Britannia Radio

I've just watched Prime Minister's Questions and  Cameron roasting 
Brown over Sir James Crosby, who, being unmasked as the man who 
ruined HBOS, was appointed by Brown  to the key regulatory body, the 
FSA.   Cameron said everybody else is apologising - why is Brown not 
doing so?
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 From ConservativeHome Blog
Cameron accuses Brown of incompetence and arrogance at PMQs
Highlights, not verbatim:   (AND it totally fails to match what 
actually happened -cs]

Noon: Sir James Crosby has resigned from the FSA. As Nick Robinson 
notes on BBC1, there are lots of just-in-time-for-PMQs resignations 
on Wednesday mornings!
12.02pm: Does the PM not accept, says David Cameron, that he was 
guilty of a serious error of judgment in appointing a man to the FSA 
- Sir James Crosby - who may have fired a HBOS whistleblower? Gordon 
Brown urges the Conservative Party not to rush to judgment
12.05pm: No apology about boom and bust. No apology about Britain's 
deep recession. The bankers apologise.  Why won't the Prime Minister 
apologise for appointing this man to a senior post? [The Speaker 
issues a stern warning to David Cameron for another use of "You" 
towards the Prime Minister].
12.07pm: Does the PM agree, says David Cameron, with Ed Balls that we 
are in the worst economic shape for 100 years? The Prime Minister 
doesn't answer the question but says the Conservative Party opposed 
the rise in child benefit, in pensions, in infrastructure spending 
and of a cut in VAT
12.09pm: This is a government that gets its facts wrong and never 
apologises, says David Cameron. Incompetence plus arrogance equals 
two million unemployed.  Brown responds by quoting a previous speech 
by David Cameron in favour of lower regulation. His judgment is 
consistently wrong, he says.
12.12pm: Nick Clegg reminds Brown of various broken promises. He 
accuses the Prime Minister of being a "say anything, do nothing" 
politician.
--------------------------------------

I think it is right to emphasise that, however right Paul Moore's 
allegations were (and they were spot-on) the warning was made 
internally,  After HBOS / Crosby sacked him,  he took legal action 
and got compensation for loss of office. [The so-called 'gagging 
order' presumably increased the compensation offered! ]  He then kept 
quiet until the crisis finally erupted when he spilt the beans - 
apparently to Tory MP Andrew Tyrie .  Mr Moore cannot be faulted as 
such,  though he doesn't qualify as a 'hero' either.

As for the committe yesterday the Times leader came to the same 
conclusion as I did - - awasted day.  It was only when a Tory MP 
disclosed Paul Moore's testinmonty that the  Committee showed ant 
purpose in its exuatence at all. - - -"The parade of bankers before 
the House of Commons Treasury Select Committee made for great 
theatre. The bankers delivered their prepared soundbite of profound 
and unreserved apology. They conceded that the bonus system was part 
of the original problem. The former bosses of the Royal Bank of 
Scotland admitted what had been plain to everyone else for a long 
time - that the purchase of ABN Amro had been a costly error. For 
three hours the bankers were questioned vigorously and they responded 
with both candour and courtesy. The committee members probed 
assiduously enough but, not for the first time, they were outsmarted 
by expert witnesses with too much technical information at their 
disposal"

Christina
A reminder - NEWSNIGHT tonight.
========================
TIMES      11.2.09
Unmasked, the City chief with close ties to Gordon Brown

Ian King: Deputy Business Editor

Sir James Crosby was Banquo's ghost at the Treasury Select Committee 
- he wasn't there physically and nor was he mentioned directly by name.

However, he is almost certainly the biggest casualty from yesterday's 
session, having been fingered in written evidence - extracts of which 
were dramatically read out by one of the committee members, Andrew 
Tyrie (Tory MP) - for having personally sacked the former head of 
risk at HBOS when he dared to speak out about the way the bank was 
being run.

0The 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.

Mr Hornby, by contrast, ran the bank only for its final two years - 
during which time, as he pointed out yesterday, most of his energies 
were being devoted to preventing Sir James's runaway juggernaut from 
running off the road.

