy.

  • Comment number 22.

    I would ask these two bank chiefs what happened that made them decide to shift the internal balance of power away from the prudent credit departments staffed by traditional bankers to the investment bankers and traders - and challenge them if they claim that it was not just greed for the enormous short term gains promised by the high earners - all of which have of course now been written off in subsequent losses. If the market is now forcing banks to return to traditional conservative banking strategies, why are they so afraid of seeing their big earners walk out of the door?

  • Comment number 23.

    I don't mind paying more tax but how can I make sure that it goes to bankers?

    I don't want is squandered on OAPs, schools or hospitals.

    No banker left behind.

  • Comment number 24.

    Dear Peston,

    Please, you are still following the government's red herring (bankers for scape goats). Please concentrate on what matters: the expansion of the monetary base = printing money = inflation coming. (Stephanie Flanders is right: "follow the money!")

    The most important questions are: Are we going to have inflation? When? How much? For how long?

    It is possible to construct a few (3?) scenarios, using econometrics. You must know a good econometrist. Or ask/pester the IFS!

    We need 3 charts, with 3 inflationary curves: a best case scenario, a worst case, and the middle one.

    Hard? Maybe, but let the academics do their job. We pay them for it.

    Cheers, Laura

  • Comment number 25.

    I wonder if the PM’s reluctance to take some decisive action with the banks has something to do with his future job prospects?

  • Comment number 26.

    Why ask those questions Robert?

    In your article, you mentioned Hornby was not a trained banker so was hardly likely to follow established banking practice. Surely the question in his case should be who allowed him to take charge.

    As for Goodwin, you said it yourself, despite numerous voices telling him this was a mistake, he carried on. Why were the other board members so ineffective? Or had they reached the Nick Leeson stage - all or nothing on the next deal.

    My plumber doesn't come to fix my electrics, so why put a grocer in charge of a bank?

    Don't buy an old decrepit building and expect to turn it into a palace without it costing almost everything you have.

    Common Sense IS common, just some people think they're too clever and the normal rules don't apply to them

  • Comment number 27.

    Short of total revolution the exclusive club of the wealthy and powerful will remain in control, with minimal lip service to lesser interests.
    Whatever wealth and materials can be extract from the world at large will continue to be converted into gravy-trains and yachts.

    So let we, the people, use the mighty power of the democratic process to act decisively and bring about major change by ..........

    Voting in the Tories!

    Boy oh boy! I feel so much better for that.
    Blue skies all the way now.

  • Comment number 28.

    I thought Hornby came on the scene late when all the damage was done at HBoS. He certainly was the first to break ranks and say the problem was profound. Whatever he has done I wouldnt lump him in with with the RBS raving banker who spent money as though it was going out of fashion, well it was, so he got that bit right, just he forgot the debt bit.

  • Comment number 29.

    How can RBS be expected to make an announcement of a LOSS of 28bn GBP later this month and still be paying out bonuses of 500m - 1bn GBP?

    What are they based on, worst performance?

    If some of these bonuses are part of legally binding contracts, then who on earth negotiated these contracts?

    Surely there was a clause that the company had to actually be solvent before they were obliged to honour them?

    If not, no wonder they ran it off the end of a cliff... They knew they'd get paid, whatever -

  • Comment number 30.

    There is only one question thread they need answer:

    Given that it is now clear the 'profits' upon which your previous bonuses were based were in fact not real, will you be paying these bonuses back or relinquishing the shares awarded ?

    If not, why do you think you are entitled to keep them?

  • Comment number 31.

    18 supercalmdown

    I'm getting worried - you are on thread and not asking for a public sector pay rise of 40 percent. Is everthing all right in calmdowntown.

  • Comment number 32.

    #2 - LuisEnriqueUK

    It would do nothing to Man U if all other clubs were doing the same?

    If no one is hiring, they'll stay where they are for less money or be unemployed.

  • Comment number 33.

    Fine let the banks pay as much bonus as they like.
    But impose a windfall tax on the bonuses paid to city workers (no exemption for non-doms) for the last five years.
    I would suggest a retrospective rate of 80% less whatever tax they have already paid.

    Perhaps the anti-Terror leglislation might help?
    (reference to Iceland!)

  • Comment number 34.

    So the former top 4 men from RBS and HBOS have apologized this morning.

    I can't say that does much for me and my family or my small business as we struggle on in the mess they helped create.

    Even more disgusted to think they can all ride off into the sun set now with the millions they have already banked for their so called outstanding performance of recent years.

  • Comment number 35.

    Balls... is living up to his name.
    How on Earth can the current economic mess, be compared to the economy of 100 years ago.










  • Comment number 36.

    Sorry if this is off topic, but a barrel of Crude Oil is now worth $40 - so why is a litre at the pump still nearly 90p?! I know the pound is weak (@$1.48 at the mo), but still, the oil companies are making a killing here.

