Lord Stephenson - dishonest or delusional?

Ex-chairman of HBOS called to account.

The Bank of England has said that the economic impact of the financial crisis was on a par with the Second World War. And the wannabe Inglorious Basterds on the Parliamentary Commission on Banking Standards continue to call to account the war criminals.

It all feels a bit like old news now… We know full well that HBOS was badly run. We know about the secret bailouts, the “spirit of optimism” that led to disaster.

This week it was the turn of Lord Stephenson. The ex-chairman of HBOS was - and still is - suave and silver-tongued. He is the kind of man who you believe when he says something like

..there was just no way we [the HBOS leadership] were encouraging a culture of excessive risk-taking.

But one committee member – Lord Lawson – wasn’t having any of it. “You are living in cloud cuckoo land,” he said.

And to remind ourselves just how risk-averse HBOS was in the lead-up to the melt-down, we should recall the story of Benny Higgins. A bona fide banking superstar, Benny Higgins joined HBOS in 2006 from RBS, where he had overseen the successful integration of NatWest into the group.

After less than two years, he left HBOS under a cloud, having presided over the dramatic reduction of the bank’s  mortgage book. With hindsight it sounds prudent and praiseworthy action. At the time, however, he was universally pilloried for presiding over such a huge loss in market share.

And in the wake of this “disaster”, silver-tongued Stephenson was there to reassure twitchy stakeholders that the bank would bounce back and regain its position in residential mortgages. Not only that, but he wrote to the FSA (a letter since published by the Commission), emphasising that HBOS was a “highly conservative institution”.

I am not aware of any lurking horrors in our business or our balance sheet. Quite the reverse ... HBOS in an admittedly uncertain and insecure world is in as secure a position as it could be.

Happy to be crossed questioned on this but I hope you know me well enough to know this is neither a bravura nor an ill considered statement.

There you are – a man in control… Confident and reassuring. A year later the bank had been merged with Lloyds and was being bailed out by the taxpayer to the tune of £17 bn.

We could rely on Lord Lawson to remind Stephenson just how much bravura there was in that statement. “Either you were being dishonest when you wrote that or, if you believed it, you were delusional,” he said.

“Spirit of optimism” at HBOS: Photograph: Getty Images

James Ratcliff is Group Editor of  Cards and Payments at VRL Financial News.

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Richmond is a wake-up call for Labour's Brexit strategy

No one made Labour stand in Richmond Park. 

Oh, Labour Party. There was a way through.

No one made you stand in Richmond Park. You could have "struck a blow against the government", you could have shared the Lib Dem success. Instead, you lost both your dignity and your deposit. And to cap it all (Christian Wolmar, take a bow) you self-nominated for a Nobel Prize for Mansplaining.

It’s like the party strategist is locked in the bowels of HQ, endlessly looping in reverse Olivia Newton John’s "Making a Good Thing Better".

And no one can think that today marks the end of the party’s problems on Brexit.

But the thing is: there’s no need to Labour on. You can fix it.

Set the government some tests. Table some amendments: “The government shall negotiate having regard to…”

  • What would be good for our economy (boost investment, trade and jobs).
  • What would enhance fairness (help individuals and communities who have missed out over the last decades).
  • What would deliver sovereignty (magnify our democratic control over our destiny).
  • What would improve finances (what Brexit makes us better off, individually and collectively). 

And say that, if the government does not meet those tests, the Labour party will not support the Article 50 deal. You’ll take some pain today – but no matter, the general election is not for years. And if the tests are well crafted they will be easy to defend.

Then wait for the negotiations to conclude. If in 2019, Boris Johnson returns bearing cake for all, if the tests are achieved, Labour will, and rightly, support the government’s Brexit deal. There will be no second referendum. And MPs in Leave voting constituencies will bear no Brexit penalty at the polls.

But if he returns with thin gruel? If the economy has tanked, if inflation is rising and living standards have slumped, and the deficit has ballooned – what then? The only winners will be door manufacturers. Across the country they will be hard at work replacing those kicked down at constituency offices by voters demanding a fix. Labour will be joined in rejecting the deal from all across the floor: Labour will have shown the way.

Because the party reads the electorate today as wanting Brexit, it concludes it must deliver it. But, even for those who think a politician’s job is to channel the electorate, this thinking discloses an error in logic. The task is not to read the political dynamic of today. It is to position itself for the dynamic when it matters - at the next general election

And by setting some economic tests for a good Brexit, Labour can buy an option on that for free.

An earlier version of this argument appeared on Jolyon Maugham's blog Waiting For Tax.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues.