The hidden dynamite explodes - Paul Moore blows the cover
It seems that yesterday wasn’t wasted after all. After the hyped appearance of the heads of two banks fell flat the real meat was to come, thanks to Tory MP Andrew Tyrie who electrifiued the whole procedings
All the papers today - well almost all - lead with Paul Moore’s devastating exposure of the origins of the HBOS disaster which tried and failed to stop, HE lost his job while the man who got rid of him has been promoted to be Gordon Brown’s chief adviser on the mortgage market (which he wrecked).
Below I give story as told by The Telegraph and if you watch the attached video clip you’ll hear Sir Fred Goodwin of RBS say that nobody saw it coming! Ahem! Paul Moore saw it comoing and got the sack for saying so!
After the main story I confine this posting to comments and any other facts that have surfaced.
Christina
LATE NEWS Brown's ally Crosby quits
CITY regulator Sir James Crosby quits his job at the Financial Services Authority
As things are moving so fast I will stop my trawl of the media at that point and post this. I will return to it later.
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TELEGRAPH 11.2.09
Senior HBOS executive 'sacked for warning of banking crisis'
Paul Moore, a senior executive at HBOS, was sacked by one of Gordon Brown's favoured bankers after warning his bosses they were taking excessive risks, MPs were told.
By Andrew Porter, Political Editor
The former head of risk at HBOS - one of the biggest casualties of the banking meltdown - told the Treasury Select Committee how he predicted the bank's practices could "lead to disaster".
He informed the bank's board of his concerns, but was later sacked by Sir James Crosby, the bank's former chief executive.
Sir James is now the deputy chairman of the Financial Services Authority, the watchdog tasked with monitoring wrong doing in the City. He was appointed by the Treasury and has also carried out a wide ranging investigation into the mortgage market for the Prime Minister.
In his evidence, Mr Moore told MPs "anyone whose eyes were not blinded by money, power and pride" would have realised problems were mounting for HBOS and the other high street banks.
However, he claimed he was replaced by someone with no experience for voicing his fears. HBOS would later become one of the highest profile victims of the credit crisis. Ultimately, it had to be taken over by LloydsTSB last year.
Mr Moore's disclosures provide the most stark evidence yet of bank boards refusing to question their business models at the height of the banking and credit boom.
In a damning testimony, submitted to the Treasury committee's inquiry into the banking sector, Mr Moore said it was clear that "excessive consumer credit based on massively increasing property prices" was bound to cause problems.
But he said no one felt able to speak out because of the "fear" of the executives who were being paid vast sums.
The select committee heard that it was Sir James who made the decision to sack Mr Moore.
In his evidence Mr Moore, who was head of Group Regulatory Risk at HBOS between 2002 and 2004, wrote: "I certainly knew that the bank was going too fast (and told them) had a cultural indisposition (and told them) and was a serious risk to financial stability …and consumer protection (and told them.)"
He said he told the board they "ought to slow down" and that their sales culture was "significantly out of balance with their systems and controls."
Mr Moore claimed he had been told by the FSA that he was doing a good job, but that this was dismissed by Sir James. He sued for unfair dismissal and the claim was settled.
He added: "I was subjected to a gagging order but have decided to speak out now because I believe the public interest demands it.
"After I was dismissed and to prove just how seriously HBOS took risk management, I was replaced by a new group risk director who had never carried out a role as a risk manager of any type before."
He concluded: "Sadly, no one wanted or felt able to speak up for fear of stepping out of line with the rest of the lemmings who were busy organising themselves to run over the edge of the cliff behind the pied piper CEOs and executive teams that were being paid so much to play the tune and take them in that direction."
Two former HBOS executives were quizzed by the Treasury select committee over Mr Moore's dismissal. George Mudie, a Labour committee member, said: "At the end of the day you sacked your group risk fellow. Now, four years later it turns out he was right and you were wrong."
Lord Stevenson, the former chairman of HBOS, replied: "I remember the incident very well. It was taken very seriously by the board." [Eh? It was rejected! -cs]
Last night George Osborne, the shadow chancellor, said: "Paul Moore has made very serious allegations about how his warnings about the risks being run at HBOS were dismissed by the then chief executive, James Crosby.
"Given that as Chancellor, Gordon Brown appointed Sir James as Deputy Chairman of the FSA and that as Prime Minister he relies upon him as a key economic adviser, the Government need urgently to investigate the allegations and discover the truth.
