You have said that the time for remorse is over.
Aha, that's not what I said. I said, "The time for remorse needs to be over." And I think I was referring not, you know, to Barclays (BCS) or to Bob Diamond, but really for the U.K., for the U.S., for government officials, for companies, for banks. It's time we focus on the things that are really, really important. We've been through a very difficult period. And every bank has made mistakes; every banker has made mistakes. But it's time now to look at job growth and economic growth. And I think it's time to balance regulatory reform ... with creating jobs and creating economic growth. And I think it's time to pass the mantle of growth to the banks and to the companies that can drive that growth.
From governments to companies and banks?
We've seen a lot of stimulus over the last couple years coming from governments. And using the U.K. as an example, the Prime Minister and the Chancellor of the Exchequer have been very clear that the issues around the deficit, around public spending, have to be addressed. So there is a comprehensive spending review. There's a reduction in public spending and the public sector. And that's necessary. And it's important. But that means that there won't be job creation or economic growth coming from the public sector. It's going to come from the private sector.
When the crisis struck, you received two big loans—from Qatar and Abu Dhabi—and that enabled Barclays to avoid both bailout money and government capital restraints.
That's right. We raised our equity privately. Barclays is one of the very, very few banks that never took any public money from any government anywhere in the world. We were profitable every single reporting period. We were able to acquire the Lehman Brothers U.S. business and Standard Life Bank in Scotland to add to our retail banking business in the U.K. And so we came out in a much stronger position than when we went in.
About Lehman, tell me more about how it happened. You got a call from Bob Steel, Under Secretary at the Treasury Dept., now deputy mayor of New York?
Yup, about a month after the Bear Stearns bankruptcy. He said this is unofficial and he's not proposing anything, but he wants me to think through two questions. Is there a price at which we'd been interested in Lehman? And, if so, what would we need from the Treasury?
He was talking about you buying all of Lehman?
At that time, certainly. I said to him: "That's a very good question. I'd like to take that away and give it some thought." In the back of my mind was just how suddenly the Bear Stearns deal had been put together. And I was curious about which other banks might have been called. Broadly, [Steel] was saying, "Be prepared." So I met with our executive team and we bandied it about. The strategic opportunity with the combination of Lehman and Barclays Capital was probably the best in the world. The Lehman businesses in equities and M&A were A-plus. It was a fantastic business.
But their mortgage business was in trouble.
To be fair to a lot of the people at Lehman, it was really the proprietary positions in commercial real estate that were the largest source of problems. There were some issues in subprime and mortgages but probably not any bigger than a lot of the other Wall Street firms.
How much money would it have taken to buy Lehman prior to the bankruptcy?
Our conclusion was, yes, this combination would be terrific. It would be transformational. There was a price that would work, but it would be very low.
Suppose it had worked out. How would that have changed things? Because after Lehman, everything went to hell.
If you look back at the time, two or three days before that Fannie Mae (FNMA) and Freddie Mac (FMCC) were nationalized. Within a day or two, we had a first run on a money market fund. On Monday, I think it was, Merrill was rescued by BofA (BAC). And within a week, the next Monday, both Morgan Stanley (MS) and Goldman Sachs (GS) were bank holding companies.
But the psychological impact of Lehman ...
Most people point to the Lehman bankruptcy as the trigger of the deepest, darkest fears that came. But would there have been another trigger had it not been that? It's really hard to say.