The shredding of Liverpool's dignity and Manchester United's sense of looming crisis both arrived almost exactly two years since Lord Triesman, the now-deposed Football Association chairman, delivered his famously rejected warning about high levels of debt in English football.
In October 2008, the Premier League's chief executive Richard Scudamore dismissed the analysis as naive and ill-informed. The debts of the clubs in the world's richest and most popular league were sustainable, Scudamore said, because they added up to the same, around £2.5bn, as their overall income. "Debt to a degree is healthy," Scudamore said. "What is important is that the level of indebtedness has got to be in proportion to your income."
Given the dragging of Liverpool through courts in London and in Dallas before last Friday's takeover by John W Henry II – who paid Tom Hicks's and George Gillett's £200m "acquisition debt" back to the Royal Bank of Scotland, the £769m debts loaded on to Manchester United by the Glazer family's takeover, last season's insolvent wreckage at Portsmouth and the 2009 bankruptcy of West Ham's then owner and former Icelandic "billionaire" Bjorgolfur Gudmundsson, it is instructive to revisit Triesman's analysis.
"There is one certain fact about debt," he said. "It has to be repaid [which mainly it is not] or re-financed. The debt mountains are owned, and therefore the clubs are owned, by either financial institutions some of which are in terrible health, or very rich owners who are not bound to stay, or not very rich owners who are also not bound to stay. As we all know today and far too painfully, finance institutions have finally become highly risk aware … I tell you, I think this poses very tangible dangers."
Calling on the professional game to work with the FA and introduce regulations to protect the game financially, Triesman said the leagues and FA should be: "Partners in a spirit of common purpose."
What happened instead was the vilification of Triesman, which continued until he was ultimately forced to resign after the Mail on Sunday reproduced extracts of a taped private conversation Triesman had with a friend, Melissa Jacobs.
The Premier League said Triesman had made his speech without warning or consultation, which was his most grievous offence. Triesman said he had consistently tried to raise financial issues since early August 2008, and to begin a joint approach, but the Premier League told him it was none of the FA's business and it would regulate its own financial affairs.
In the aftermath, Triesman was characterised as a dolt who did not understand finance, who could not read a balance sheet. In fact the then FA chairman was, and still is, a visiting professor of economics at Cambridge University, had been a government spokesman in the House of Lords for the Department of Trade and Industry, and had conducted his own investments successfully since the 70s. He may have underestimated the lethal nature of English football's power politics, but he could read a balance sheet. He did have a clue that there was a global economic meltdown coming and the top clubs were more vulnerable than they were prepared to believe.
Six days later, 13 October 2008, with the football media backlash against Triesman gaining momentum, the government announced it was injecting £20bn and taking a 58% stake in Royal Bank of Scotland. Alistair Darling, the chancellor at the time, revealed later that a senior RBS executive had called him and said the bank was two hours from collapse. That experience, Darling said, made him realise: "Even something that looks extremely strong and secure can be extremely fragile."
RBS had made many graver misjudgments than lending Hicks and Gillett the £185m to buy Liverpool in February 2007, repayable in 12 months. But that loan, to fund the needless takeover of a healthy sporting institution 115 years old and so loyally supported, encapsulates something of the banks' irresponsibility, as well as the destructiveness of the leveraged buy-out.
Liverpool's crisis this month was precipitated by RBS, now 84% owned by the taxpaying public, deciding it wanted its £200m back, as Triesman warned banks would. The club's chairman, Martin Broughton, beamed last Friday that Henry's paying of Hicks's and Gillett's "leverage" will transform Liverpool financially, because the club is suddenly almost debt free and not paying £30m interest a year. In effect, a new US owner, who may be well intentioned – not in it to make money for himself, as he claimed at the weekend – but who knows nothing of football, now owns Liverpool because he has put them back to where they should have been had the former chairman David Moores never pocketed £90m of Hicks's and Gillett's borrowed money by selling the club to them.
Throughout the determined campaign which Liverpool supporters ran against the pair, they were stunned by the silence from the Premier League and FA. "The authorities were nowhere," laments James McKenna of the Spirit of Shankly fans' group. "The frightening thing is: this can happen again. There are still no rules to stop somebody borrowing money to buy a club, then making the club pay those borrowings."
The Premier League can point to new rules introduced since Scudamore responded to Triesman by claiming clubs were managing their debts "responsibly". Clubs must now show they can pay their way for a full season, and new owners like Henry must show the league their business plans and source of funds. Most Premier League clubs, besides United, are financially supported by owners, not drained by them, and Uefa's financial fair-play rules, beginning next season, are designed to ensure they live within their means.
"We have taken financial regulation and governance to a place few would have imagined possible even a few years back," a Premier League spokesman said. "The regulations, which the clubs have bought into and willingly submit to, create a framework that encourages responsible and sustainable financial management."
However, there are still no rules to prohibit leveraged buyouts, and nobody in football will say a word about it, even as Broughton was punching the air because Liverpool were liberated from theirs. Manchester United have paid £487m bank interest, charges and fees – around the cost of building the 2012 Olympic stadium – to service the Glazers' 2005 takeover. Despite that, the total owed has grown to that eye-watering £769m.
When United released their accounts for 2009-10, amid the assurances that the debts are not hampering investment – whatever Wayne Rooney's reported grumbles – a telling detail got a little lost. It was that £41m, much more than United spent on players, went out on an interest-rate hedging arrangement. It had to be repaid in full, in cash, when the Glazers refinanced and borrowed £500m via a bond in January.
Throughout all this, from the FA, and its acting chairman Roger Burden, there has been not a peep. Triesman's experience had not led to an emboldened FA. Instead, seeing the fury which broke over him afterwards, the lesson has been that no good will come of warning about "very tangible dangers", and that the financial damage visited on England's greatest clubs is not, after all, any of the governing body's business.
David Conn @'The Guardian'
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