'Hint of arrogance' as bankers apologise
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Independent Minds
Former bosses at bailed-out banks Royal Bank of Scotland (RBS) and HBOS said they were "profoundly sorry" today and admitted they under-estimated the extent of the financial crisis.
Sir Fred Goodwin, former chief executive of RBS, which is now nearly 70 per cent owned by taxpayers, apologised for "all of the distress that has been caused" in a bruising encounter with MPs on the Treasury Select Committee.
But the ex-bank chiefs also claimed they had lost millions of pounds themselves and could not have foreseen the collapse in credit markets.
Andy Hornby, former chief executive of HBOS, said he "never received a single penny" of his bonuses in cash during his tenure at the bank, while Sir Fred claimed to have lost more than £5 million in shares having invested his bonus in stock.
But Sir Fred - known in the industry as "Fred the Shred" - and former RBS chairman Sir Tom McKillop faced accusations of "destroying a great British bank and costing the taxpayer £20 billion" thanks largely to their decision to buy Dutch rival ABN Amro at the peak of the market.
They said the £50 billion RBS-led takeover in 2007 was "a bad mistake" and was now virtually worthless after the bank market collapse.
The bosses presided over RBS and HBOS during the credit crunch that brought the banks to their knees and led to the industry's £37 billion taxpayer-funded rescue. HBOS was bought by rival Lloyds TSB and the new entity - Lloyds Banking Group - is 43 per cent owned by the taxpayer.
MPs on the cross party Commons Committee heard how Sir Fred earned £1.46 million last year and Mr Hornby was paid a salary of nearly £1 million.
However, all four witnesses admitted they had no formal banking qualifications.
Mr Hornby said that while he was "extremely sorry for the turn of events" that led to HBOS's rescue takeover by Lloyds TSB and Government bail out, he was "not personally culpable" for the crisis.
Lord Stevenson, ex-HBOS chairman, added: "All of us have lost a great deal of money, including of course a great number of our colleagues, and we are very sorry for that.
"There has been huge anxiety and uncertainty caused for particular of our colleagues but also, for periods of time, for our customers.
"And I would also say we are sorry at the effect it has had on the communities we serve."
He agreed there needed to be a review across the board of banking bonuses as rage mounts over proposed payments to senior banking staff - including within part-nationalised banks.
Sir Fred denied RBS had ignored warnings from the Bank of England and the Financial Services Authority (FSA), insisting that nobody had anticipated the scale of the crisis.
"There was a definite mood that the economy in this country and generally was going to slow down, that the financial markets were going to slow down, but at no point did anyone get the scale or the speed of this, and that was what was so damaging about this slowdown.
"It wasn't that our business was premised on everything continuing to go upwards forever. But that things could turn as quickly as they did, I don't think anyone saw."
Committee members grilled the bank bosses over a failure to spot - or that they even ignored - the risks of trading in toxic assets and relying heavily on wholesale money markets.
RBS is expected to have racked up losses of as much as £28 billion in 2008, which will mark the biggest ever loss in UK corporate history.
The group has suffered a mammoth hit due to bad debts and write-downs on the value of past acquisitions.
He said he "fully accepted his responsibility", confirming that he did not receive a bonus last year and put every previous bonus into shares in the bank, shares which have seen their value decimated in recent months.
But Sir Fred's final salary pension pot is safe, while many UK pensioners with pensions invested in shares of banks have seen their retirement funds devastated, MPs said.
Mr Hornby called for changes in the bonus system for bankers.
"There is no doubt that the bonus system in many banks around the world has proven to be wrong in the last 24 months," he told MPs.
"In that, if people are rewarded for purely short-term cash form and are paid very substantial short-term cash bonuses without it being clear whether these decisions over the next three to five years have proven to be correct, that is not rewarding the right type of behaviour."
Mr Hornby said bonuses should be tied to the performance of an institution's shares over a period of years.
He had received no bonus for 2008, he said, and had invested all of his bonuses over nine years as both chief executive and, previously, as a board member, in HBOS shares.
"In the two years that I have been chief executive, I have lost simply more money in my shares than I have been paid," he added.
He confirmed he was currently being paid £60,000 a month in consultancy fees under a three-month contract with Lloyds, but said he would "do it for free" if the bank required his help after this time.
Following the hearing, Treasury Committee chairman John McFall said the bankers' apologies had come with "a hint of arrogance".
