Did the government know that the HBOS risk model was flawed?
The departure of Sir James Crosby yesterday has prompted more questions than it has answered and left Gordon Brown in a very difficult situation. His government has been on the attack for some time, regarding the UK banking sector, with suggestions that the "Masters of the universe" had been 100% at fault for the collapse of the UK economy. However, it now turns out that the FSA had serious reservations about the risk model of HBOS over three years ago and did not think to alleviate these fears.
Slowly but surely the truth is coming out into the open and many people are now asking if these concerns expressed by the FSA were pass to any government ministers, prime ministers and the Treasury. If it is discovered that Gordon Brown or any of his senior aides in the Treasury were aware of such risks this could spell the end for Mr Brown's tenure.
Many people warned some time ago that this constant onslaught of blaming the UK banking sector for the demise of the UK economy was a high-risk strategy. While the UK public had begun to turn against the banking sector this latest revelation could yet turn the argument full circle.
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