Its objective was simply to "further the cause of thrift and home ownership" and it had spread the word by means of a national network of more than 100 branches. These branches were responsible for vetting and rationing mortgages as well as chasing up any bad debt and were invariably managed by male missionaries with a "West Riding" accent. The organisation attracted conscientious, loyal and diligent employees who all believed in the cause.

In truth, it was a simple but robust business model which relied totally on its retail savers for its funding. Market fluctuations were catered for by an extremely prudent liquidity ratio. Building society business had always been cyclic and the management planned accordingly. And so it continued for another 35 years until directors and executives with big City connections realised that the deregulation of the 1980s allowed them to start raising increasingly large tranches of funds from the wholesale money markets.

However, the big issue of the day, after the passing of the 1986 Building Societies Act, was whether to convert to a plc. The Halifax's treasury division – along with Rothschilds, its advisers – were keen on conversion and indeed the society's senior management would have been much better rewarded working for a plc rather than a mutual organisation. In 1988, and to their credit, the board debated the proposal and came to the conclusion that there was no immediate need for plc status.

This allowed the Abbey to take the limelight and become the first building society to convert in 1989. Subsequent dealings in junk bonds by its treasury division led to its demise and eventual takeover by the Spanish at the start of the next century.

Nearly 10 years were to elapse before Jon Foulds, the Halifax chairman, and his CEO Mike Blackburn persuaded the board that a takeover of the leaderless Leeds Permanent Building Society would be a good idea. Both sets of members needed bribing and this was to be done by converting to a plc as part of the overall takeover proposals. Thus in 1997 the biggest giveaway in the history of the world took place, when almost £20bn was distributed to eight million members. Greed is not just confined to big City bankers!

Events and the market were changing quickly when a Cambridge-educated Scotsman, Dennis Stevenson, took over the chairmanship in 1999. He commented that the Halifax was short of world-class management, but that had been corrected by the appointment of Andy Hornby at the ridiculously young age of 32.

Hornby was to be the chief executive of the Halifax retail division – not bad for someone with no banking experience. As is usual with new appointments, Hornby brought in lots of chums, often with Oxbridge rather than West Yorkshire accents, with many sharing his background of management consultancy. Sell, sell, sell and grow the business was the new message, but at what cost?

Ever more mortgage business was coming through introducers rather than the branch network and with that came a relaxation of underwriting standards – 100 per cent plus lending, income multiples of five and heaven forbid, self-certified mortgages. Taking on buy-to-let mortgages, coupled with the corporate lending side being heavily exposed to property-related investments, meant that HBOS – created when Halifax and Bank of Scotland merged – was more exposed than any other major bank to a collapse of the market. All this business was being financed by an increasingly large percentage of wholesale funding which was set to become more expensive.

Hornby would have you believe that his problems were brought about by developments in the USA, short selling and the unprecedented market conditions. The plain fact is that this was a disaster waiting to happen and the bad news is that it has a lot further to go if the slump of the 1990s is anything to go by. Predicting the future is more difficult, but talk of 40,000 job losses and three years to integrate the Lloyds and HBOS businesses is well off the mark. HBOS, at least south of the border, is still a mortgage bank, while Lloyds is heavily into business banking, so rationalising the networks will not be as easy as, say, the Halifax/Leeds merger.

Also HBOS is three to four times bigger than Lloyds in the mortgage and personal savings market – so that should be good news for offices in West Yorkshire working in these areas. Other rationalisation will obviously eventually take place and as usual all is to play for.

Hornby certainly has many business and management skills – he spends a lot of time telling everyone about them, but one flaw that is little published is his inability to select fellow executives to work with him.

Others must also take their share of the blame, including Sir James Crosby, the former chief executive, for his backing and support of the wonderkid and many of the faceless wonders who sat on the Halifax and HBOS boards over the years – they should all be sleeping a little less comfortably in their well-feathered beds.

In this tale of greed and ego those conscientious, loyal and diligent (but not stupid as the new world-class management would have you believe) employees must scratch their heads and say "when did it all go wrong"? It wasn't yesterday, it was 20 years ago.

Richard Barrow worked for the Halifax Building Society from 1969 until 1996 in its IT division. He is the author of Fifty More Years of the Halifax 1953–2003 available at Fred Wade Bookshop, Halifax or direct from RicBarrow@aol.com