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Why Sir James Crosby resigned

Robert Peston | 16:12 UK time, Wednesday, 11 February 2009

Paul Moore, the former head of risk at HBOS, has won the big argument.

In 2003 and 2004, he warned HBOS's senior directors that they were expanding the bank's loan book too fast: HBOS was lending too much.

Guess what? He seems to have been right.

HBOS went to the brink of collapse because it financed its lending growth by raising funds on wholesale markets - and when wholesale funds became progressively harder to obtain after the summer of 2007, HBOS was careering toward the cliff edge.

It is alive today only because it was rescued by an injection of capital from taxpayers and by being taken over by Lloyds.

So no-one in their right mind would argue that Moore got it wrong in respect of the big issue - though Moore's critique was not that funding would dry up, but that borrowers would have difficulty repaying (which is an important nuance).

And since Sir James Crosby was chief executive of HBOS at the time Moore was making his complaints, history - or the closure of wholesale markets - has made Sir James look like a bit of a nit.

Which is why if Sir James had not resigned today as deputy chairman of the Financial Services Authority, the City watchdog, he would probably have been forced from office over the coming weeks and months by unforgiving public opinion.

But that does not mean that Sir James was wrong - in a legal or regulatory sense - to have asked Moore to leave HBOS or to have rejected some of Moore's concerns.

Moore's dossier of complaints that HBOS and Sir James were taking excessive risks was thoroughly investigated by KPMG, the accountancy firm.

And KPMG's conclusion - that HBOS had appropriate risk controls in place - was accepted by the Financial Services Authority.

My understanding is the FSA stands by that judgement.

Which is not to say that either the FSA or Sir James would have no regrets that HBOS did not check its lending growth.

But - amazing as it may now seem - HBOS and the FSA did not believe, in 2004 and 2005, that it was appropriate to assess the riskiness of its rate of growth on the basis that funds from wholesale sources could vanish.

What's the point? Well, it's that Sir James was not obliged to resign as the FSA's deputy chair because of evidence that he broke any law or regulation.

And the FSA put no pressure on him to resign.

Sir James chose to resign because he wanted to protect the FSA from incessant criticism by media and opposition politicians that its number two had made a chronically bad judgement as chief executive of HBOS.

So the lesson of hindsight is that Sir James made a disastrous judgement about HBOS's rate of expansion - but not that he committed a crime or a misdemeanour.

And some would say that it's right that he quit, because all of us are paying for his misjudgement with the massive financial support that taxpayers have been forced to give HBOS.


Page 1 of 4

  • Comment number 1.

    The horse has already bolted. Tidying the stable won't bring it back.

  • Comment number 2.

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

  • Comment number 3.

    And there was me thinking that the reason the wholesale funding market dried up was because the wholesale market thought that borrowers would have difficulty repaying.

    Yes your right Robert it is a nuance.

  • Comment number 4.

    Well - I am glad I dont work for KPMG they are obviously not very good!

  • Comment number 5.

    perhaps he has resigned from the FSA so that he will be free to talk about his time at HBOS and the FSA.
    I sincerely hope so.

  • Comment number 6.

    This has been the biggest hyjacking of a financial institution in history. The execultives who were employed to safeguard the companies assets infiltrated the banks like a vius, poisoning the company with it bad dealings with a stupefying lack of altruism. The banking system is now rotten to the core and the thieve have made off into the night.

    The question is not that bonuses should not be paid this year but how to get the bonuses back from previous years.

  • Comment number 7.



  • Comment number 8.

    During 2003 The Money Programme uncovered systemic mortgage fraud throughout HBOS. The Money Programme found that during the investigation brokers advised the undercover researchers to lie on applications for self-certified mortgages from, among others, The Bank of Scotland, The Mortgage Business and Birmingham Midshires

  • Comment number 9.

    Gradually the cards are starting to fall, unlike Watergate I doubt they will keep falling right to the top, as the Queen probably did not have a hand in any of it - does she have a credit card, they say she does not carry cash?

  • Comment number 10.

    I'm surprised at your assertion that "KPMG's conclusion - that HBOS had appropriate risk controls in place - was accepted by the Financial Services Authority." This morning's Guardian quotes the FSA as saying that HBOS was "overly sales-focused and gives inadequate priority to risk". Have you been spun?

  • Comment number 11.

    services to banking got him a knighthood... now that it transpires HBOS has cost the tax payer millions he should be stripped of his title and previous bonuses as they had been deceptively obtained.

  • Comment number 12.

    ‘So no-one in their right mind would argue that Moore got it wrong in respect of the big issue’.........Hello Robert, here I am !
    Why do apparently intelligent people appear to struggle over the distinction between two separate issues:
    1.Did HBOS make ‘risky’ lending decisions
    2.Did HBOS make a mistake in expanding using the wholesale money market
    If 1. is correct, then LTSB has also made a mistake in acquiring them (and Eric Daniels still thinks he was prudent in his purchase)
    If 2. is correct then the whole world was wrong and globalisation has no future, in banking at least.
    It’s sad to see our human frailties exposed so clearly as we continue to toy with our wounded prey.

  • Comment number 13.

    Revenge is indeed a dish best served cold.

    The FSA need to get their act together. Their 'soft touch' regulatory system has failed abysmally and absolutely. And will they be up to the mark when the Wall Street Kids come-up with another 'Originate & Distribute' scam?

    The scammers (invesment consultants) must be fuming at the lack of profits and consequent lifestyle adjustments they are now 'suffering' as a result of the collapse of their sub-prime/cdo/ninja loan rackets.

