It wasn’t me

Font Size

Print

Feedback

Email

Discuss

• Discount UK Shopping

: Some view history as just the biography of great and of villainous men. By this account bank bosses are to blame for the great crash of 2008. Most have now been booed offstage. With the departure on September 30 of Ken Lewis, the head of Bank of America, only three chief executives at America’s ten biggest banks before the crisis remain in position. Europe has let lots of blood, too: the bosses behind fiascos at UBS, Fortis and Royal Bank of Scotland (RBS) have gone to the guillotine.

Michael Moore is once again claiming conspiracy. Yet the cock-up theory of history also has a lot going for it in this case. Certainly, bank bosses displayed the hubris of all big corporate baddies: paying themselves loads, making nutty expense claims (try an $87,000 rug) and, in one case, playing bridge in Detroit as their firm collapsed. Compared with Kenneth Lay of Enron or Bernie Ebbers of WorldCom, however, they were amateurs. Most were useless rather than venal.

Far from expertly manipulating their firms’ books, many could not understand them. Citigroup’s boss reportedly learned of its $43 billion of toxic assets only in September 2007 (he was told losses were unlikely). UBS’s own post mortem found that “at no stage” did managers have a decent assessment of its subprime exposure. Merrill Lynch signalled a $5 billion write-down in October 2007, only to increase it to $8 billion a mere 19 days later. Even when they had decent numbers, executives struggled to manage their mutinous staff. One ex-boss says his job was “less management, more crowd control”. Meanwhile shareholders pushed bosses to take risks. The vast majority backed RBS’s suicidal takeover of ABN AMRO.

Some acquisitive firms such as Bank of America, Fortis and RBS floundered; others including Barclays and JPMorgan Chase prospered. Managers at Lehman Brothers and Bear Stearns owned lots of shares, yet did not run their companies for the long term. Imperial chief executives have been blamed for these firms’ collapse, yet they did brilliantly at JPMorgan and Santander. A hyperactive risk committee may have helped the latter, meeting 98 times in 2007, yet Credit Suisse’s risk committee got out of bed only six times, and it did pretty well too.