  • Comment number 37.

    Dear Sir,
    I have been putting some thought to the current global financial crisis and would like to put forward to you a hypothesis for consideration, if it is a viable solution to the increasingly catastrophic situation the global financial system is currently experiencing.
    It is about time that someone came up with some constructive thoughts and started to look at the 'credit crunch / recession /depression) as an entirely global problem that is not going to improve in anything like the near future.

    Global problems require global solutions and the only REAL solution is to tackle the problem on a global scale.

    Consider this hypothesis - the only way to revive the world economy is to instill confidence in the public mind, give investors something to invest in!

    Banks and bankers cannot do this anymore nobody trusts them

    The answer is to respond to the masses in such a way that they have the power to bring the world economy back on track.

    Bring confidence back and it will turn around very quickly, the burning question is HOW?

    A simple solution is available, provided that the world financial systems and all governments work as one entity for one goal.

    THE SOLUTION IS SIMPLE IN CONCEPT BUT DIFFICULT TO RESOLVE WITHOUT 100% GLOBAL COOPERATION AND METICULOUS PLANNING TO IMPLEMENT THE CHANGEOVER TO REVALUED CURRENCIES AND ALL FINANCIAL TRANSACTIONS ADJUSTED TO THE NEW LEVEL.

    Close down all financial dealings for 48 hours

    The concept is to take all global assets, everything but hard cash and reduce the value to one tenth

    Next take all cash assets and multiply value by ten

    (this would require revaluation of every world currency) yes print new money

    This would create wealth for every man and women in the world overnight and create a differential of 100 times between asset values and cash values globally and therefore will not have any inflationary impact whatsoever.

    after 48 hours all transactions would recommence with all assets a tenth of what they were before, but cash assets having being multiplied by ten they would be worth 100 times more. However the status quo of assets, wages, prices, etc., relatively, will remain the same.

    The windfall from the change gives revenue back to the people to spend but have 100 times more spending power. Costs of assets are slashed and the cash assets allow people to buy houses and spend while still maintaining the original differential as the revaluation is totally global therefore there will be no difference in the relative values of assets compared to incomes.

    If such a plan was considered and published globally it would almost certainly create confidence, in fact ity may even improve the world economy before it is applied. Just the knowledge of global improvement may give the kick-start the banking bail-out strategy has not.

    I am an engineer, not an economist, I look for solutions to problems every day.

    Regards,

    CG London

  • Comment number 38.

    Former top dogs have apologized and admitted to mistakes. That only leaves one person left -

    When are you going to finally hold your hand up Mr. Brown and admit you have let the British people down???

  • Comment number 39.

    The horrible losses at Northern Rock this morning (45.9m GBP on repossessed homes) are worse when you look at the comparables.

    It had lost 10.2m GBP in the preceding SIX YEARS, so an average of 1.7m GBP per year. For this to mushroom by 35.7m GBP IN A YEAR is a staggering decline!

    As it has redeemed it's better customers and now begins to aggressively lend to anyone the government says it has to (the worst risks, or they'd get finance elsewhere), I wonder how long this lame duck has left?

    People talk of getting "all there ducks in a row". If they did that here, it would be duck season -

  • Comment number 40.

    Perhaps a major reason why HBOS strayed so far from normal banking prudence is that its Chairman and Chief Executive had no formal banking background. Lord Stevenson can best be described as a "professional" chairman without any knowledge of banking let alone risk management before he joined the Halifax. His CEO, Andy Hornby, although an intelligent man owes his success to running retail stores for Asda and I do not believe he, or most of the HBOS board, had any real knowledge of the risks they were running for both depositors and shareholders. To hear that Hornby is now being paid a consultancy fee of £60k per month to help Lloyds Banking Group beggars belief. He should donate this to the NSPCC - one of the unknowing beneficiaries of a charitable trust established by HBOS to shelter about £47bn of securitised loans!

  • Comment number 41.

    #2 LuisEnriqueUK

    Sorry but your light weight thinking doesn’t need “explaining” to the Nation thank you very much!!!!

    The bonus culture within banking and the whole financial services sector is an issue (admittedly a lot of the resentment is driven by jealousy)

    The stars in your media and film industry example are never going to bring the economy to its knees, or see ordinary people lose their life savings, or cost people their jobs...... in that particular area you reward selfishness and it works for you...

    Scale isn’t a multiplier either – we turn over approx 5 million and our FD is rewarded for the role he plays in managing our finances. If turn over increases by 10 his salary doesn’t! Just because the numbers get bigger doesn’t mean the reward increases at the same rate.

    Also we are talking about a “bonus culture” here, not specific bonuses. If the individual bankers that you refer to are responsible for “generating huge quantities of revenue” AND it is sustainable AND isn’t going to bring their bank to its knees, all well and good. But I, along with others know that buried away within these huge bonus payments, justified because of the huge responsibility that goes with generating huge profits are people that seem to have generated huge losses.