"What is at issue here is Gordon Brown's judgement and the people he takes advice from."
HBOS collapsed because of the failure of the very business model that allowed it to expand rapidly.
The bank operated with a huge £198bn so-called "funding gap" – the difference between customer deposits and customer loans. The gap was filled by borrowing on wholesale international money markets. But from 2007, those markets effectively froze as investors took fright, leaving HBOS unable to raise money and teetering on the brink.
Sir James was unavailable for comment.
But Mr Moore said: "One final observation I would make about the HBOS disaster is this: wasn't it actually Sir James Crosby rather than Andy Hornby (HBOS chief executive) who was the original architect of the HBOS retail strategy?
"Sir James is still deputy chairman of the FSA and advises the Government on how to solve the mortgage crisis. Some might now question what his 'contribution to financial services' has been when this will have led to millions of people in excessive debt, 10,000s who will lose their jobs and many more who balance sheets have been impacted by precipitous fall of the HBOS share price."
Mr Moore has previously accused Halifax bosses, including ex-Asda executive Mr Hornby, of abandoning the bank's conservative roots in a reckless rush for market share.
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LATE NEWS TIMES 11.2.09
Top banker Sir James Crosby quits after whistleblower claims
The deputy head of the country's financial watchdog resigned today after Gordon Brown withdrew confidence in him over damaging allegations from a bank whistleblower.
Sir James Crosby, the former HBOS chief excecutive, was revealed yesterday to have personally dismissed his former head of risk who raised fears that the bank was taking excessive risks.
Paul Moore said that he was fired personally by Sir James after repeatedly warning that the bank was growing too fast.
Sir James was later appointed by Mr Brown as deputy chairman of the Financial Services Authority and was an adviser to the Treasury.
When questioned by journalists at today's daily lobby briefing, the Prime Minister's spokesman would say only: "These are serious allegations." It was the clearest sign that Sir James’s role was in jeopardy, and he resigned immediately afterwards.
Mr Moore, a former partner of KPMG, was head of group regulatory risk at HBOS between 2002 and 2005.
The explosive allegations which led to Sir James' resignation were made when four former banking chiefs were grilled before the Treasury Select Committee yesterday. During the testimony, it was revealed that Mr Moore had said that his job at the time "felt a bit like being a man in a rowing boat trying to slow down an oil tanker".
He accused the bank of "a total failure of all key aspects of corporate governance" and pointed the finger of blame firmly at Sir James, whom Mr Darling asked last April to review the problems in the mortgage market.
By dismissing him without good reason, HBOS broke in-house rules, he said, and he was replaced by Jo Dawson, a sales manager with less experience of risk management – a "personal" appointment by Sir James against the wishes of other directors.
The allegations came at a time when the banks' risk-taking has come in for huge criticism as Britain slides into recession
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Comments and extracts from (some) other sources:-
1. Telegraph
=== (Leader)
It's not just bankers who should be in the stocks
Commons confessional was a small step in the right direction.
The spectacle of RBS's former bosses, Sir Fred Goodwin and Sir Tom McKillop, and their counterparts at HBOS, Lord Stevenson and Andy Hornby, being put in the stocks at Westminster yesterday was a cathartic moment in the banking crisis. Their actions not only caused immense damage to their own businesses but have shaken the entire economy to the core. It was important they were held to account.
As the quartet testified before the Treasury Select Committee, there was no shortage of contrition for the havoc they have wreaked. Yet while most of their reputations may be in shreds, the four bankers actually put up a robust defence of their actions. They argued that even the most egregious of their mistakes – RBS's purchase of the Dutch bank ABN Amro after the credit bubble burst; HBOS's lunatic over-exposure in the property market – may look disastrous "with the benefit of hindsight" but did not do so at the time.
Such special pleading sounded rather lame when it emerged that HBOS's head of risk, Paul Moore, warned as long ago as 2004 that the bank was expanding too fast and this was posing "a serious risk to financial stability and consumer protection". The bank's response? It fired Mr Moore and slapped a gagging order on him.
What the four were really saying was that the herd instinct had, fatally, taken a grip on a banking sector which convinced itself credit and property prices would go on growing for ever and the seven-figure bonuses would keep gushing forth. While the bank bosses are the focus of the public's outrage over this catastrophe, they were not alone. Boards of directors and institutional shareholders were caught up in the frenzy. So were home-buyers who eagerly took on irresponsibly high levels of debt in the belief that property prices had just one direction of travel. So too were the consumers who made the UK the credit card capital of the world, running up a personal debt mountain of £1.3 trillion before the bubble burst. And at the pinnacle of responsibility sat a government which allowed the growth of money to run dangerously out of control while presiding over a regulatory regime of its own creation that was to prove hopelessly ill-equipped to forestall the crash.
