The inside story: The global financial crisis
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The inside story: The global financial crisis

2008: While the GFC raged, Euromoney had an inside view as politicians on both sides of the Atlantic tried to save the banking system (from the imagination of Jon Macaskill).

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By the summer of 2008 it was clear that disaster loomed, so Euromoney was happy to respond to a call for assistance from the UK government.

A secondment with chancellor Alistair Darling began in August, soon after he made a statement on economic prospects that infuriated prime minister Gordon Brown. Darling’s remark that “we’re all doomed” was poorly received in the markets, and Brown’s advisers used it to drive a wedge between the former allies.

The mood in Downing Street was not helped when RBS chief executive Fred Goodwin – or ‘Sir Fred the Shred’ as he was known at the time – arrived for a meeting in a private jet from the bank’s new Edinburgh headquarters, a futuristic office including features such as a golf course with a retractable roof.

“Can you not think about the optics man?” Brown asked Goodwin. 

The RBS chief executive took offence and said that as a knight of the realm and head of the world’s biggest bank by assets he could hardly be expected to travel on public transport. 

“If your tone does not improve, I will be forced to withdraw my offer to buy Barclays and HBOS and apply my trademark efficiency to their bloated corporate structures,” he said. 

“You only run the biggest bank in the world because you overpaid for ABN Amro and let Greenwich Capital run amok with sub-prime mortgage CDOs,” said Darling, glaring at Goodwin. “But a day of reckoning is upon us, when everyone who is proud and lofty shall be brought low and cold waters will run over the markets of the world.”

Conflicts of interest

Euromoney suggested a trip to Washington to liaise with president George W Bush and his advisers over a global solution to the financial crisis; we arrived on Sunday September 14. 

Treasury secretary Hank Paulson was a former chief executive of Goldman Sachs, which created some conflicts of interest. 

“Mr president, I have here a plan to selectively guarantee certain derivative contracts and let a maximum of two investment banks convert to commercial bank status so they can receive backing from the Federal Reserve,” he said. “Young Tim Geithner here from the New York Fed agrees with me that Goldman and Morgan Stanley should make the cut, so that after a period of harsh but necessary turmoil we have five dominant US banks – or five families if you will – with a much increased market share.” 

Bush didn’t seem interested in the details. 

“Whatever you say, big guy,” he replied. “How much longer do I have to stay here anyway? Are the elections always in November or can we ship out prior?” 

I assume everyone is also OK with this Libor quoting arrangement to keep the markets calm - Bob Diamond

Paulson excused himself to make some private calls to New York. 

“It’s all arranged,” he said when he returned. “Lehman will file for bankruptcy overnight and I’m confident that this will draw a line under any concerns about these great American markets of ours.”

We flew home the next day, missing the first of a wave of massive downward lurches in global markets.

The mood back in the City of London was febrile. Was it true that Goldman’s European head Michael ‘Woody’ Sherwood had hedged his exposure to the banking system by storing a million £50 notes in a giant freezer in north London that he rented from his friend Philip Green? 

Would football-loving broker Amanda Staveley be able to close a deal to recapitalize Barclays with Abu Dhabi’s Sheikh Mansour while he was in Britain to buy Manchester City?

Barclays president Bob Diamond was so keen to raise cash that he offered to stop supporting Chelsea and shift allegiance to Manchester City, but in the event no such personal sacrifice was needed.


Euromoney arranged a conference call between Diamond, Brown and Darling from a shared phone in Downing Street, and Bank of England governor Mervyn King, who called in from an old boys cricket match at Wolverhampton Grammar School.

Darling was predictably downbeat. 

“Can someone please explain to me how a British bank with limited capital can buy Lehman Brothers and pay bonuses all over the world while magically conjuring up money from the Middle East?” he asked.

A deal was nevertheless agreed and Diamond signed off with a cheery farewell to King. 

“I assume everyone is also OK with this Libor quoting arrangement to keep the markets calm,” he concluded.

But all we heard in reply was a crackle down the line from Wolverhampton.

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