    By all means Name and Pay the successful

    But Name and Shame the others please....... this seems like one big game of Hide & Seek

  • Comment number 42.

    In his comments published today Mr Balls seems to be saying that this is the worst recession since The Federal Reserve Act-which was 1910 I believe.

    That was when the big central banks in the US found a way to hide behind the taxpayer. Balls is actually right for a change because this scam -the results of which are now emerging-started then, and has gone on ever since.

    This time they went too far.

  • Comment number 43.

    Can someone please tell me how in todays world if you want ( as a company ) to borrow you need to put up assets at market prices or 100% yet banks are still speculating with depositors moneys on terms of 40-1 leverage?

    What the hell is the Bank of England, The Government and the absolutely useless FSA doing about that ?

    At what point is their tiny little minds to they pick up what everyone at street level sees daily?

    We have a system in place that can't work yet no one is doing a thing to stop the damage. To many of those who could do something have their noses so deep in the trough they cant see the wood from the trees.

    The onlky way to make things happen is to get a change of Government and Leadershio at the FSA. Until that happens UK plc will continue to sink and we will just look on as blind leadership lead blind regulators.

  • Comment number 44.

    Post 2

    You are wrong to liken bankers earnings with other high earners. Bankers do not have totally exceptional gifts, they should not earn so excessively (this is proven as there are thousands and thousands of bankers who have peen paid million pound plus bonuses).

    The other highest earners are few and far between in their feilds.

    They have been paid because they earn the banks so much - but their employers forgot it was a one way bet for the employee - hence the mess we are in. Hence it HAS to change!

  • Comment number 45.

    We all need scapegoats; its the human condition - the Bankers are as good as any. But we were all complicit from the Gov over borrowing and promoting the boom, to businesses over leveraging to us buying £100 hair cuts and Plasma TVs for the bathroom.

    Its easy now with the rear view mirror but few voices of reason were heard at the time as we all talked up the boom; our infactuation with house price growth; chancellors unending growth figures; and economists Goldilocks model.

    History is littered with calamitious population decisions and trends that in hindsight seem crazy. But they were not at the time. As humans we are extremely susceptible to such group think and momentum thinking. We tend only to look for confimatory evidence.

    I don't blame the Bankers, most of us would have done the same and contributed in our own small ways with our own debt and consumption decisions. I like the last piece of your article which focuses on the situational variables and conditions that allowed all of us, not just fat bonused bankers, but businesses, Govt and citizens to be sucked in. Bring in Sir Fred not for public humiliation but for an honest discourse on decisions and how and when they were made. Do the same for representatives of business, Gov (Gordon) and the citizenry. Then we may learn the lessons.

  • Comment number 46.

    'grilled' ?

    Don't make me laugh, they knew the questions before hand, not only that its a big show put on for joe public.

    We are slaves / peasants

  • Comment number 47.

    Dear Robert

    "hens Gordon Brown going to give evidence and say sorry?2

    AFTER ALL THIS IS ALL HIS DOING AS WELL AS THE BANKERS.

  • Comment number 48.

    Dear Robert

    "whens Gordon Brown going to give evidence and say sorry?2

    AFTER ALL THIS IS ALL HIS DOING AS WELL AS THE BANKERS.

  • Comment number 49.

    #13 - supercalmdown

    Public sector workers now recieve bonuses and in many cases are better renumerated than their private sector comparable.

    Don't get me started on their pensions!

    Let's just leave them as is, eh?

    Or ban the practice of giving bonus to civil servants for doing their jobs!

  • Comment number 50.

    Why don't the government simply impose a 90% income tax rate on all bonuses paid by banks in which they have a stake.

  • Comment number 51.

    Why not expose the detail of banking shareholding in failing industry. Company chairmen are bleating about liquidity: give us money the say, the national debt must come to our rescue, the government must fund the banks who must then fund us.

    The smoke needs cleared, the mirror made true. No more bailing out of tycoons. Nationalise and plan the economy on the basis of collective need.

    We will see an economy of grovelling today and in the coming weeks and months. Greedy capitalists will proclaim, we are the saviours, the beneficient employers of the masses, give us the money. If our companies fall, it won't be our fault, after all, we only did what the banks allowed us to do.........

    Come on Robert, cut to the chase, reveal the hidden thoughts of the knights of capital.

  • Comment number 52.

    "Off with their Heads"

  • Comment number 53.

    @32.

    Right. So, do you think that's the case? Do you think other banks will stop hiring individuals that can bring millions in revenue with them? And they don't just have to move to existing competitors: new brokers and M&A shops get set up all the time.

  • Comment number 54.

    With apologies (and due reference) to Lloyds List this morning:

    IMAGINE a Scottish bank which suffers liquidity problems after questionable management decisions and is forced to seek a bail out.

    Yes, we are discussing the City of Glasgow Bank in 1878, a key lender to Clydeside shipbuilding.

    Unfortunately, it also extended speculative and poorly secured loans, particularly in the US. Then recession struck, sparking a wave of defaults.

    No longer able to provide even trade credit, it turned to the Bank of England for an emergency injection of funds. But the plea was rejected, the bank collapsed, and all directors were jailed after the discovery that the bank had been purchasing its own stock to prop up the share price.

    Some 130 years later, and we find the Royal Bank of Scotland has been rather better treated. Gordon Brown, with great political fanfare - 'It can be said that I alone have truly saved the world!' - presented its Board with his personal gift of £20bn.

    And what did the Board choose to do with our money? Line its collective back pockets with huge pay-offs and bonuses safe in the knowledge that, as long as the aforementioned Mr Brown is in power, they'll always be plenty more taxpayers' cash to keep the gravy train rolling with no danger of anyone doing time in Barlinnie for gross corporate negligence notwithstanding the law today is fundamentally no different to what it was 130 years ago.

  • Comment number 55.

    bread and circuses

  • Comment number 56.

    There have been calls on these pages for Chinese justice and even American justice.

    At the moment I would like to see some traditional Japanese justice.

    McKillop shold be invited to commit Seppuku. His haiku upon departing should be something like this:

    The money vanished
    like the drifting snow.
    It was all an illusion.

    Fred the Shred, however, whose lack of shame has thus far been totally dishonourable, should suffer the fate of Ishida Mitsunari. Who will be Tokugawa?

  • Comment number 57.

    Here are the answers that Hornby and/or Goodwin should provide:

    "I was a big swinging dick in the City; I was lapping up the trappings of my power and wealth; I loved being seen to be at the top of my profession; my fellow board members were poodles and we were operating on "groupthink" (http://tinyurl.com/62fxo ); I was more interested in my own status and earnings than pretty much anything else; I wasn't interested in looking for or asking about emerging alarm signals in the wider, global financial environment; I thought the good times would never end; I was pleasing the Labour Government who, with the Financial Services Authority, were all colluding with me to create a monumental debt bubble ... which has now burst; sorry about that".

  • Comment number 58.

    The money melted
    like the drifting snow.
    Was it ever really there?

  • Comment number 59.

    Question 1 - In 2007 what were your estimates for average house prices in 2012?

    Question 2 - What were your estimates for average salary in 2012?

    Question 3 - I paid 87p for 3 apples and 2 oranges. If apples cost 17p each how much are oranges?

    Question 3 - Are you an idiot?

    Question 4 - Can we have our money back?

    Question 5 - Did you intend retiring off the back of the huge bonuses and pension pot before 2012?

  • Comment number 60.

    #2 LuisEnriqueUK

    'Do you really think that, for example, well connected corporate bankers won't be able to leave RBS and set up their own M&A practise? That star analysts and traders won't be able to find work at other firms? '

    ++

    Are these the same 'Stars' who got us into this mess?

    These 'stars' are not wanted now, some have already gone and I very much doubt anyone else wants them.

    We should have another comittee, The Comittee For Public Safety.


    Can I drive the Tumbril?







  • Comment number 61.

    Robert

    Tough questions - Ha Ha Ha - Don't make me laugh - the questions are almost as shallow/soft/mis-prioritised inappropriate/as your recent 'snooze' before a similar committee.

    Apart from the chair and the Lady member (forgive me - don't have her name right now) - the questioning is poor and too hypothetical - no wonder these guys are laughing all the way to the bank.

    Only one female member of the Committee asking good questions - shame - there are thousands of good female tax and financial lawyers who would ask more appropriate and revealing questions!

    What is Graham Brady doing on there - his second question of the morning was inappropriate and mis-timed - he knows even less about finance than he does about education. He should stick to testing David Cameron's patience.

    Bonus/remuneration should be discussed last - any fool can see that - he's just after a sound bite and has lost the momentum of the chair's first question.

    I can think of a few GCE level teenage discussion groups which would ask far better questions and with agreement on a proper structure.

    It must be difficult to be grovel apologetic and still sound arrogant but some of these guys have achieved it.

    No wonder the country's in such a mess!

    Total YAWN!

  • Comment number 62.

    Are you prepared to apologise to the British public and your shareholders for the now dyer state of the banks you were in charge of?

    Hey, with the many millions I have pocketted over the last few years safely stowed in my government deposit guaranteed bank account, well, I'll apologise to whomever you ask me to.

    I can afford to, and since I don't need the bank anymore as I am well set for the future, it really makes no difference, but, hey, you want an apology ... here you go.

    Sorry. Smirk, conceipted downbeat demeaner.

    (apologies for any typos).

    Laughing all the way to the bank.

  • Comment number 63.

    #37 piper247

    Sort of missed the point of Money in your thinking Piper!

    It is a mobile representation of asset value

    "I am an engineer, not an economist" - you certainly are....

