“There were thousands of people walking around that busy part of London and their lives could have been severely impacted if this went badly. The pressure was huge.
“At the time you are just focusing on the here and now. But there was no getting away from it: This was the stuff of nightmares.”
The plan saw the government plow hundreds of billions of state support into the UK banking industry to keep it afloat: a £50 billion capital wall around all the UK’s banks; £250 billion of credit guarantees to underpin bank lending; increasing a Special Liquidity Scheme to £200 billion. “We had to solve all the problems in all the banks,” says Baroness Vadera.
Sir Fred Goodwin, chief executive of Royal Bank of Scotland, was a man who would become the pantomime villain of the whole crisis. A few hours after the rescue plans were announced he rang Baroness Vadera as she attempted to finally get some rest on her office sofa. Baroness Vadera takes up the story. “He asked if I was sitting comfortably because he was about to say how much he thought RBS would need to stay afloat and I might be shocked. He offered a figure of between £5 billion and £10 billion. I replied that I was shocked but only because I was convinced RBS would need more.”
She was right. Ultimately RBS took £45 billion.
The word “tension” doesn’t go far enough when describing the atmosphere. The world hung on the flickering terminal screens in London, on Wall Street and across the globe.
“There was never a moment’s respite. We had BlackBerries back then and mine was primed to alert me to certain financial indicators and it would keep going off during the night. That tension and total awareness are hard to switch off. When I left in autumn 2009 I had nightmares. It stays with you.”
It’s not as if any playbook existed for this frightening an economic threat. “This was not some ‘off-the-shelf’ rescue plan you could take down and implement. This was something radical. It absolutely could have erupted if people had responded badly.
“We had to get the thing done before the markets opened on Wednesday, October 8. Honestly, anything else was irrelevant.”
So how do you deal with a crisis so profound, so real and so global? Then-Prime Minister Gordon Brown was, she says, “the man for that moment.”
“There were people who understood the politics, people who understood the economics, and people who had the connections, but only one person who embodied all of that in one individual, and it was Gordon Brown.”
Baroness Vadera points to the G20 summit in London in April 2009, where Mr. Brown persuaded fellow world leaders to back a $1 trillion injection of funds to stabilize the global economy. “We had constructed a $1 trillion liquidity package for the world and were negotiating it live; I have never seen the like. That is a story that has not been told.”
Is the financial world and corporate world prepared for the next crisis. Where might it come from?
“I don’t know where the next one is coming from but there are cyber risks, there’s uncertainty in the political environment globally and there’s increasing activity outside the conventional banking system. The banks are ten times better capitalised but I have to tell you there is no shortage of crises in the world.”
Andrew Porter is a Partner in Brunswick’s London office, specializing in public affairs and media. He is former Political Editor of The Daily Telegraph.
Photograph: Chris J. Ratcliffe/ Bloomberg via Getty Images