CREDIT crunch fatigue must be setting in. If, at this time last year, a former top banker and leading regulator had proposed that the government should hand over £100 billion to banks in return for their mortgages, there would have been blood.
Bu
t in these extraordinary times, the proposal drawn up by Sir James Crosby, former head of HBOS and the deputy chief executive of the Financial Services Authority, seemed modest compared to what has come before it. Crosby's plan for improving the function of mortgage finance markets barely registered when it was announced last week. Even the diligent economists and media analysts who bothered to read the report seemed to shrug their shoulders.
Mervyn King, head of the bank of England, dismissed it like he would a vaguely annoying fly buzzing around his head. Crosby's securitised mortgages were "a form of lending that for rather good reason has fallen out of favour", according to King. At the same time King was in front of a Treasury select committee warning how the biggest challenge for everyone now was to get bank lending moving again.
Crosby's report, commissioned in April when most banks were still privately owned, was unveiled in a brief mention made by the Chancellor in his Pre-Budget Report speech on Monday.
Alistair Darling acknowledged the report, said he shared Crosby's concerns and then said it would take wrangling with the EU to sidestep state aid rules to get it up and running but "we will proceed to work up a detailed scheme based on his recommendations". Some took this as a "don't call us, we will call you" signal.
According to Ed Stansfield at Capital Economics, the Chancelto the report was telling. "It probably tells you a lot about how much of this you are going to see pushed through."
At the age of 52 Crosby is still at the younger end of the eminence grise spectrum. When he handed HBOS to his even more youthful protege and successor, Andy Hornby, he was expected to take on another big job. Yet he hasn't.
There was talk he might aspire to head a non-banking PLC. He has not run out of time yet, but currently for Crosby there are only a smattering of jobs, including the non-executive directorships at Compass and ITV and a trusteeship of Cancer Research.
His big job is the deputy chairmanship of the Financial Services Authority (FSA) but his lack of ambition there is a little starling considering his standing in financial services.
When the FSA was in the market for a chairman earlier this year, Crosby, as deputy, was clearly in the frame except he let it be known early he was not interested. Previous to this, he was also a leading contender for the chief executive's job.
In retrospect it looks like he may have been choosing an easy life. Instead, Hector Sants stepped up as the FSA chief's job, to what many consider is a thankless role. It was Sants who had to apologise for failings at the regulator when Northern Rock collapsed. Crosby has not had to apologise for anything.
Yet some think he has much to apologise for. For it was Crosby and not Hornby that forged HBOS out of the merger of a couple of provincial mortgage and commercial lenders to one of the top mortgage lenders in the UK. He also fostered its commercial lending and wholesale banking strategy – which Hornby merely continued until he had to resign ignominiously having handed his bank over to Lloyds TSB in order to prevent it from failing.
"To some extent Hornby had only overseen the very latter end of the difficulties at HBOS," said an analysts. "So, yes, previous management would shoulder a considerable amount of responsibility."
For Sir George Mathewson, who only recently retired his lance and shield as one of the "white knights" attempting an HBOS rescue, the problems set in very early after the Crosby- designed merger of Bank of Scotland and Halifax.
"The merger managed to get the worst out of both businesses. You had an explosion on the housing side and an explosion on the corporate side in the Bank of Scotland and they both stretched the cord too far," said Mathewson.
But timing is everything. Getting out of HBOS and staying out of the FSA executive means Crosby's reputation is officially unblemished.
According to Stansfield, bankers like Crosby can maybe even start to deserve some sympathy – at the time it was almost impossible to resist the lure of the wholesale banking merrygoround and Crosby had emerged as an adept. "It was very difficult for the banks to avoid playing the game, says Stansfield. "There is an element of the music is playing you can't ignore it."
According to Crosby, hiring Hornby was one of his best moves at the bank. Like Hornby, Crosby too was once a young upstart when he took over as chief executive of the Halifax in 1999 at the age of 42.
At the time he said of Hornby: "I got someone simply outstanding, but to get him I had to put him in charge of two-thirds of the business when he didn't have any experience of financial services at all. Fortunately it worked."
Sadly he was wrong on that count too.
Feeling a little philosophical, he also told a journalist that his management style involved more action and less thinking, which will be a luxury in the new regulated and publicly-owned world his successors now face.
Said Crosby: "It is better to set off in the wrong direction and then fix it than spending loads of time making your mind up."
BACKGROUND BORN in 1956 in the prosperous Leeds suburb of Alwoodley, the son of a tax inspector. An avid cricketer the otherwise dedicated Yorkshireman – who is married with four daughters –was ten when his family crossed the Pennines to Lancaster where he went to Lancaster Royal Grammar School and later Brasenose College, Oxford, to study pure maths.
1977 – joined Scottish Amicable in Glasgow as a fund manager, followed by senior positions.
1991 – a founder director of J Rothschild Assurance (now St James Place). From 2000 to 2006 he was a director of St James Place plc.
1994 – Joined Halifax to launch its bancassurance business and later oversaw £800m acquisition of Clerical Medical insurance.
1999 – chief executive, Halifax
2001 – becomes chief exeacutive of HBOS following the merger of Bank of Scotland and Halifax
2006 – Retires from HBOS and receives a knighthood.
The full article contains 1097 words and appears in The Scotsman newspaper.
