Monday, 8 April 2013

Another Labour argument weakened

On Radio 4's Any Questions? last weekend, Michael Heseltine castigated Labour for its failure to regulate the banks when in office. In reply, Diane Abbott repeated the familiar Labour line that nothing could be done in the face of the "global" crisis.

Leaving aside the fact that the crash in confidence in financial institutions directly affected a limited number of countries, last week's report of the Parliamentary Commission on Banking Standards, as quoted in the Independent, knocks away one of the props of that argument. Lord Heseltine clearly had not had time to read it in detail or he could have quoted one of the report's conclusions about the failure of HBOS:

The report lays the blame for the demise square at the door of its management, dismissing the arguments of former boss, Sir James Crosby, his successor, Andy Hornby, and the chairman, Lord Stevenson, that it was due to the one off unpredictable events of the credit crunch and subsequent financial crisis. They complained that no one could have predicted the closure of the wholesale money markets on which the bank relied to fund its lending.

The report excoriates that version of events saying: "The problems of liquidity were the occasion for the failure of HBOS, not the cause. If HBOS's difficulties were solely the result of funding and liquidity problems, their lasting effects would have been much more limited, including for the taxpayer.
"The explanation by senior HBOS management given to the commission for the scale of the Group's losses is entirely unconvincing. The impairments and losses incurred were substantially worse than for the peer group."

While the three have previously issued apologies they have persisted in putting the blame on "unpredictable" events such as the credit crunch. The commission says: "The apologies of those at the top of HBOS for the loss imposed upon the taxpayers and others ring hollow; an apology is due for the incompetent and reckless Board strategy; merely apologising for having failed to plan for an unforeseeable event is not much of an apology."

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