What Did Gordon Brown See in Sir James Crosby?

Tuesday, February 10, 2009

What Did Gordon Brown See in Sir James Crosby?

Iain Dale 12:30 PM

Paul Waugh has given me permission to republish his latest blogpost here. It's both gripping and damning.

Gordon Brown has spent months now condemning the "irresponsible" bankers, blaming them in part for our recession woes. But it seems that one of those very bankers may one of the PM's favourite advisers. Having conducted a review of ID cards for the Government (that surprise, surprise said they were a good thing), Sir James was hired by Chancellor Alistair Darling to see how we could ressurect the ailing mortgage market.

Amazingly, Sir James suggested - and even more amazingly Darling agreed - that a way out of the crisis is to find ways of using securitisation to help boost lending.

Mervyn King was rightly worried that the solution risked sounding just like the very thing that got us into the mess in the first place.

But what has not been much remarked on is the fact that Sir James was the chief exec of HBOS until 2006 - and oversaw its rapid and disastrous expansion based on wholesale markets.

Sir James left HBOS to become, wait for it, deputy chairman of the FSA - the very body that should be in charge of monitoring risking lending. HBOS was left in such a dire state by the collapse of the wholesale markets that it had to be swallowed whole by LloydsTSB.

Yet today's news from the Treasury Select Committee is the most damaging threat of all of to Mr Brown and Mr Darling's judgement in relying on Sir James.

Former head of risk at HBOS Paul Moore alleges (under Parliamentary privilege allowed to the Committee) that Sir James sacked him after he tried to blow the whistle on the fact that the bank was expanding too fast and that its sales culture was overshadowing its risk management.

The TSC today heard that Sir James then personally appointed a new head of risk with no experience in risk management. Mr Moore claims that he was "summarily dismissed" and that Sir James wrote - contrary to HBOS policy - at the time "the decision was mine and mine alone".

Former HBOS chairman Lord Stevenson today said a nine-month probe into Mr Moore's claims concluded there was no truth in the claim that he was sacked for trying to blow the whistle. But his claims are potential dynamite - for both HBOS, Sir James and Gordon Brown.

A great piece of analysis and journalism from Mr Waugh. If you haven't already bookmarked his blog, do it now.