Skilfully blaming Sir James, without once naming him, Mr Hornby 
recalled to the committee how, on taking over at HBOS, he had 
immediately halted a share buyback programme to preserve capital, 
slammed the brakes on new mortgage lending - cutting the bank's net 
share of new lending from 25 per cent to 8 per cent - began cutting 
its exposure to the short-term wholesale markets and put more 
emphasis on attracting more deposits. He added: "Over many years the 
reliance on wholesale funding left us in a vulnerable position."

While Mr Hornby was trying to undo his work, though, Sir James - an 
Oxford maths graduate and qualified actuary - was wasting little time 
in becoming a member of the great and good. A month after leaving 
HBOS he was named as chairman of a task force set up by Mr Brown. who 
was still Chancellor at the time, on how the Government might win 
public trust in its identity card scheme.

A year later Sir James, who had accrued a pension pot worth more than 
£9 million when he left HBOS, was named deputy chairman of the 
Financial Services Authority - which, ironically, is the key 
regulatory body supposedly in charge of monitoring risk.

Then, in April last year, Alistair Darling put Sir James in charge of 
an emergency review of the mortgage market - asking him to come up 
with proposals on how to unfreeze it. Sir James duly obliged with a 
call for £100 billion worth of government guarantees for mortgage-
backed securities. He may now face questioning from the select 
committee himself. The damning written evidence given by Paul Moore, 
the former HBOS head of risk fired by Sir James, suggests that he 
certainly deserves to.

The man responsible for the Halifax adverts featuring Howard the 
singing banker had, until yesterday, avoided any blame for the 
collapse of HBOS. Now he is well and truly in the spotlight for his 
role in the affair - and that could make things very embarrassing for 
his political master, Gordon Brown.
========================
FINANCIAL TIMES      11.2.09
Crosby quits as FSA deputy chairman
By Jennifer Hughes and Jim Pickard in London
Published: February 11 2009 11:49 | Last updated: February 11 2009 12:30

Sir James Crosby has quit as deputy chairman of the Financial 
Services Authority, the City regulator, the FSA said on Wednesday.

His resignation follows allegations that he and other former HBOS 
directors ignored warnings over the bank's rapid growth from Paul 
Moore, the bank's ex-head of regulatory risk.
+++++++++++++++++++++++++++
EDITOR'S CHOICE
Paul Moore's memo in full - Feb-11
Ex-HBOS chiefs accused over risk controls - Feb-11
MPs told HBOS was warned of 'serious risk' - Feb-10
Interrogation: Called to account - Feb-10
Matthew Engel: Sorry tale from four men in denial - Feb-10
+++++++++++++++++++++++++++

Mr Moore was made redundant by the bank in 2005, it emerged in a 
Treasury select committee hearing in parliament on Tuesday.

HBOS, now owned by Lloyds after its near-collapse last year, and Mr 
Crosby have strenuously denied the allegations made by Mr Moore, who 
sued for unfair dismissal. The bank settled his claim in mid-2005.

In a statement published on Wednesday, Sir James confirmed that as 
chief executive he had asked Mr Moore to leave the bank as part of a 
wider restructuring. The "risk function was elevated to report direct 
to the CEO" said Sir James.

"At the time he [Mr Moore] made a series of allegations," said Sir 
James.
"These were independently and extensively investigated on behalf of 
the board, the results of which they shared with the FSA. That 
investigation concluded that Mr Moore's allegations had no merit."

Sir James, who received a knighthood in 2006 and became FSA deputy 
chair a year later, said questions had been raised about his 
independence from government. He has produced two reports for the 
Brown administration, one on identity cards and another on mortgage 
finance.
"I am confident that anyone who either worked with me on the reports 
or indeed anyone who has read them will conclude that they are the 
work of someone who is genuinely independent of government," he added.
"In addition I want to emphasize that I have absolutely no political 
connections or affiliations."

But he said it was "the right course of action" to resign from the 
FSA board.
Only minutes before the resignation, Gordon Brown's official 
spokesman told journalists that the allegations against Sir James, a 
former adviser to the prime minister, were "serious".

In a written submission to MPs on the committee, which is 
investigating the financial crisis, Mr Moore said: "I told the [HBOS] 
board they ought to slow down but was prevented from having this 
properly minuted by the chief financial officer. I told them their 
sales culture was significantly out of balance with their systems and 
controls."