The end result? The banks failed in their paramount duty, the safe keeping of their customers' money. This has shattered people's trust in them and, until that is restored, the banking sector cannot flourish and nor can the wider economy because a strong financial sector is vital to this country's economic health – before the crash it contributed more than 10 per cent of GDP. Yesterday's Commons confessional by these fallen titans was a small step in the right direction.
===Treasury committee MPs miss chance to grill bankers in detail about their role in crisis
[Clearly written before Paul Moore spoke although timed at 5.39 am today!!!]
By Richard Fletcher
[- - - - - - - - - -]
Almost all of the MPs on the Star Chamber that is the Treasury Select Committee had tales of outraged constituents who want to see bankers hang. So it is understandable that in front of the packed crowd gathered yesterday for the bloodsport, the MPs felt the need to grandstand.
Yet it is a shame that in the marathon session – three and a half hours as opposed to the planned 90 minutes – they did not land any lasting punches on the four bankers who were at the heart of Britain's banking melt-down.
We have learned very little new information about how exactly the two giant lenders, Royal Bank of Scotland and HBOS, collapsed spectacularly last October [- - - - - - - - - -]
There were odd glimpses. Sir Tom McKillop looked to be on sticky ground when he admitted RBS's disastrous acquisition of ABN Amro had been largely based on due diligence done in May 2007, five months before the deal completed and before the economic outlook had dramatically worsened. He should have been pressed harder on why RBS did not think again about the deal.
The HBOS duo got themselves tied in knots over why Peter Cummings, their commercial lending supremo, was allowed to effectively build his own empire within the bank which left it with a lethal exposure to the property market.
All four bankers, who appeared to have been heavily coached ahead of yesterday's appearance, were ready with their fulsome apologies for what has happened – though each one was careful not to take personal blame.
Given that it is very unlikely that any one of them will ever end up in court over the implosion of their banks, this was an important opportunity to grill them publicly and in detail about their role in the crisis. It was missed.
===THE SUN SAYS - - - - -
FAT CAT SLAP
WELL, we got an apology. Sort of.
The four jokers who destroyed Britain’s once-proud banking industry fell over each other to say sorry... for other people’s mistakes.
Fred “The Shred” Goodwin, of RBS, “could not be more sorry”. HBOS’s Andy Hornby felt “profound and unreserved” regret. There were crocodile tears all round.
They even sobbed over the personal fortunes they’ve lost buying shares in their own doomed banks. Poor saps.
But none of it was their fault, of course. The crash was impossible to predict. There were “no siren voices”.
That’s how it stood until Tory MP Andrew Tyrie shot them down in flames.
HBOS was warned early on by its own “risk manager”, Paul Moore, that the bank was dangerously over-stretched, under-resourced and expanding too fast.
Mr Moore was backed by the City’s watchdog, the Financial Services Authority. Instead of listening to this highly qualified whistleblower, the bank sacked him, gagged him — and replaced him with an unqualified successor.
And why not? After all, NONE of the four bank chiefs quizzed by MPs have any banking qualifications whatsoever!
Toxic
Nor, they confessed, did they have a clue about the toxic American debt now burning a hole in taxpayers’ pockets. They also ignored clear warnings, squandered £10bn on a dud Dutch bank — and landed us with the bill.
Complacency oozed from these sharp-suited ex-Masters of the Universe.
Gordon Brown and Alistair Darling must be appalled by such reckless
acts in their own political backyard.
They will surely ask why warnings from the HBOS whistleblower were ignored? And who was so stupid as to sack him?
The answer, worryingly for us all, is ex-HBOS chief Sir James Crosby.
Today, Sir James is deputy head of the FSA [WAS- - - see Late News in intro ] — the body that supported Paul Moore.
He also happens to be one of the PM’s key credit crunch advisers.
Is that why Mr Brown seems so reluctant to ban all further bonus payments to those banks supported by taxpayers?
The Prime Minister expresses anger at these bonuses with one breath — and fear of legal action with the next. He should tell these greedy bankers to sue and be damned.
Because, with millions now facing years of hard times in the worst recession for a century, he’ll be damned if he doesn’t.
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