He said the evidence received by his committee showed "a real failure of corporate governance" in the Royal Bank of Scotland, and dismissed arguments that the banks had been let down by regulators or overcome by events outside their control.
Mr McFall told BBC Radio 4's World At One: "They did give an apology and it seemed fulsome, but, as the session went on, I think they were drawing back from that and saying 'Well, look, there were events outside our control'.
"If you ask me my opinion - yes, they were advised to do it (apologise). Was there a hint of arrogance still there? Absolutely."
Mr McFall said the bankers had "got involved in issues of such complexity that they didn't fully understand them".
He added: "What we did today was have a forensic examination of the business models and the decisions within the banks.
"The business models have been admitted to be faulty, and when it comes to the decisions within the banks, for example the Royal Bank of Scotland, they have the brightest and the best on the board - like (former non-executive director) Sir Peter Sutherland and others - but they were duped, they didn't look at the situation as it was.
"That signals a real failure of corporate governance."
Mr McFall said the committee had been critical of regulators' failings, but added: "These guys - it's not like children in the playground looking for the headmaster, so that they misbehave and if anything happens the headmaster comes for them.
"These are guys getting millions upon millions of pounds in salary, unrecognised by the ordinary person, so their responsibility is increased as well."
Derek Simpson, joint general secretary of trade union Unite, told World At One: "I think it is probably well and good that people say they are sorry, but it doesn't change the situation."
Ordinary bank workers would have little sympathy for Mr Hornby's complaint that he has lost money by putting his bonus payments into HBOS shares, he suggested.
"A lot of my members would like to be in his position even with the shares not worth as much."
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Comments
Great. That's made everything okay then.
They're not bloody sorry at all!
All they're sorry about is that they've been caught out in their incompetence, reckless behaviour & general mishandling of other peoples money.
Strip them of all personal wealth & shove them into Housing Association accomodation on the most God-awful estate in Britain.
THEN they'll be sorry!
Does that anger you? If so, seriously consider moving you banking activities to a building society that is still mutually owned. That way, you cause more sorrow for the bankers and their colleagues.
The banks then relend this money to the taxpayer and charge interest well above the 1% BoE base rate, so one has to ask where the banks are being punished. They're allowed to take huge loans and become nationalised without coming under direct control from the taxpayer via the Government, they're allowed to take out large loans from the taxpayer, only to lend it back to the taxpayer at a higher rate and they're allowed to give bonuses to non-board members. Well on the last point, I stand quite clear. In the John Lewis Partnership, of which I used to be a member, partners' bonuses were based on profit. The banks bailed out haven't made any profits, ergo surely that means no bonuses for anyone - apparently not when it comes to banks!
This is the State proping up a failed system of Capitalism and we should seriously look at what the alternatives are. There are many ways in which Capitalism can act within economies and it is clear that, just like in the 1930s, our system of Capitalism is severely flawed.
But what does it matter? Whatever we do now, in 80 or so years time, the same mistakes will be made again and there will be another severe recession or depression in the economy, its sad how humans are able to continuously make the same mistakes time and time again.
I am glad you slipped in that sentence, mate, as it makes you slightly human and slightly intelligent.
Slightly.
The information was all around you my Lords.
As soon as northern rock toppled it was as plain as a peach that this would not stop. You, the leadership were plainly out of touch! All bastions of power have to come under the control of the majority at one point. Anti globalist organizations have been talking and demonstrating for years at G7/8 summits for control of the bankers and their "war" influencing politics.
There's hardly a person in the country who's not been humbled by a bank for debts. Last year people fought to free themselves from the galactic cost of going slightly over par on their accounts.
The ipod generation knows that the Federal Reserve Bank of the USA is privately owned and not controlled by the government of the USA, and "scammed" the sole right to print the dollar in 1913.(google "who owns the fed" and you'll be amazed although it's not a great secret anymore).
The run-up to the 1929 crash is well documented in the history books!
In banking you have hundreds of analysts around the globe.
You were all hoping the consequence of the sub-prime mortgage collapse would just go away on it's own like a dangerous insect.
Information, the rallying call of our day!
DIDN'T KNOW?.......THE SCALE AND THE SPEED?......GENTLEMEN..DEAR ME, WHAT INDEED!!
That's the stuff, Lord L, Ayn Rand would have been proud of you!