    Good quality, alert regulators will be needed more than ever as the WSK are sure to turn-up again, like a bad CDO squared.

  • Comment number 14.

    Raising any concerns should have meant an automatic processed kicked in.

    The board, with staff, should have sat down, looked at the complaint, investigated the area, and any other associated risks.

    Their response should have been 'Crivvens'

    Appropriate action to preserve the future of the organisation over the long term should have been the next step.

    This did not happen. Corners were cut, etc.

    How many companies, large or small, can honestly say they have not acted in the same manner? My guess is not many.

    This paints such a said state of business management functioning and ability. Our business organisations suffer from a complete lack of willingness and intent to ensure they function within the law and demonstrate a level of professionalism.

    I've no doubt there are hordes of UK employees who could tell similar tales to Mr Moore.

    Mr Moore seems to have held on to his health. Unfortunately, many of those paid to tell the bad news do not.

    Shame of those bankers.

    Mr Crosby, you choose the rope, and you then proceeded to wrap that rope around your own neck. Bet you regret that now!

  • Comment number 15.

    I wonder what Adair Turner, Chairman of the FSA might have to say about this....

    From 2000-06 he was Vice-Chairman of Merrill Lynch Europe. That's the Merrill Lynch now swallowed up by Bank of America......

  • Comment number 16.

    Quite right - long overdue.

    I don't much give a damn about the finer points of Moore's concerns - it is grotesque and manifestly absurd to have as second in command at the FSA a man who presided over such institutional irresponsibility and wrecklessness that this country will be paying for the consequences for a generation. How fitting that he is/was also a key advisor to this outrage of a government.

    The man should be ashamed.

  • Comment number 17.

    We all need to recognise that bank bonuses WERE THE CAUSE of the collapse.
    They are not some side issue.
    "Bonus crazed" bankers, high on all sorts of dodgy substances, both here and in the USA.
    It could be argued that all the executives were either asleep or chasing their own bonuses.

  • Comment number 18.

    No mention of KPMG then

  • Comment number 19.

    Robert you and the prime minister are correct KPMG did investigate Mr. Moore's claims and found them to be unwarranted.

    Guess who audits HBOS's accounts, yes you guessed it KPMG !

    Conflict of interest?

  • Comment number 20.

    What have I been saying for months now?

    "Not one of the directors questioned yesterday had a SINGLE BANKING QUALIFICATION BETWEEN THEM"

    Would you go to a doctor who had not previous medical experience?

    Probably not, but worse still, would you put that same Doctor in charge of many other Doctors?

    It would be madness surely.

    Well that's how this system works, and don't be impressed by the harsh questions posed by ministers yesterday - they are all in the same incestuous loop, it just happens the spotlight has moved at the moment.

    So now can the public believe that our system promotes fools to the top of the game whilst talent and real skill is left to waste on the floors of factories and low paid industry?

    Why did the FSA employ the man who made the mess to advise the Government on how to clean it up?

    Robert - get out there and start asking the awkward questions.

    How about:

    "Does the Government realise that for some time Capitalism has been replacing the diminishing profit by increasing debt levels of the consumer to 'create a market' and that if this continues the crashes will be bigger and more destructive and eventually the Economy will collapse?"

    Replacing diminishing profit with debt will speed up the collapse of Capitalism - and I don't think that's what you're trying to do now is it?

    Capitalism is a system based on greed and competition, eventually it will suffocate itself.

    We had better start looking at another way quickly, or it will be too late!

  • Comment number 21.

    When HBOS share price dropped from £5 to £3.50 shorter were blamed.


    If I remember correctly on this blog you reassured people "don't panic I have checked the accounts and there is nothing to worry about, HBOS is a well run bank" whilst at the time you reckoned that Northern Rock had a 100 billion black hole.

    Now it has been confirmed that it was reliance on the wholesale market that was the reason that HBOS came a cropper. The same reason that caused Northern Rock to approach the BOE before you started a bank run and made a bad situation ten times worse.

    Instead of doing the decent thing and admitting you were wrong and that the problems affecting Northern Rock were not of there own making. You have taken to writing three blogs a day with non speak to shift the blame.

    e.g. of Pestonesque non speak:

    Bailout - borrowing money from HMG at a penalty rate
    Taxpayer - Investors in China and Middle East willing to lend as long as guarantees given by govt
    Excessive risk - Any loan
    Bonus - payment in shares that has taken a hammering
    Black hole - Liabilities of a bank excluding assets

  • Comment number 22.


  • Comment number 23.

    From the FSA

    How we evaluate our performance - the Outcomes Performance Report and developments in our approach since 2002

  • Comment number 24.

    So KPMG - HBOS's auditors and raking in millions in fees as such, decided not to criticise HBOS. Shock, horror. Don't bite the hand that feeds you springs to mind.

    And Crosby - well great so he's not a criminal...just fantastically incompetent.

    Brown, the FSA and Crosby are all in this together, as are the other reckless idiots at the other banks who thought the sun would never set on their debt party.

    Now we are all paying for it, whilst they can barely even say sorry. (or not even admit any mistakes at all in Brown's case)

  • Comment number 25.

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

  • Comment number 26.

    The whole financial system has been in denial for over a decade. Not just a few years.

    I have been through my exchanges of letters and I find that I wrote about the problem of overinflated asset prices particularly in the UK Housing market on 31st August 1999 to The Prime Minister (Tony Blair). Their reply was received on 11th October 1999 from HM Treasury. The substance of which was that I was wrong and they were right. I had a similar exchange of letters with the Governor of the Bank of England around the same time.

    In my letters I proposed ameliorating solutions to cool down the over exuberance of the market.

