Tonight:
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AFTER Sir Fred, Sir Victor. Today it's the turn of Sir Victor Blank, chairman of Lloyds, to prove that the word of a bank boss no longer counts for anything - and that they stand condemned for their sheer greed and hubris.
In Sir Fred Goodwin's case, it was his decision as chief executive of Royal Bank of Scotland to buy ABN-Amro that proved his and his bank's undoing. In Blank's, he took a perfectly good, conservatively-run operation, Lloyds, and merged it with a giant, aggressive organisation, HBOS. The result is a huge mess of an organisation called Lloyds Banking Group - and what may prove to be a massive loss for his previously contented investors.
His claim on Jeff Randall Live on Sky News last night that the merger was good for Lloyds shareholders was greeted with a fall of nearly 50 per cent in the shares. They've recovered partly but the damage is done. Lloyds investors do not believe him.
What they suspect happened is that Blank did his friend Gordon Brown a favour by taking HBOS -reeling from excessive corporate lending in the Bank of Scotland division - out of the nationalisation equation. The banks were in crisis, HBOS was the biggest of those, and up stepped Blank to do the Prime Minister's bidding. In return, competition rules were shoved aside to allow the creation of a high street superbank.
Blank says that's not the case, that he and Lloyds chief executive, Eric Daniels, had been plotting the move, that they were fully aware of what they were buying. Yes, they got a break from the Government in being allowed to buy HBOS but that was the extent of the bargain. He said as much again yesterday on Randall's programme and today's calamitous plunge is the response.
The City suspects that the new group is short of capital and the Government may have to raise its stake from 43 per cent to 50 per cent. For Lloyds shareholders, the switch in fortunes is incredible. Everyone supposed HBOS was trouble, that the BOS end was piled high with toxic debt. Lloyds, by contrast was well-managed and in little danger from the subprime and credit crunch fallout. But Blank and Daniels knew better.
We've been here before. At RBS, Goodwin drove RBS to undreamed of heights as one of the biggest banks in the world. When Barclays first bid for ABN-Amro, the reaction of the British bank's peers was to shrug. ABN-Amro was a tough ask, a jumble of different banks around the world, good luck to them. Not Fred. He saw the Barclays move as a threat to RBS's hard-fought for position as Britain's next banking powerhouse after HSBC - and he decided to attack.
But the Barclays offer was in shares; Goodwin, having launched repeated takeovers to push RBS forward, could not do the same. He paid cash. He also joined up with Santander and Fortis. Under the deal they struck, though, Santander, the Spanish bank run by people with a desire as great as Goodwin's, got the best bit - ABN-Amro's operations in Latin America. The RBS chief had every chance to pull back and every excuse because the markets were turning. But he pressed ahead. The outcome was a bank loaded with debt and in no shape to fight the credit crunch. Crucially, when RBS cracked, few leaped to Goodwin's defence. He was so unpopular in the Square Mile that the queues to dance on his crushed CV were long. But to say that he should be stripped of his knighthood is absurd. He has not committed any offence that we know of. He might cause wide offence, but that is different. Vince Cable rightly says Goodwin should never have received the honour, but that too is not the same as taking it off him now. RBS was chaired by Sir Tom McKillop, who had previously worked in pharmaceuticals. If Goodwin's award is on the line then McKillop's should be too. Also in any roll-call of shame should be Merrill Lynch, the investment bank that worked on the ABN-Amro takeover and earned huge bonuses.
Goodwin himself can enjoy a comfy retirement. He received £4.2 million alone in 2007, his last full year, and his pension pot stands at £8.37 million. Just as guilty are the spineless members of the RBS board who went along with him. Goodwin has been joined by Blank. It looks as though nothing but full nationalisation for both banks is the answer - along with a clearout of all the venal lackeys who supposedly constituted a generation of world-beating British bankers.
Reader views (5)
So are we any closer to finding out what other 'black holes' are in HBOS. No, they've just been shovelled over to Lloyds. I wonder, do Victor Blank and the shareholders of Lloyds know what was in the "secret dossier" prepared by the Tripartite Authority about HBOS? I hope they did know and I hope it was all good stuff because when the matter of this document was raised at the Court Of Sessions (12th Jan. 09) David Sellar QC, acting for HBOS said :
"The secret dossier contained information about the liquidity position of the Company (ie HBOS plc). The information was never used in the Competition Appeal Tribunal and all copies were destroyed".
It does seem irregular (to say the least) that a 'secret' dossier even existed in light of the PM's call for transparency. I'm not a shareholder of Lloyds (except in the sense that we all are now) but, if I had actually invested in it, I would be very worried that Victor Blank, Gordon Brown and other financial genius are destroying information that the public is entitled to see. I wonder how many other documents about how many other banks and bankers are being destroyed as we speak?
Still, as Andy Hornby told various members of the press throughout 2007 and 2008 "there are no black holes in HBOS." So that's all right then. Still, he should have added or Lloyds or RBS or Uncle Tom Cobbley.
- Nikki Turner, Cambridge, 23/01/2009 14:11
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A common thread through all this is Scottish Financial Incompetence - sounds failure? Add to this ths Northern Rock affair - the moral? Never trust a financial institution from the Labour Heartlands.
- David, Lewes, East Sussex, 21/01/2009 07:29
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For gods sake and our future Gordon go and go quickly and quietly...........you have become part of the problem we need a phyiscal change to allow us to start the build up to optimism you can never be part of - you waited too long to get shot of B Liar and you have inherited his legacy of spin economics...........
- Christian Ball, London, UK, 20/01/2009 14:41
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Gordon's angry because his future is closely tied with these characters. His reputation was built on the economy, which maintained continuous growth through asset bubbles(Gordon's choice) and low import and commodity prices(Nothing to do with Gordon). His reputation will now be based on the economy he leaves us. Broken and Broke.
- Alex C, London, 20/01/2009 11:44
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Of greater benefit to the country, for the the UK's health should be the primary reason for any action, would be the prompt shredding of one Gordon Brown. This man is the reason for the UK's problems and Fred Goodwin is but a fly in the ointment.
- Bingham Macnamara, lymington, hampshire, 20/01/2009 10:34
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