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The curse of hindsight

I had been puzzled how Sir James Crosby, ex- deputy chairman of the Financial Services Authority and the man who was commissioned by the chancellor to rehabilitate the mortgage market, escaped the flak following the fall of his former financial empire.

After all as the chief executive of HBOS he had been the principle architect of an expansionist business strategy that had left the group woefully reliant on wholesale funding and exposed to the vagrancies of the propertty market.

It therefore seemed not only unfair but ironic that Andy Hornby, his protégé and successor, became the fall guy when the Brown stuff (the capital B is deliberate) hit the fan.

Stack them high and sell them cheap might have been his mantra but that’s what Sir James had brought in Asdaman to do.

Now of course the Treasury Select Committee has done its work.

Paul Moore, the former head of risk at HBOS who apparently raised serious questions about the group’s exposure to risk and was sacked by Sir James, used the committee’s recent hearing as a stage to raise serious questions about his judgement and that of the Prime Minister.

Whether true or false, his allegations have done their work.

We have seen that erstwhile captain of industry fall on his sword and resign from the FSA and in theory I should be pleased but I’m not.

Let’s face it, the hearing itself was a pretty shoddy affair at which the politicians played a divide and shift the blame game with a group of former fat cats who initially appeared to be humbled and contrite but when all was said and done their mei culpa moment proved to be no more than an opening gambit.

And as for Moore, his position was aptly captured by Camilla Cavendish in The Times on February 13. “He took a ‘substantial’ pay off in exchange for silence”, she noted, “but now haunts the BBC and the Treasury Select Committee like an Ancient Mariner with hindsight”.

The problem is that it is all too easy to be wise after the event. Worse the hindsight on offer at that hearing probably doesn’t give us the whole picture and ignores what drove business decisions at the time.

For example, what if Sir James and the board had reined back mortgage lending in 2003 or 2004? There was no shortage of mortgage funds in those days so others would have taken up the slack, leaving the City to judge HBOS as being asleep on the job.

It’s certainly hard to judge when to jump of a bandwagon and in that sense I had thought that Sir James had got it exactly right.

It had seemed that he had left HBOS just in time but is it his past that has now caught up on him, or the slowness of our government to recognise the scale of the financial crisis when the credit crunch first manifested itself that has brought about his downfall?

The government has yet to implement the recommendations in his report and many of those were first proposed by the Council of Mortgage Lenders as its initial response to the challenge of restoring the wholesale funding and securitisation model.

Just think, if Crosby had been quicker off the mark with his report and the chancellor had actioned it with some urgency, well Northern Rock might still be our only nationalised bank and Gordon Brown might not have had to bend the competition rules so Lloyds TSB could take over HBOS without doing proper due diligence. But that again is another £10bn story.


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