    I am supplying this information in defence of the commercial bankers. It is not right to only blame them as everybody concerned was complicit - and that is why all must resign or be sacked as those concerned are unable to lead us out of the problem that they managed us into. (I want the regulators (FSA and Treasury) and Governor and the MPC to go.)

    The problem goes further back than the last election as I recall similar exchanges of letters with the previous Tory administration - which I remind everyone was led by a fully qualified banker - John Major.

  • Comment number 27.

    Do you ever get the feeling you've been cheated? Crosby was responsible for the bad decisions made by HBOS which drove it to the taxpayer. Then not only was he appointed an advisor to Brown but he was also appointed as deputy chairman of the financial regulator.

    Then both the Government and the FSA try to cover their backs by saying that KPMG investigated the whistleblower's complaints. But KPMG insist that they were only asked to do a narrow review and did not investigate the substance of the complaints.

    Crosby, Brown and the FSA have all been found out. But only one of them has so far resigned.

  • Comment number 28.


    "The rationale behind "Ignorantia juris non excusat" is that if ignorance were an excuse, persons charged with criminal offenses or the subject of civil lawsuits would merely claim they were unaware of the law in question to avoid liability, even if they know what the law in question is.

    Thus, the law imputes knowledge of all laws to all persons within the jurisdiction no matter how transiently. Even though it would be impossible, even for someone with substantial legal training, to be aware of every law in operation in every aspect of a state's activities, this is the price paid to ensure that willful blindness cannot become the basis of exculpation.

    Thus, it is well settled that persons engaged in any undertakings outside what is common for a normal person, such as running a nuclear power plant, will make themselves aware of the laws necessary to engage in that undertaking. If they do not, they cannot complain if they incur liability."

    No lives have been lost only livelihoods. Is ignorance of sound Banking principles an acceptable defence? Failure to protect the interests of an Enterprise under Company Law must be a factor? These are the difficulties facing legislators on reckless banking/insurance activities.

  • Comment number 29.

    The central issue is that the government has had such a close relationship with Crosby they got him to release that report on the mortgage market - at a time when it was increasingly obvious that those in charge of the big banks during a relevant period, would be coming under scrutiny regarding their judgment.

    It all highlights how clueless the government has and continues to be. The other lot are no better - just opportunists that will sieze on all this for political point-scoring.

    What should be on the table is a blueprint for how to restore financial stability and credit markets. No-one, government included, appears to have any idea and frankly you get the impression they hope the Americans and China will pull us out of it.

  • Comment number 30.


    He went because when he fired Moore, he was a non-exec of the FSA as well as Chairman of RBS. That put him in an untenable conflict of interest, and he should have gone long since.

    The fact you cannot see the immorality of running with the hare and hunting with the hounds means you should no longer blog, Bob.

    On which count, I hope the female members of this blog have researched the hobbies of the new boss of RBS? Those of the political persuasion had better start running fast...

  • Comment number 31.

    As I understand it, this is exactly the same position as the Risk Director of Northern Rock and Adam Applegarth.

    The Risk Director warned and was roundly undermined by the Exec.

    I suppose the fact he was a Director was slightly different, but still - It demonstrates that the Exec find it too easy to sideline Risk in favour of profit and increased bonus to themselves!

  • Comment number 32.

    The public are learning that if people resign, it means they were, or about to be, pushed.

  • Comment number 33.

    Oh. The dead horse has been flogged once more, I see.

    10 blogs on the bounce solely on the banks and / or bloomin bonuses.

    Surely as business editor you have a slightly wider remit???

    Go on, give us all a surprise for once!!!

  • Comment number 34.


    On this occasion your line of argument will not wash.

    Read Paul Moore's evidence to the Select Committee.

    If it is accurate James Crosby has told porkies about the departure of Mr. Mooore and misrepresented the circumstances more generally.

    They can't both be right. This matter needs INDEPENDENT (outside the FSA) investigation. Until we have such an examination, I know who I will believe.

  • Comment number 35.

    Come on mods, get a move on and approve the waiting list of comments, it's been over 45minutes since the 1st post.

  • Comment number 36.

    Surprisingly, little has been said about the impact of demutualisation by the Conservatives. Many of us benefitted and so didn't complain, but this was the beginning of the end of sensible mortgage lending (personified by the bad practices of HBOS) and created the conditions for the banking crisis. The Treasury Committee should look into this.

  • Comment number 37.

    It has become impossible to commit a crime under this Government. As a result, I'm going to name [Unsuitable/Broken URL removed by Moderator]and hope FlamingPat's happy.

  • Comment number 38.

    You may refer to the difference simply as a 'nuance' but, surely, without the extremely aggressive expansion plans embarked upon by HBOS the amount of funding thus required, via the wholesale money markets, would have been a whole lot less, and not of a magnitude that has now got LBG in the 'proverbial'.

    Full marks to Paul Moore. Having worked in credit risk myself I fully understand how difficult it is to swim against the tide especially when being intensely pressured by senior execs.

  • Comment number 39.


    Simple SImple SImple

    Do not give menu to Institutions

    The government should pay on our behalf
    all or part of our DEBTS per family or individual-
    Money goes to lenders BANKS
    We have excess money left ---we spend
    buy- Car- Fridge etc and money recycles

    We are all happy and better off

    Simple SImple


  • Comment number 40.

    KPMG only checked that the correct boxes were being ticked in the HBOS formal procedure for assessing risk. Mr. Moore's assessment that HBOS was opento excessive risk was not within their remit.

  • Comment number 41.