  • Comment number 64.

    When I worked at HBOS quite a few of the professional accountants and actuaries were at best sidelined and at worst marginalised from the top level decision making process and formulating strategy. Hence prudent banking was thrown out of the window in favour of rash "punts" which if they came off woud be highly profitable, but conversely this was also risky.

    Secondly the prevailing culture within the group promoted a being positive mood. Any dissent from the company line brought censure and accusations that you were not a team player. Consequently the culture generated a "brown nosing" attitude by staff towards senior management as a means of currying favour and the rewards were promotion and salary rises.

    That the regulators did not carry out due diligence only compounded the problem. One thing that acts in mitigation to the directors, is that HBOS was just too big to manage properly. The being positive attitude also meant that it aws very easy to cover up bad news. On top of that there was the simmering resentment of the merger between Halifax and Bank of Scotland - it was very tribal and your identity was defined as by what side you were on.

    How Lloyds Bank Group will fare is anyone's guess. The comments made by Gordon Brown a few months ago about protecting Scottish jobs at the expense of English ones was unhelpful. Both RBS and HBOS employ tens of thousands of people in the West Yorkshire/Manchester corridor where Ed Balls and Yvette Cooper are MPs.

  • Comment number 65.

    so these four top ex-bank bosses have no banking qualifications !

    they were chancers who played a high tech game of poker and lost leaving millions to pay their tab.

    they walk off with obscene payments and now they are sorry.

    what more do we need to know about the "free" market.

    it is not a market but a casino played with other peoples money where they win, we lose is the main rule.

    as for the "tax" paid on bonuses, I will believe it if it ever gets paid and not spirited away to a tax haven.

    bankers used to be boring and need to return to their core role, not explore other areas !

  • Comment number 66.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 67.

    #17 MrTweedy - correct!

    I would ask these guys whether lending long and borrowing short is a strategy they would repeat, and;

    Which of their previous employers subsidiary businesses they would sell to re-capitalise.

  • Comment number 68.

    #53 LuisEnriqueUK:

    "@32.

    Right. So, do you think that's the case? Do you think other banks will stop hiring individuals that can bring millions in revenue with them? And they don't just have to move to existing competitors: new brokers and M&A shops get set up all the time."

    ++

    The millions in revenue were not brought in. It was just a house of cards. The money was never there!

    All the nonsense has to stop. One more time: It cannot continue as before.

  • Comment number 69.

    Can someone explain to me why these people are not being investigated by the serious Fraud Office.There actions and those of their Boards have been criminally negligent.

    There was uproar when a certain Mr Leeson was gambling with money he didn't have but i do believe he went to prison for what he did,is this situation any different,apart from the sums involved and the scale of the recession it will cause.?

    At some point in the past a decision was made at Board level to start malpractice in lending,all bonus's from that time onwards should be recovered from all board members involved unless they can prove they spoke out against the measures at the time,and i dont care whether they have to become bankrupt to pay them back.

    This so called "expertise" myth has be blown out of the water we need people at the top who have the ability to add up !!!

    In days gone by they would have all been dangling at Tyburn,a project that if resurrected would give a much needed boost to the construction industry.

  • Comment number 70.

    Comment 10 bysupercalm is a question I've longed to hear the answer on.
    Either there was corruption or the rating agencies were simply not up to the job - why is it they are still given the same credance?

  • Comment number 71.

    No Robert the question isn't for Hornby, it is for the current Cheif Exec of HBOS, and it is this:

    "Why are you paying (taxpayers money) GBP 60,000 per MONTH right now to Hornby for his "consultancy" services?"

    Robert, you are devoting time to "bonuses" but say little about these other less visible misdeeds.

    The taxpayer needs to know that Hornby despite his failed leadership is STILL BEING PAID by HBOS, why do you not ask the Prime Minister to justify this?

  • Comment number 72.

    finally mr peston has come back to the burning issue of financial mismangement by the 2 companies who created a moutain out of molehill in the uk banking industry.

    forget northern rock and braford and bingley for a secong,both companies business models were a accident wating to happen and everyone in the know knew it.

    what the average financial joe blogs didnt know what HBOS AND RBS had a even worse business model for lending then the 2 companies mentioned above.

    rbs woes are not just down to dutch bank abn amro(how barclays were lucky on that one!!)

    they are also down to bad purchasing/lending practices aswell in my eyes.

    as mr peston mentioned hbos had the worsed business model for lending of the two and quite rightly have fallen flat on their backside begging to be bailed out.

    i hope the treasury select commitee give them a DAM GOOD THRASHING!!

  • Comment number 73.

    posts #5 and #6

    Fred Goodwin did not receive a bonus for 2008.

    Andy Hornby has never received a cash bonus, prefering instead to take shares instead.

