Today’s report into the banking rescue doesn’t exactly rewrite history, but it throws new light on how officials coped during the biggest financial crisis of modern times.
The Sir Humphreys of the Treasury turn out to have been every bit as disingenuous, cunning and secretive as their fictional namesake. But they also seem to have been uncharacteristically ballsy. Faced with financial Armageddon, they (and their ministerial masters) pressed the button on a rescue that they estimated at the time would cost the public purse a net £180 billion.
Officials used to tweaking footling measures worth a million here or there were suddenly forced to devise an unprecedented rescue scheme that they calculated would drain away the equivalent of the health, education and defence budgets combined. The final bill will probably be much, much lower. They weren’t exactly overstaffed either. When Northern Rock crunched its way into Westminster consciousness in September 2007, a paltry 17 officials worked in the Treasury’s financial stability department. To call them “stretched”, as the NAO does, looks like an understatement.
Mistakes were made. To have judged Royal Bank of Scotland as “reasonably strong” seven days before it ran out of cash was unfortunate. But that probably had far more to do with the sanguine picture painted by RBS executives.
What comes across strongly in the report is the desperate desire by officials and bankers to keep the true extent of the crisis hidden — from the public, from shareholders and even from Parliament.
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We learn that authorities were putting in place contingency plans for rescuing HBOS in March 2008 — seven months before Lehman Brothers went down.
We also learn that the Financial Services Authority was hawking HBOS to potential buyers as early as 2008, so worried was it about the bank’s prospects. Yet at that time, HBOS was portraying its woes as a minor and trying to raise £4 billion.
We are told how the Treasury judged that the secret loans were so sensitive that they couldn’t be whispered to two of Westminster’s most senior politicians, in breach of normal parliamentary protocol.
The truth can be fatal. Suppressing it is essential. It is one more cost of the financial crisis, one that can’t be measured in pounds and pence.