    KPMG only checked that the correct boxes were being ticked in the HBOS formal procedure for assessing risk. Mr. Moore's assessment that HBOS was open to excessive risk was not within their remit.

  • Comment number 42.

    All of which begs the question, Mr Peston, of when the Golem who oversaw all this insanity as Chancellor of the Exchequer is going to resign from his new post as Prime Minister?
    But, since the Golem has not one single shred of decency, honesty or integrity, we all know that he'll have to be dragged kicking and screaming from Downing Street.

  • Comment number 43.

    What are you talking about Robert? Crosby resigned 30 minutes before PM Questions. He was clearly pushed.

  • Comment number 44.

    KPMG and the FSA investigated HBOS and gave it a clean bill of health? Either HBOS went seriously awry in the years that followed, or the people at KPMG and the FSA had no idea of, well, anything at all.

    Then again, Arthur Andersen went bust because they missed some fairly obvious fraud.

    Accountants too cosy with the companies they are meant to be auditing?

  • Comment number 45.

    Of course Sir James Crosby had to quit for the simple reason his position had suddenly become untenable.

    He had sacked a man who had pointed out a downside to the prevailing strategy of his business and replaced him with someone with a more emolient manner.

    I congratulate Paul Moore for eating his revenge cold.

    What has become quite apparent in the last few days is that there has been regular intercourse between the City and the government over a long period. How often and what the manner of that intercourse remains to be seen. I doubt if they went Dutch and so we will have to ask who has been paying that particular bill.

    Given the apparent rewards of posh titles and consultancy roles there seems to be only one answer to that question and that is the same person who is now propping up the banks: the taxpayer.

    I think this is going to turn into a major scandal of quite cosmic characteristics.

  • Comment number 46.

    ‘Sir James chose to resign because he wanted to protect the FSA from incessant criticism’

    Oh come on, it's more basic than that: the fundamental principle is that risk management must be truly independent, seen to be independent, and supported when it makes challenges: & that goes for regulators, too

    He should never have been appointed in the first place - and that’s not hindsight.

    Protecting Brown would be more like it.

  • Comment number 47.

    It would not necessarily have been within Mr.Moore's remit to judge the funding issue. In most banks it would be the Treasury Chief's concern to ensure that funding diversity and time spreads were somewhat more than prudent.

    Other risk managers were fired for speaking up; most notably the Fannie Mae man in 2005.

    Before too long I expect to see stories emerge of bank Treasurers who got fired for complaining about their funding positions. There must have been some old enough and experienced enough to be unable to sleep at night. I can deduce that the man at NR
    was barely old enough to shave.

  • Comment number 48.

    Why don't we remove the FSA facade
    Oh, please don't you rock the boat
    I don't want my boat to be rocking no
    Every little action, there is a reaction

  • Comment number 49.

    In my opinion this just highlights another completely useless set of "workers" in our corrupt and broken system. This set of people know the cost of everything and the value of nothing. They produce nothing and are just another set of parasites in the system. Guess we'll be finding corrupt lawyers soon. Who would have thunk it!

  • Comment number 50.

    So you are now PR for Crosby, this is getting hopeless, a whole bunch of money grabbing cronies led on by HMG bringing the country to its knees and the Beeb just trots out the party line.
    Are you worried about the next round of licence fee discussions ?

  • Comment number 51.

    The very fact that he was appointed in the first place tells a story.

    It seems like all roads lead back to Gordon Brown.

    When will they realise that bankers are not the best people to change the banking system - the whole edifice is completely corrupt.

    Now we have established that the bankers were either greedy, negligent or stupid we should move on the the FSA. How much were these guys getting paid and what were their qualifications?

    Once we have dealt with the FSA we can move on to the BOE and the government itself.

  • Comment number 52.

    An apology from the bankers is welcomed if only just because at least, they have admitted in public that they are not so clever as they say they are. However, it is not enough. These people, as any other workers who acted with such a degree of irresponsibility should be brought to a tribunal to be judged. How can they even dream they deserve bonuses with public money!??
    The damage they have caused is not only material) but physical and mental. We will soon have reports on an increase in a number of medical conditions closely related to the economic downturn provoked by the banks’ horrendous failures. The pressure on the health system will be enormous and costly. These costs should be added to the many billions these banks already owe to the population. Should the health professionals receive bonuses so that they can cope with the extra hard work, using scarce skills, as the bankers claim?
    I also wonder if teachers and academics should receive big bonuses so that the government can really ensure that the best possible professionals are employed to EDUCATE the future REAL CLEVER (not only greedy) bankers, not only in maths, economics and management but in ethics ?
    However, the major problem is that the government and its Agencies have allowed this to happen by idolising deregulation and failing in their auditing obligations.
    Where is the hope??

  • Comment number 53.

    He was right to resign. The question that remains is how many more Sir Jamess' there are, working as "regulatory champions" that have actually benefited from the credit crisis! Aren't they the ones we wanted to throw in prison for leading us into this mess? It's about time, the names of board members for the last 5 years from major Financial institutions are brought into public domain and the positions they currently hold! I just wich there were more Pauls around to see this through...

  • Comment number 54.

    "Sir James chose to resign because he wanted to protect the FSA from incessant criticism by media and opposition politicians that its number two had made a chronically bad judgement as chief executive of HBOS."

    A gentle tap on the shoulder to do the helpful thing, no doubt.

    "So the lesson of hindsight is that Sir James made a disastrous judgement about HBOS's rate of expansion - but not that he committed a crime or a misdemeanour."

    Let us not be too quick to pre-judge before all the facts are in.

  • Comment number 55.