    I'm afraid you are just further examples of individuals who are jumping on the badwagon to lampoon banks and bankers without the slightest understanding of how banks work and why they are essential to the capitalist system.



  • Comment number 74.

    15
    Have we not had a barrister in charge of the country?

  • Comment number 75.

    Mr Preston You should not just skirt around
    Ed balls comments;

    really need a far greater analysis . as he fears quit rightly that there will be a massive turn to the right, which might well be a good thing too. With some of this turned onto the BBC and its biased non reporting over the last 10 years.

    Saw 2 Jag on Newsnight still spinning it was nothing to do with labour, they should get all the credit for the Boom/bubble and bear no responsibility for the Bust on there watch. Yet where was paxman and the grilling that the Tory home secretary (later leader got)

    On BBC R4 the long view somebody was talking about the irrespnsible fiscal position by the Current regime over the last 10 years that fuelled the Bubble.

  • Comment number 76.

    (I'm Sorry)
    It's like I missed a shot,
    It's like I dropped the ball.
    (Damn I'm Sorry)
    It's like I'm on stage,
    and I forgot the words.
    (Damn, I'm sorry)
    It's like building a new house,
    with no roof and no doors.

  • Comment number 77.

    Just been watching Stevenson and Hornby. A couple of amateurs out of their depth. Blaming it all on the wholesale markets. Not on the pumping up of the asset value/debt bubble.

    In the end, they don't understand the principles or history of economics. That is if asset values or debt are out of all proportion to the productive capacity of the economy there will be a crisis. It's always happened in the past. It will happen again in similar conditions. It's as fundamental to real economics as the law of gravity.

    From what I've seen of Hornby, Stevenson, and Shred, they all all economic flat-earthers.

  • Comment number 78.

    Supercalmdown You are on the right track but ALL public sector workers getting a 40% percent pay rise? Some of them are on a damn good whack.
    No what would work though is - as some posters have suggested - taxing the hell out of the bankers (and management consultants and auditors) who earn over say 150k. Then re-distribute that wealth (in the words of John Stewart on a memorable today show - 'make it rain beeatch') to ALL the lowest paid workers - anyone on minimum wage, also up benefits for the unemployed (tories might not like this one but be cool headed here - economically it WILL work) then also up the basic rate pension for anyone with no private pension income. These people WILL spend they do not have the luxury of saving.
    As for the idea that people who oppose this bonus culture are envious. Maybe - maybe not. I for one have a friend whose father is a multi-millionairre - he has a very sucessful business that (get this) MAKES THINGS and EMPLOYEES people. He really does create wealth - therefore I presume many do not mind his wealth.
    Many do not hate the wealthy per se - just those that are parasites on society and do no good.
    In fact we do not need a stock market at all - lets just get rid of it - forever. Capitalism used to work without it I am sure it could do so again.

  • Comment number 79.

    Off with their heads !
    Off with their heads !
    Come shouts from the public gallery
    And MP’s
    As former bank chiefs are led
    Into a Court of Evidence
    Before the Treasury Select Committee
    Guilty for stealing all the tarts
    And playing their parts
    In the economy’s downfall
    But it’s all too late
    To call a debate
    The credit crunch bites on
    With no appease
    Mercilessly swallowing its victims
    While banks swallow up each other
    Up and down
    Boom and bust
    Who CAN we trust ?
    ( work in progress - From Cheshire Cats, Fat Pigs...)

  • Comment number 80.

    Dear Mr Peston,
    It is long past time that the media stopped repeating the self serving whine of bank chief executives that huge bonuses are necessary to retain the brightest personnel. It should now be obvious to all that huge bonuses are only necessary to retain the greediest personnel.
    The brightest people would not involve themselves in an industry that over the past decade has become nothing less than Government Approved racketeering, for which the people will now have to pay the price.

  • Comment number 81.

    Nice and biting. Keep going.

    I've just joined the blog and haven't read many of your past posts: have you already commented on WHERE all the 'bad debts' have gone, re banking, sub-prime etc?

    Are we looking a world where a great many people are gleefully looking at their free or very cheap house; where companies and institutions have simply run off with the cash they have received as loans. Do debtors have the money or an asset as the result of a defaulted loan? Money, like matter itself, surely doesn't disappear, but ends up in a pocket somewhere, doesn't it? To be returned to circulation in due course?

  • Comment number 82.

    So the two big boysa say sorry to the committee. I would like to say sorry to RBS that this month I will not be paying my mortgage....does it wash?

  • Comment number 83.

    Goodwin should return his bonus payment for 2007. he should also return his salary for 2008. he says that he "lost £5m in the value of his shares" He NEVER paid for them they were given free as part of his contract!!! So those should also be returned.

    All the Executives of RBS should return their bonus for last year. They made the errors that led to this debacle. The ordinary staff in branches especially should be paid theirs for 2008 as they had targets to meet and I know the majority had to work damn hard to reach them. The losses are NOTHING to do with the people in the branches and to punish them is just not fair.