I would love for Sir Fred, Sir Tom and Lord Stevenson to reap what they sowed. For them to be bankrupt and having to scrape pennies to pay the rent, sign on at the DSS with no potential job on the horizon. Many folk are innocent and have to survive through these troubles. I could be very uncharitable indeed to these idiots and i mean idiots! The hubristic approach that Sir Fred had to the new HQ in Edinburgh, demanding that a hill be removed from his office view since he did not like it (so the rumour goes) and all when the down turn was becoming evident.
PS the down turn has been obvious for the best part of 5 or 6 years in marginal areas. One of Scotland's major industrial areas at Grangemouth had been hit, many jobs lost, companies closed and also all due to corporate banking negligence. The negligence of the government at that point was gob smacking and still is. GB is too scared to be decisive and will inevitably fall at the next hurdle.
this system is concerned with profit from the production and distribution of commodities.....
to ensure this is maximised lending must be raised as high a level as possible..
longer term sustainability is ignored as considering this lowers short term profits which makes the company uncompetitive in the marketplace..
Without international regulation of the marketplace investors just move to where short term profit is put first..
THIS INDIVIDUAL RATIONALITY IS COLLECTIVE (ECOLOGICAL AND SOCIAL ) SUICIDE AND MUST BE ADDRESSED
it is the same force that ensures our addictions to Oil and Arms and Drugs ...
BOLLOCKS!!! This was foreseen by many ordinary people with no financial qualifications other than their own common sense. For many months now, if not for years, blogs have been full of posts saying that the house-price bubble was unsustainable. An inevitable consequence of that unsustainability is that the loans market would go belly-up, followed by the banks which had provided such insane amounts of money with no hope of it being repaid within sensible timescales. And meanwhile the banks borrowed moneyfrom each other to pay off their own loans - the very habit which they are constantly cautioning their customers about. It's like using one credit card to pay off another credit card - the loan gets larger and larger but is never actually paid off. "Could not have foreseen" it???? - what a DAMNING indictment of the state of British banking and those who purport to lead it.
"And Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the moneychangers, and the seats of them that sold doves, And said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves. And the blind and the lame came to him in the temple; and he healed them."
If someone gave me a million pound for constructing a spreadsheet, I would feel guilty, wouldn't know what to do with all that money and the only place you can put it in is a bank :-)
This pestilent clique has to go and go now. They blame everything and everyone except themselves, Weisel words, coached and coaxed aplogies. Irrational exuberance? Herd mentality? Wasn't me Gov.
Before the next bail out let's see what's in the laundry bag. Did anyone even bother to examine any of the dodgy transactions or was it all rocket science, ie made up formulae by acned 20 year old masters of the universe who thought Prudence was a tart and due diligence a brand of fizzy wine?
A spell at Guantanamo with 3 daily showings of Capra's "It's a Wonderful Life" for 90 days should help to focus the minds of the boys at the Treasury, the regulators, the bankers and the accountants.
Nice work for louts that can't count.
SORRY, SAID THE SINNER,
DEEPLY CONTRITE,
THINKING THAT THE DEVIL WOOD SAY
THAT'S KWYTE AWRYTE
SORRY IS AN ADMISSION,
IS WOT THE DEVIL SED
AND YOUR ACCOUNT WITH WE
IS DEEP IN THE WRED
I hope the government will Mutualise the nationalised and partly nationalised banks - and those that will fail during 2009. (Barclays will be next)
Furthermore, this iwll be an opportunity to give time off to these arrogant bankers and to spend time learning how to be humble and be down to earth.
P.S. Before anyone starts writing that it doesn't work like that, I already know. I just thought it would be a good question to ask and one to think about.
It is quite staggering that criminal looters can get away with such statements when the evidence is irrefutable that warnings were repeatedly given, but they ignored them.
II
V
Taxpayers' Money
Taxpayers' Money,
Is Money That Belonged To The Common Wealth
Until It Was Purloined By Cromwells' Exchequer,
And Thus Became
Parliaments' Money
The Taxpayer Is Not A Shareholder In The (So Called)
Royal Bank of Scotland,
Just As The Taxpayer Is Not A Shareholder or A Stockholder In
Parliament or In Cromwells' Exchequer
PROOF
The Queen Is A Taxpayer
And The Queen Does Not Have A Royal Bank of Scotland
Share Cerificate
TallyManM8*