    Paul Moore was appointed to an influential position in HBOS and was required to think the unthinkable. He did, and was sacked. Four years later...

    In 1997, Frank Field was appointed to Blair's Cabinet and was told to think the unthinkable. He did, and was sacked, in large part because of the intervention of Gordon Brown. Twelve years later...

    What a mess we're all in.

    I'm afraid that our culture requires the implementation of short term fixes to attain perceived short-term advantages for those in positions of real power. Being objective and honest is, apparently, fatal for the individual concerned.

    Or am I thinking the unthinkable?

  • Comment number 56.

    The FSA is a waste of space.

    What financial scandals will come to light over the next few years during the FSA's watch?

    We need a root and branch change to the financial regulation in this country.

  • Comment number 57.

    The FSA's support of Crosby is a disgrace.

    FSA should be investigating why HBOS' compliance officer was summarily sacked for doing his job, as he clearly was.

    Why would any compliance officer bother to stick their neck out if that's the regulators response?

  • Comment number 58.

    I see that a big firm of accountants gave a clean bill of health re the whistleblowers warnings- no doubt for a massive fee. They need to be called to account as well as all accountants who gave clean audit certificates in respect of the various banks who jolly well knew there was so much bad debt around.

  • Comment number 59.

    So what is the difference between Sir James Cosby ex HBOS and Applegarth of Northern Rock?

    Could anyone possibly imagine Applegarth being given a job with the FSA or appointed as an advisor to Gordon Brown after Northern Rock went bust?

    If this is only the tip of the iceberg what on earth is lurking in the murky depths still to uncover.

    The tsunami is still heading in just wait to see what it uncovers when it starts to sweep back out.

    Those poor politicians on the Treasury select committee are trying their best but most of what they are hearing is well beyond their understanding or what most of us would call sanity.

  • Comment number 60.

    Sir James chose to resign because he wanted to protect the FSA?

    Robert, don't you think it sounds just a little contrived that he his resignation happened to be half an hour before PMQs?

    Come on, who was he really trying to protect?

  • Comment number 61.

    This just makes you sick.

    It drives home the fact that the FSA is pretty much a completely discredited organisation.

    If Brown has any hope of a future, he needs to become one of 'us', not one of 'them', and fully "get" the extent of the revolution that is needed within the FSA to control these s****

    It's probably worth quoting Paul Masons blog yet again to describe the situation succinctly:

    "Both the Bank of England and the FSA have the statutory responsibility to maintain financial stability. They failed. The statutory responsibility was conferred on them by the Treasury. It, by implication failed.
    There is a legitimate question: why? I will answer it with another question. Is it because the whole world of banking regulation and supervision is in fact a closed club populated by former bankers? Is it because the politicians were too starry eyed about the bankers? After all the rise of global finance delivered seemingly endless growth, and lots of tax revenue to plough back into the lower reaches of society in the form of tax credits and benefits. Was this apparently win-win situation allowed to cloud the judgement of the politicians and regulators?"

    .... a closed club populated by former bankers...??

    You bet!

    Next move required please - get rid of any bankers who have worked for tax havens like Liechtenstein.

  • Comment number 62.

    It has been suggested

    Our Lords take money to amend law

    Our MPs bend the truth to claim 100s of thousands of pounds of expenses they have not spent

    Our Hedge funds borrow billions to buy assetts only to cut wages and condtions of normal hard working people to sell on at a profit

    Our Bankers gamble with billions and still take huge bonuses for mind blowing failiure

    Our regulators are appointed to regulate practices they themselves have encouraged for years.

    Its not difficult to see, enough is enough the whole system Stinks.

    Lets get rid of them all and start again......

  • Comment number 63.

    SHAME on you Peston!

    For the first time, I am starting to believe the hype that you are just the government's spin doctor.

    SHAME on you. SHAME on you for this, your worst piece of writing ever.

    You may need to resign too. SOON.

  • Comment number 64.

    Paving the way nicely for a court case against all those bankers and their massive bonuses.

    Maybe Daniels did show his cards at the right time ...

  • Comment number 65.

    ......."Moore's dossier of complaints that HBOS and Sir James were taking excessive risks was thoroughly investigated by KPMG, the accountancy firm.....

    Is this the same KPMG that audited the countrywide the US biggest mortgage lender accounts before they were made bankrupt?

    or the same KPMG cited here......

    An independent report ordered by the US Department of Justice points the finger at auditor KPMG for either initiating accounting fraud at New Century Financial Corp, one of USA’s biggest providers of home loans to people with poor credit, or ‘standing idly by’ as the failed sub-prime mortgage lender committed fraud in 2005 and 2006.

    Well done Mr Moore you deserve the knighthood!

  • Comment number 66.

    Another conclusion would be that KPMG said what their client wanted to hear and the FSA said what they thought their masters in government wanted to hear.

    Why did funds from wholesale sources disappear? Could it be that this happened because those wholesale sources saw that people in the US were having difficulty repaying the loans and figured the same thing would happen in the UK.

    He was right to identify people having difficulty paying as the problem. The wholesale funders just reacted to the problem faster than the UK banks - which in itself says something about the was UK banks were managed.

    'Eyes wide shut' would describe the UK banks, UK regulators and UK government as long as the bonuses and tax money kept flowing. Lets not forget that a major perk of being an MP is a second home allowance so our representatives were hardly motivated to pop a UK house price bubble.

  • Comment number 67.

    So many small shareholders of HBOS had heard of James Crosby, and had been so trusting of him that even when he turned up with his report to Gordon Brown last July about the credit crunch in mortgage lending, we thought we were getting a truthful and objective report.