    Finally I want to see the law of the country held up. The executives should all be brought to court for not complying with Company law insofar as the two banks RBS and HBOS were broke and the executive should have notified the FSA that they were insolvent and stopped trading.

  • Comment number 84.


    It's easy to say your sorry! *

    Andy Hornby still has a massive consultancy.

    This was November, a reported 60K per month,
    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/3382068/HBOSs-Hornby-lands-60000-a-month-consultancy.html

    On BBC last night, he was reported as receiving 40K per month.

    No doubt he is one of the "best and brightest" but I would be interested to know exactly what he does for this money.**

    The Nov report suggests that it is to tide him over while he looks for a new job. Evidently he hasn't been snapped up yet.


    *I recognise that some very arrogant people are incapable of saying sorry even when it is in their own best interests.

    ** I have heard some bad people say that he knows relatively little about banking. I am sure this cannot be true.

  • Comment number 85.

    Is it just me who queries why 'Sir' James Crosby is nowhere near the firing line and instead is some sort of lauded consultant for the Government? How ridiculous is that? Instead pick on the boy Hornby...tut tut...not even trained as a banker...blah blah...when those that have been trained as bankers or whatever form of training exists for politicians, have proved themselves to be just as culpable.

    My point being that if the government was really taking any of this seriously instead of dressing up a show to attempt to appease the masses, then I would have expected a different way of addressing things.

    Having a few bankers turn up to say their rehearsed apologies is all very well and a start but no-one actually has a plan beyond that to kick-start wholesale markets, bank lending etc. All of them, governmment, board members of banks and their so-called consultants...are fairly clueless.

    bw

  • Comment number 86.

    "The big question is why, oh why, did he (Goodwin) buy the BULK of the giant toxic Dutch bank ABN right at the top of the market?"

    Actually, only 10 billion worth. Loose change, for these guys.

    A REALLY big question is why, oh why, did Varley and his crew at Barclays want to take on ALL of the "giant toxic Dutch bank ABN" at the same time, not as part of a consortium (RBS, Fortis, Santander), but as a complete deal, "worth" 60 billion plus?

    And, bearing that in mind, why are Varley and the rest of the Barclays comedians currently being lauded as the embodiment of good banking practice. No apology needed from these guys, apparently.

    They got SOOOOOO lucky. But don't let us confuse that with competence. Had they got their way with ABN, Barclays would have gone to the wall.

    Let us view their recent 6-billion plus of "proits"with a due pinch of salt.

    Although Mr Varley does sound reassuringly plausible. Shouldn't he be knighted?

  • Comment number 87.

    BY the way...what exactly is the point of the Treasury Select Committee??

    Of the numerous grillings of various great and good so far, what tangible and constructive wonders have actually come out of the 'work' of the committee?

    Frankly I think any of its members should themsleves be put up to the light and examined as to what they are actually achieving.

    bw

  • Comment number 88.

    At least one of your correspondents is still arguing for high pay for bankers as they made high profits for their banks. The problem is that they did not- they thought they did which is the real nub of the problem. The ex CEO of A&L summed it up well on newsnight when he said bankers had got themselves mixed up between banking and trading- with trading using the capital in banking to take bigger and bigger risks.

    In terms of questions I would ask the RBS people to admit that they went into ABN for vanity only- it did not make sense and really only served some ego that wanted a bank to challenge the US giants. The problem with this deal is that the downside was so huge- after all I think RBS put up 13 billion euro to get a bit and would then carve the group up with Fortis and Santander- I am sure it looked good on paper but what was the upside? The downside has turned out to be £20bn write off this year and goodness knows what else will come out of the woodwork.

    That was vanity but with HBoS it is worse because they went astray in their banking big time- in a typical transaction they would over lend to a frightening extent with huge fees payable on doing the deal that they then got bonuses on- and I am talking about hugely distorted amounts- so a £200m deal might involve £8m of fees for the bank- let alone the other parasites in the transaction- and the company would then be working to pay the bank extortionate rates of interest- often well in excess of 10%- and the bank would then try to lay off the risk to other banks who would all have their snout in the trough and charge fees for taking part of it on. So the immorality of it is that on a £200m deal- the cash generated by the business would have been £20-25m- so where would the return be to shareholders or money available to for investment? That is why the bank took shares- nobody else in their right mind would and of course that way the bank staff could still get their bonus. If it had been a sensible deal the amount lent would be less and the fees less and the interest rate less- who were the sellers who made all this money- normally of course other banks or private equity houses- so that they in turn got their bonuses. That is why the bonus culture is so evil. And we have not even looked at the encouragement given to those who cannot afford it to borrow money- how many people on low incomes have ended up with a mortgage that took up 30% of their income and loans that probably equalled their annual earnings and that got recycled through credit card companies and so on. The greed of these bankers was not just at the top, they were rotten to the core.

