The coverage of Adair Turner’s Mansion House speech has rightly focused on his radical ideas for jolting the UK back to growth. But it has also added cheekily to the canon of musical metaphors about the financial crisis:
Remember Chuck Prince of Citigroup, and his comment to the FT in 2007, just before it all went bad?
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
Antony Jenkins, new chief executive of Barclays, and Rich Ricci, chief executive of corporate and investment banking, have said the right thing. Can they now do the right thing?
The rhetoric of their speeches to analysts on Monday was fine. Mr Jenkins said Barclays would “operate to the highest ethical standards. It will be balanced, less risky and more profitable”. Mr Ricci expanded on this:
We have always scrutinised our businesses based on their ability to generate returns, with careful evaluation of risk and controls embedded in that analysis. Now however, I feel it is appropriate to modify that assessment by explicitly looking at reputational risk as the first hurdle. We have to take a fresh look to see if there are products and services in which, given the changing environment, we no longer deem it appropriate to do business, regardless of financial return.
Watching Chuck Prince and Robert Rubin, the former Citigroup chairmen, giving evidence today on the bank’s losses in “super-senior” sub-prime mortgage securities, was not reassuring for anyone seeking lessons from the 2008 financial crisis.
In summary, they told the Financial Crisis Inquiry Commission in Washington that the risk management and management structures at Citigroup were state-of-the-art, that regulators were keeping a close eye on the business, and that the board was functioning correctly.
The problem was that no-one actually saw a hole looming in the $40bn portfolio of triple-A tranche collateralised debt obligations being held on Citi’s balance sheet. Read more