    Indeed, you, Robert Peston, I think it was in the ensuing months, said on the radio that there was no way that HBOS could ever go down, because it simply was too big! And we all believed the same as you. It was too big, and there was no way it would be allowed to go down. Of course, things took a fatal turn in September, after the Lehman Brothers wave of the Global Financial crisis, and HBOS was given away to Lloyds TSB as the only way of saving it.

    Now this revelation about James Crosby this week, whether the allegations of Paul Moore prove true or not, open up the scrutiny at last of the persons who were really in positions of influence when this era of Global Financial excess was indulged in: the era following 9/11/2001, whence a blind eye was turned to economic wisdom for the sake of keeping economies flowing.

    Excellent. The Times Online shows where we are with this investigation of James Crosby's role.

    To quote from there, "the unmasking of Sir James, one of Gordon Brown’s top City advisers, for his culpability in Britain’s banking meltdown is long overdue. There is still amazement in the City at the miracle of timing that had Sir James step down from HBOS in July 2006 in favour of the much maligned Andy Hornby – a hospital pass if ever there was one. For it was the Yorkshireman Sir James – whose knighthood in 2006 is thought to have been on Mr Brown’s recommendation – who devised the business model that brought HBOS to his knees.

    Furthermore, from the creation of HBOS in September 2001 from the merger of Halifax and Bank of Scotland, it was he who implemented that strategy until he stepped down."

    Banquo's Ghost! I'm delighted to see intelligent minds are not only looking beyond their noses, at last, but adding such witty examinations of the failures of Corporate Governance.

  • Comment number 68.

    So far the involvement of the accountancy firms in the banking collapses has not been fully examined and it needs to be.
    This statement is almost laughable ..."Moore's dossier of complaints that HBOS and Sir James were taking excessive risks was thoroughly investigated by KPMG, the accountancy firm." Has anyone seen one of the major firms finding against one of their clients in an audit the client asked for?

    You just have to look at the Enron affair to see that the accountancy firms are completely bound to the major institutions. The galling things is that when we have one of these institutional failures we get laws like Sarbanes-Oxley which means that the accountants just rake more cash in.

  • Comment number 69.

    Paul Moore was the former Head of Risk at HBOS

    We aren't talking here about a tea boy but the most important person next to the CEO.

    The shoot the messenger policy adopted by Crosby has cost the taxpayers of this country billions of pounds.

    Yet Gordon Brown appoints him as a close economic advisor during the worst financial crisis ever which Crosby helped to instigate. Yet another unknown titled advisor that has just sprung out of the woodwork.

    Not only that he gets a plum job with the FSA.

    I think I am not the only one who thinks he did a fast runner to limit the damage to Gordon Brown who I suspect has a lot to answer for himself.

    This doesn't end here because now we need to back track on some of the worst decisions made over the last few months in the handling of this crisis and ask who was responsible and who is really running this country.

  • Comment number 70.

    well well well -- of course you are right that his resignation is not an admission that Moore was right -- but why are you trying to cool down the collective temperament? Are you, and those you talk to, worried that we may yet have a proper erruption of built-up frustration?

    Btw, you say that Moore was worried that borrowers would not be able to repay the loans -- but is that not the same as the wholesale markets freezing up for HBOS?

    HBOS could no longer access these markets because those who lent out the cash to banks could no longer believe that HBOS would be able to pay it back if its mortgagees defaulted. If Crosby et al. assumed that the wholesale markets were limitless, then that is unexcusably poor judgement. Many of the bankers are still in denial and blame the failure of their banks on 'abnormal' market conditions. 'The market' sorts the wheat from the chaff, when it comes to healthy and unhealthy companies -- there is no such thing as an 'abnormal' market. They should have considered the possibility that funding from the wholesale markets may one day diminish. So, I don't see the distinction you are trying to make between Moore's concern and what ultimately brought down HBOS.

  • Comment number 71.

    Is Sir James one of your friends Robert? since I find your comments rather lacking in objectivity.

    Three reasons I suspect that Sir James has resigned:

    1. Details of the private conversation he had with Vince Cable are now in the public domain and are most damnable (similar to Chuck Prince's infamous comments 'we're still dancing' at Citigroup).

    2. His appointment by Commissar Brown is a huge embarassment and would draw more fire on Brown re judgment (catching MP's question time today Brown & Darling looked like they were on the bridge of The Titanic)

    3. The FSA itself has come under increasing pressure to explain how it was comatose at the wheel regarding the financial fiasco which happened under its watch.

    It would seem that we put a wolf in charge of the sheep-pen. Mmmmmm..

    I was also amazed that Sir James wasn't sitting in front of the MPs committee yesterday rather than the poor Andy Hornby who was taking the flak on his behalf (though he made some coded comments).

    The real obnoxious thing is that Sir James has taken home huge reward and pension entitlements when he should be giving them back.

    Honourable - don't make me laugh.......

    It's just lazy incompetent management ignoring any sign that didn't reinforce the chosen view - where I have heard that before.....?

  • Comment number 72.

    He seemed to go a bit too readily given that he'd been cleared of any wrongdoing by KPMG.

    Is something more serious about to surface?

  • Comment number 73.

    Postscript to 55

    Of course, I'm being naive: Moore and Field became irrelevant, the HBOS grandees became rich and even more powerful, Brown is still there, only as PM...

    So it WORKS!

    Only, the rest of us have to live in our broken society with its devastated economy, and pick up the tab.

    NOW I get it.

  • Comment number 74.