  • Comment number 89.

    This is nothing short of a "Publicity Stunt"








  • Comment number 90.

    Robert, please get your facts right. ABN AMRO was not toxic. RBS was toxic. What was a grotesque mistake by RBS management was the timing and price of the transaction. However, the bulk of the toxic waste sat within RBS by virtue of their US exposure (ABN had negligible exposure) and their market share in leveraged loans. RBS executives are conveniently attributing their own write-offs to the business thy acquired. Nothing could be further from the truth.

  • Comment number 91.

    IMO the reason that Bankers got into this positon is simply avarice and the human instinct to herd. The same thing which enabled Madoff to run his scam.

    It's just like people queuing in the sales, they are desparate to get there before anyone else, in case they miss out on a bargain.

    The Bankers saw others making vast amounts of what they thought were profits which enabled them to receive much larger bonuses and so they wanted a piece of the action. Their fellow Bankers would have laughed at them had they not taken the opportunity to be 'part of it'. Almost fever-like they 'jumped in' and enjoyed the water!

    It's a natural re-action when all around your fellow Bankers are making millions, so you want to bask in the 'cred' of being able to do it too. They are, after all, only human. It was a 'money fest'!

    I don't think you can learn from these mistakes long term. We will see caution initially but eventually some other 'type' of investment will appear - and off we go again!

  • Comment number 92.

    I think this inquiry must also look for evidence of criminality in banks.
    Is the paying of vast bonuses (including yourself) against non-existant profits a criminal offence?
    Is the paying of vast bonuses (including yourself) when you KNEW the bank was in serious trouble a criminal offence?
    Let's hope they find out.

  • Comment number 93.

    Where were the NE Directors in all of this ? Picking up 50K a year for a couple of days work - their job was to protect the shareholders.

    Of course in reality the NE Directors just scratch the backs of the executives. Anyone shouting any form of dissent gets kicked off the board.

    Finally, it is my understanding that as a Director there are two things that are impossible to indemnify yourself against under English Law. One is negligence. The other is fraudulent trading. Time for Mr. Brown to show us what he's made of ...

  • Comment number 94.

    Why are we bothering to question these monkeys? Talk to the organ-grinder!

    If anybody needs to answer our Treasury Select Committee's questions, it's America!

    That's right, let's drag the whole bloody lot of them in to be questioned. It's their fault!

    We're facing a depression that will last 100 years, I heard, and it's because of them doing something or other. Let's ask them exactly what they did and how come they made us copy them!

    I can't believe we're wasting our MPs precious time in this manner! It's just not good enough. I mean, they had these bloody reporters in the other day, asking them whether they had caused this great economic crisis, and whether they could have done anything different.

    What was the point in that? I mean, are we questioning from the bottom up in this fiasco?

    The other day an MP came round to my office and asked me whether he thought that I could have provided more of a fiscal stimulus to the economy. He suggested that I buy a car. Apparently he was suggesting it to everyone, but I felt pretty pressured for a bit there.

    In the end I told him to get lost, if anybody should be buying British cars right now, it's America. They should be buying our cars as an apology for doing whatever it is they did. That's what I told him.

  • Comment number 95.

    Nick Leeson got what ?
    5 to 7 years?

    Therefore as a leveraged multiple these guys should be getting 999 years.

    Less time off for saying
    'I am very very sorry'

    Net effect - erm, sorry for taking your time up Mr SuperBankers

    Have a nice day y'all now

  • Comment number 96.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 97.

    69 - Yes it is about time the serious fraud office got involved if only to try and recoup some of the money.

    Am watching the panto on TV, they're all Sir, Lords and it's not their fault, but they're sorry.

    Can't wait for Bremner Bird and Fortune version of it, may be they could try for Comic Relief too

    62 Surely you mean laughing all the way from the bank!!

  • Comment number 98.

    It's easy to get round the issue of contractual bonuses.

    Make everyone redundant and then re-hire them on different terms.

    I doubt in the current climate there'll be much in the way of dissent.

  • Comment number 99.

    77 May be they should try football management, they'll get sacked faster and more spectacularly

  • Comment number 100.

    #42, 60, 68

    Much of what you say is correct, and I am not trying to defend what these people did. You must remember that while some parts of the banking industry made what you might call illusory profits, many other parts make real money, and now we, the taxpayer, own some of these banks we need them to keep making real money otherwise we, the taxpayers, will suffer and all the profitable activity will move to elsewhere. It would be great if we could co-ordinate new payment structures across the industry, but unless we do that, all I'm doing is pointing out that unilateral salary & bonus caps can backfire on us - the taxpayers. Even if a law was brought in to limit salaries and bonuses across the industry, brokers etc. could, for example, just quit, start up partnerships, conform to the new laws and take the money they make as dividends. My ideal world would not feature super-rich bankers either, but I don't want to cut of my nose to spite my face.

 

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