Mr Moore said that after his dismissal he was replaced by a new group 
risk director. He claimed this was "a personal appointment of the CEO 
against the initial wishes of other directors."

He added in written evidence: "One final observation I would make 
about the HBOS disaster is this; wasn't it actually Sir James Crosby 
rather than Andy Hornby who was the original architect of the HBOS 
retailing strategy?"
"At first this was good in that it purported to be a "Customer 
Champion" strategy. The problem was that a reduced margin strategy is 
predicated on the need for improvements in cost control and at the 
same time massive increases in sales. It is now clear that this 
disastrous "grow assets at all costs" strategy was what led to HBOS's 
downfall and humiliating demise by the forced acquisition by Lloyds."

The resignation will be a blow to the FSA, which has already faced 
criticism for its poor supervision of Northern Rock, the now 
collapsed bank.
The watchdog said on Wednesday that the Moore allegations, first made 
in 2004, had been "fully investigated by KPMG, which concluded that 
the changes made by HBOS were appropriate."

Adair Turner, chairman of the FSA, will write to Alistair Darling, 
chancellor of the Exchequer, by the end of Wednesday setting out the 
details.
The regulator added: "We would like to thank [Sir James] for his very 
significant contribution to the FSA over the past few years."

The government came under fire because of Sir James's links to Mr Brown.
Mr Brown and David Cameron, leader of the Conservatives, clashed in 
the Commons over the affair.

Mr Cameron asked the prime minister in Wednesday's session of Prime 
Minister's Questions whether it was a "misjudgment" to have appointed 
Sir James to such major official roles.

Mr Brown said that the allegations against Sir James Crosby were 
"contested" and it was right for the banker to step down from the FSA 
to deal with the issue. He added that Sir James was "no longer an 
economic adviser to the government."

The Treasury insisted that the government had not demanded the 
resignation.
"His statement makes clear it was his decision to resign," said a 
spokesman. "We knew about it more or less at the same time as it was 
announced."
===================
POLITICS HOME     11.2.09
(from House of Commons Committee)
RBS boss: The issue is how much worse can we treat our staff
The Chief Executive of Royal Bank of Scotland has said that he 
intends for the banks to lead the way on reforming its bonuses system 
but has warned it cannot treat it's staff worse than other banks.

Answering MPs questions in parliament Stephen Hester said: "I 
empathise 100% with the public mood. It would give me no joy to pay 
bonuses to anyone and if that was responsible thing to do I would 
recommend that in a heartbeat."
"I do think that bank payment in some areas of the industry is way 
too high and in need to come down and in intend us to lead the process".

However he said that he needed to balance this with retaining and 
recruiting staff so that the bank could stay competetive.
"Somehow I need to engage our staff to and attract the best people 
stay with us and to attract better people to replace the ones we got 
rid of," he said.
"176,500 of our 177,000 staff did what they were asked to last year 
and made profit.  [That's what their salaries were for, weren't 
they?  Bonuses, what for? -cs]
  "When we consider how to treat them aside from issues of 
incentivising them, the issue is how much worse can we treat them 
relative to any other banks in the world".

Mr Hester also said that there was a "moral hazard" in reforming the 
risk management in banks.

"Eventually we all need to save more and borrow less and it's trying 
to get the balance in allowing the economy to adjust gradually so 
that borrowing is not withdrawn swiftly but there is some moral 
hazard sitting around there that we all have to watch out for," he said.
[Can anybody but a self-serving banker explain what this "moral 
hazard"  is ? -cs]

Other Bank bosses at the committee echoed Mr Hester's criticism of 
the previous bonus payment arrangements, but insisted that action to 
reform them was already underway.

Antonio Horta-Osorio of Santander said there were "clearlyflaws in 
the old system" but said "several steps in Santander are already 
takenin that direction".

Barclays chief executive John Varley said: "It would be in my view 
very strange for anybody, and bank, to make the suggestion that all 
is well in the compensation structure", adding that his review had 
been conducting a review on pay "for some months.

[They don't get it do they ?  There are no grounds in any 
organisation's pay structure for any bonus that is not directly 
related to company profits and EXTRA effort.  All these bonuses paid 
over recent years have been paid from monies stolen from savers and 
should be repaid forthwith.  NO bonuses should be paid in the public 
sector whatsoever.  -cs]