    Yes, the FSA have got off far too lightly in all this, right since the beginning of the Northern Rock collapse. And now we see why - if Crosbie is anything to go by, the poachers were put in charge of the gamekeeping.

    But it is not enough just to change the FSA faces at the top - it needs wholesale reform, along with the Bank of England. Neither have shown themselves fit for purpose.

  • Comment number 75.

    If it's acceptable that the FSA wasn't bothered about HBOS borrowing so much on the wholesale markets, then why (in the politicians' minds) is it acceptable that Northern Rock did the same ?

    This really means that Northern Rock's management were no less complacent than HBOS's management. The only difference is that Northern Rock got caught out first - before the government bail-out scheme was created.

    It seems strange how the FSA is continually avoiding any scrutiny or blame for what went on. It couldn't be that, as Gordon's baby, any criticism of the FSA might be too close to No.10 for comfort ?

  • Comment number 76.

    FSA procedure

    1. Close the complaint
    2. Outsource the work to Close the complaint

    2 is preferable to cover ones sub-prime rump

  • Comment number 77.

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

  • Comment number 78.

    There is an issue of lying - Moore's story is quite different from Crosby's on the sacking, and it is a joke to suggest KPMG's investigation was "independent".

    However the major issues to come out of this are the lack of effectiveness of non-execs who basically are appointed through the network and because they can be relied upon not to rock the boat and just to collect their fees and freebies, and the lack of independence and competence of the FSA.

    So when a CEO wants to get rid of somebody who is not toeing his line, it is very easy to do.

    This does not just apply to banks but to all listed companies - consequently very little protection for the real shareholders from the misjudgements of one man - the CEO.

    The fund managers of course who invest our money/pensions also want an easy life - after all it's not their money they are losing, and they do not suffer if they together all lose our money.

    So we can't rely upon fund managers to seriously rock the boat - although they've got to make the odd controversial remark for appearances.

    We have senior people from the FSA getting lucrative and up until recently, prestigious jobs in the banks and vice versa.

    A recipe for turning a blind eye, and perhaps corruption.

  • Comment number 79.

    Ok, people in Government and the banks knew this crash was going to happen.
    They were even sacked because they spoke about it.
    There were people trying to warn the banks it was unsustainable.
    The bankers are trying to say they seen nothing.
    The Government are trying to say they seen nothing.
    The regulators are trying to say they seen nothing.
    Now they are either lying or stupid.
    Considering the amount of people involved I doubt they could all be stupid.
    Crosby was given a job in Gov. and they are covering his back with the story about resigning.
    What would make them lie and almost wipe out the country?
    There are as always the big three, Money, Sex, Power.

  • Comment number 80.

    the funding has repatriated back to U-S-A!
    borrowers in default have entire loans called -
    by outsourced solicitor and debt recovery firms
    who love to place charging orders on properties

  • Comment number 81.

    Of course he had to resign but then so should all the FSA senior management.

    They are the ultimate group of people getting paid for failure annually.

    How can we expect anyone there who all got it so wrog to now get things right.

    A complete clear out is what is required. I see that with one down thee are another 200 to go!!

  • Comment number 82.

    So KPMG didn't spot the obvious risk that house prices may fall - and therefore the money may dry up.

    Also the FSA didn't spot it; in fact it stands by it's findings; where is Sir James working now????

    Also the board of HBOS didn't spot it.

    ...but somebody did, and pointed it out to them...and they still didn't spot it.

    Are we missing something here?

  • Comment number 83.

    Peston's article did not address the other key issue which is excessive lending to individuals whose houses are way over valued by historical standard.

  • Comment number 84.

    There are two rules in almost all organisations:
    Rule 1: The boss is always right.
    Rule 2: When the boss is wrong, when you know for absolute sure that he's wrong, then Rule 1 applies.

  • Comment number 85.

    So HBOS asked KPMG to investigate Moore's dossier of complaints.

    Did you ask yourself Robert who HBOS's auditors were at the time? None other than KPMG.

    Enough said. I think we can let readers form there own judgement on the thoroughness of the investigation.

  • Comment number 86.

    Halifax hardly had a problem when it was a Building Society. It lent money to good borrowers and at a reasonable multiple of income. Even now the government and Bank of England wants to get the economy moving again by encouraging yet more debt. Why ?? The government should create money itself in a controlled manner, not allow private banks to lend new money (money not covered by their deposits) into existence. My first small terraced house cost 1.5 times my low income in 1979, it was easy to buy, why do borrowers have to take on massive multiples of mortgage debt at say 5 or 6 times income ? We have run out of borrowers even at 0% interest rates, like the drug dealer has run out of addicts. Much better to put interest rates back to 5% so savers get some return and can spend and let house prices fall rapidly to 3 times income, say £ 75,000 for the average house, then the economy can move forward and grow again. Anyone with any sense would not borrow more than 3 times income to buy a house, and the same applies to the lender.

  • Comment number 87.

    It is all to do with the invisible molecular string?

    Feeble UK accounting rules in need of massive over-haul.

    Feeble tripartite goon show regulators and regulations.

    Feeble sleaze museum made of two houses of sleaziment with fat cat politicians and peers taking bungs, giving peerages, passports from whoever/wherever they can get them and hiding them through favours and donations with intermediaries.

    Feeble, incompetent government scared of the banksters because of bung taking.

    Feeble egocentric banksters and bungsters running the banks.

    Feeble UK tax rules full of loopholes for non dom vultures and bad banks.

    No wonder Global Goodon Clown is afraid of sorting out the banks!

