I never understood why James Crosby was made the MD at HBOS but here is how it happened:
He studied maths at Oxford. Now who studies maths at Oxford, although apolgies to all my friends who did, and Frances K who is a Maths prof. at Balliol?
Being of a mathematical bent he thought thet actuarial qualifications would be a good idea, so he started his career at Scottish Amicable, a pension fund, then moved to Rothschild's where he worked in fund management. He was clearly so good at picking stocks he got put in charge of IT.
From there he fluked the job in 1999 of MD at Halifax. Perhaps this wasn't so surprising because Halifax was not known for the calibre of its staff, so to get an Oxford graduate from the admin side of Rothschilds probably sounded like a good idea - but have you ever bnoticed how Rothschilds bankers always end up in soft jobs or government jobs, hey never seem to end up cutting it in the really top banks. But Crosby seemed good enough for a plain vanilla mortgage bank.
By a stroke of good luck, Halifax and Bank of Scotland decided to merge, with the chiefe executive at BOS, Peter Burt, deciding to switch to a Deputy Chairman role, amanging the merger, leaving Crosby to manage the bank on a day-to-day basis.
So after two years experience in banking in 2000 Crosby was running abank with a market cap of about £30 billion, which in those days was big bananas. The securitisation salesmen in all the investment banks in the City and on Wall Street must have seen a real patsy, because he then went on a property splurge funded by securitisation.
He buit the HBOS/Halifax mortgage business through TV advertising and funded it by issuing paper rather than attacting deposits, a risky strategy because there is always a risk that the wholesale markets will dry up, although the bond and commercial paper orginators will says that is a remote, very remote, highly remote possibility. About as remote as the M25.
Crosby and the other HBOS directors were warned in 2004 that the risks were becoming extensive and dangerous. He didn't like to hear this, so he sacked the messenger and gagged him with a confidentiality clause. Then realising that the game was going to be up pretty soon, he stood down, took a knighthood and made a hospital pass to Andy Hornby. He to a nice little earner with Downing Street on how to push ID cards on an uncompliant populace and for his troubles the Prime Minister makes him Deputy Chairman of the Financial Services Authority.
Having fluked it to the top of the UK banking industry without ever having to sign off on a loan (boards are not credit committees), he suddenly gets to be the de facto head of bank regulation, having a few banks on his CV, which is at least a step up from Adair "Executive Hair" Turner, the chairman of the FSA, management consultant and lobby group chairman, with as much experience in banking as a spotty graduate.
When the former Head of Risk Management at HBOS can tell the whole story under parliamentary privilege, it seems that not only did he tell the HBOS board that they were doomed, but he also blew the whistle at the FSA, who ignored him.
When Andy Hornby and Denis Stevenson met the House of Commons Treasury Committee, Mr Hornby told them that he had tried to undo the damage caused by Mr Crosby, reducing the HBOS share of the mortgage market and increasing the average term of their capital market liabilities, but to no avail because the Labour Party and the BBC contrived to kill the HBOS share price, cause a run on funding and and force HBOS to merge with Lloyds. Would it not be surprising if Brown hadn't been made aware of the problems at HBOs by Crosby, his financial advisor and until today, Deputy Watchdawg.
In all Crosby spent about 6 years in banking, but all of that at board level and away from the day to day banking decisions, so why he was ever appointed to the FSA or as Gordon Brown's advisor is a mystery, or rather a question of the blind leading the blind. But now he is caught like a rabbit in the headlights of an oncoming truck, and he has done what all rabbits would do in a similar situation, he has bolted down his barrow.