Speaking at the Centre for Investigative Journalism's Whistleblowing Conference at London's City University on Thursday March 15 at 12 noon, Paul Moore HBOS's former Group Head of Regulatory Risk called for a Public Open Inquiry into the global banking crash, with the powers to subpoena witnesses, including senior politicians, and to question them under oath.
He said: 'The banking crash was more than a financial disaster. Following public apologies by both President Clinton and Gordon Brown, the leaders of the two nations at the epicentre of the crash, we now know that it arose from the virtual hijacking by bankers of the political and regulatory process. As Jesse Norman MP put it "Lobbying is a canker on the body politic". And it means we have never got to the bottom of what happened, who did what, held people to account and reformed the banking sector properly.
In a keynote speech to the Institute for New Economic Thinking at the Bretton Woods conference in New Hampshire on Saturday April 9 2011 Mr. Brown said that he had come under "relentless pressure" from banks not to over-regulate. The previous April he had said in a television interview that "we should have been regulating them more".
President Clinton said in an ABC television interview he said, 'I think if I had tried to regulate the Republicans would have stopped it. But I wish I should have been caught trying. That was a mistake I made.'
Welcoming the FSA's recently announced formal enforcement action and public censure of HBOS, Mr. Moore, said:
"This action and report by the FSA is long overdue. It vindicates the clear warnings I gave to the Board of HBOS, under the Chairmanship of Lord Stevenson of Coddenham, as long ago as 2004. Had the board heeded those warnings the bank could have been saved but, driven by their own greed and pride, the board chose to ignore them and dismiss me.
'It was James Crosby, a friend and close confidant of Gordon Brown, who fired me and then went on to be appointed by Gordon Brown as the Deputy Chairman of the FSA even though the FSA knew he was running a highly risky bank. He, more than anyone else, was responsible for attempting to sweep my warnings under the carpet and when I gave my evidence to the Treasury Select Committee he was forced to resign from the FSA. He has not commented on the matter since.
'We now know that the FSA was hamstrung by conflicting objectives and by the presence on its board of conflicted people, like Sir James Crosby. We must now use the FSA's report into HBOS as a lens through which to peer into the detailed inner machinations of the banking elite that not only forced their way into the very organisations that were supposed to be regulating them but also infected and affected Government and regulatory policy itself.
That is why it is vital that the former Prime Minister Gordon Brown and other politicians and regulators must be called to describe in full, the pressures they came under at the highest level.
In the process of a proper public enquiry the full scale of the wrongdoing at HBOS (including the clear inference of non-disclosures on the Rights Issue and the Lloyds Acquisition) will be properly exposed to the bright light of day and those responsible finally held to account. It is essential, in this and every respect, that the enquiry is held in public to inhibit the "behind closed doors" fixing that has become such a destructively systemic feature of British political life.
For example, there are few people in this country who have held more of the reins of power than Lord Stevenson of Coddenham, the former Chairman of HBOS. He is a personal friend of both Tony Blair and Gordon Brown. Such people are able to whisper in the ears of our leaders but the public nature of an enquiry would go a long way towards neutralising the secret powers of such people.
Lord Stevenson has been Chairman of Pearson, publishers of the hugely influential Financial Times and chairman of the equally powerful Economist magazine. He has been at the centre of establishment life as Chairman of the Trustees of the Tate Gallery and the Aldeburgh Music Festival. He has been 'kingmaker' as Chairman of the House of Lords Appointments Commission among many some 20 other influential appointments.
Protection for whistleblowers:
The effectiveness of such an Inquiry would be massively increased by proper protection for whistleblowers. I know from a lifetime either in or associated with the banking industry that most people who work in banking are good and decent people. They are angry that the industry they serve has been brought into disrepute by their bonus driven leaders. These people know exactly what went on and are burning to lift the lid on practices that have disgusted them for many years but their duties to their families prohibit them from doing so. As I know to my cost, the penalties for taking a stand are dire; so, to encourage people to come forward, we need much better protection for whistleblowers.
We should all also understand that the banking collapse was human as well as a financial disaster. According to the UN, the global banking crisis drove more than 100m people into poverty worldwide. Mortality and morbidity statistics relating to the effect of poverty indicate that it is likely that more than 10m people died as a result.
Conducted by Moore, Carter & Associates with Professor Andrew Kakabadse of Cranfield School of Management, this survey examines: the causes of the banking crisis; the extent to which failures of risk management and governance of risk and regulation contributed; the nature of those failures and the need for internal and regulatory change.
"It is hard to read the results of this survey without concluding that the 2008 banking crisis - estimated by the IMF to have cost $10 trillion - was entirely avoidable. Only three respondents out of 563 agreed with Gordon Brown that the most important cause of the crisis was "global economic circumstances beyond anyone's control."
"The most remarkable finding of the survey is that most risk professionals - on the whole a highly analytical, data rational group - believe the banking crisis was caused not so much by technical failures as by failures in organisational culture and ethics.
"The picture that emerges from the survey is clear. Most risk professionals saw the technical factors which might cause a crisis well in advance. These included easy availability of global capital, excessive leverage and accounting standards which permitted over-valuation of assets. The risks were reported but senior executives chose to prioritise sales. That they did so is put down to individual or collective greed, fuelled by remuneration practices that encouraged excessive risk taking. That they were allowed to do so is explained by inadequate oversight by non-executives and regulators and organisational cultures which inhibited effective challenge to risk taking."
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