    The problems are in a high level circle of banksters, political fat cats, tripartite regulating goon show, don dom oligarch tax dodging bribing vultures - all held togther by an invisible telepathic molecular string of favours, faces and sleaze around the City/Houses of Sleaziment - the whole system revolving around a small fraction of city GDP value which controls the corridors of power in the UK and translates into turned into knighthoods, passports, fudged political donations.

    This is not a conspiracy theory - fats cats are clever but not that clever - it's the apex of greed, meglamania and UK sell out of millions of ordinary people in this country and it all needs turning on its head - we need an entire new political economy if Britain is not to continue it's momentous slide.

    I am sure that there are plenty of bankers like Paul Moore who wanted to say something and simply kept quiet because they knew they would not be listened to - or worse! That's the culture of fear and repression.

    Wake up - Britannia is still being taken for a ride!

  • Comment number 88.

    I suspect Robert Peston is wrong. The annual report of HBOS contains statements on risk and controls which appear to be untrue. I think that's crime. The HBOS auditors were also criminally negligent in their valuation of HBOS's assets. I hope for, but don't expect, prosecutions and long prison sentences.

  • Comment number 89.


    THEIR experience is useless ????????

    THAT WAY we can have a bunch of KNOW NOTHINGS running the show!

    BACK to where IT all STARTED THEN!!!!!!

    THIS resignationg HELPs NO bodY!

    Mind you he may well advice for FREE now?


  • Comment number 90.

    Dear Mr Peston [Robert]

    I speak as an ex-MD of the IOM subsidiary of BOS (Isle of Man) Limited who left banking in 2006 after suffering a long illness of executive stress - I actually suffered quite badly from what is commonly known as a nervous breakdown. I am now retired and fit and well.

    The principle and perhaps only reason that I was ill in 1996 was that the "Old Bank" had been "taken over by non-bankers - mainly accountants. Some of them had not been in banking before and were therefore inexperienced.

    In my personal view this is why the British banking system has gome wrong and mainly due to the wrong influences from the USA.

    I am English and found the Scots [with whom I got on well] very intense but honest plain vanilla bankers the same as myself. The problem is that banks since the mid nineties have not been run by boring old bankers but by accountants [at best] or ex Asda executives. The bottom line at all costs is the only maxim observed. Retail deposits were difficult [or rather more difficult] to acquire so most of the banks resorted to the wholesale market as the only conduit to funding. Borrowing short and lending long results in one thing - disaster. Not only that the banks at the behest of their accountancy driven policies then went into securitisation and derivatives. Why? Only one reason - bottom line results or greed. Instant profit at the risk of future stability. Please contact me anytime if you need to.

  • Comment number 91.

    On news earlier ...

    The focus of the KPMG investigation and report was much narrower than than Moore's complaints.

  • Comment number 92.

    AS for PAUL MORE

    Well if he'd been sooooo convinced then he could have tried harder.

    OH maybe not

    Clapperboard mad men on OXFORD st

    Calling the END is neigh.

    Oh I forgot

    Common sense has never been worthy.

    Especially with the appalling lack of thorough NEWS INFORMATION that we here in the UK seem to get FROM our PRESS.

    Sound BITES no information or EDUCATION!

  • Comment number 93.

    Hmmm...I believe Paul Moore received an out-of-court settlement from HBOS, with a proviso that he keep his mouth shut.
    (This proviso he has rightly ignored in the public interest)
    This should tell us much about who was telling the truth in this instance.

  • Comment number 94.

    Knit hoods allowed the recipient doodlebugger types to go unchallenged in their evaluation of the burgeoning Von Brown racket science industry used to cover the medaevil fyling saucerry practiced by bankers .

    In Crosbys favour, if evermore money was not pumped into the system thus pushing house prices up ,then those who were unable to pay would not have been able to reamortize and live to flight another day .

    The Chief culbrits are Blair and Brown who recieved the corporation tax kickback[no questions asked] to finance their things can only get better delusion of granderr.

  • Comment number 95.

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

  • Comment number 96.

    Light touch regulation cannot possibly work where there are personal incentives, greed and human nature. This ignoral of a warning by someone brave enough to whistle-blow is not untypical in industry pervaded by groupthink and run by people getting fat and abusing power. What I think is needed is to let the banks go and have extension arms and branches to the BOE with firm rules about terms of borrowing and lending and a system that is robust and transparent and heavily regulated to attract borrowers. I for one will never trust private banks in their current form ever again. Brown is in cuckoo-land if he believes dropping rates and VAT will get me borrowing in this most uncertain of climates. And I am certainly not alone. Savers will be an unfortunate casualty but they also sought reward and that carried risk.

  • Comment number 97.

    Lest we forget, whistle blower Paul Moore reached an out-of-court settlement with HBOS and signed a gagging order. "Normal procedure" a cynic might say where banks are concerned, totally averse to any negative publicity, as let's face it, banks can never make mistakes and never admit to them.

    Perhaps banks should be forced to publish details of all cases they're involved in with any regulatory, reputational or risk elements involved.

    These cowboys have kicked off the largest financial avalanche the world has yet seen. They should pay, and with more than just a resignation.

  • Comment number 98.


    Of course Paul Moore was right. I guess if you dig for more cases like this you will find plenty. You will also find the FSA has been very happy to go along with who ever is appointed in their place.

  • Comment number 99.

    'No crime committed'??? I am beginning to think my £60 fine for a '35 in a 30' was an act of such heinous barbarism i should top myself!

  • Comment number 100.

    I think you're missing the point completely - it's not about leagalities - for us, the public it's about the man's judgement and trust! If he got the BIG decisions wrong at HBOS why on earth should we trust him to make decisions at the FSA - he had to resign.


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