RBS after Fred the Shred: some lessons for Labour

Posted on Tuesday 20 January, 2009
Filed Under Business

 


FRED the Shred had to work damn hard to secure that nickname. In the heady years of mergers and acquisitions seen in the early part of this decade, it took a lot of effort to stand out from the chief executive crowd when it came to giving people the chop.

But Fred Goodwin – the working-class grammar school boy from Paisley who rose to head Royal Bank of Scotland – managed exactly that. After RBS took over NatWest in March 2000, an astonishing total of 18,000 staff found themselves out of a job.

Yet, we are told, Goodwin revelled in the moniker he acquired as a result, doing everything he could to live up to his reputation as outspoken and abrasive. Those that knew him hint that he was in doubt as to his own genius, or the stupidity of rival bank bosses, come to that. One colleague even described him as a ‘deal junkie’.

The methods even seemed to meet with success; the rise and rise of RBS saw the Scottish bank transformed from an also-ran to the global top five. Accolade followed upon accolade. In 2002, the influential business magazine Forbes named him as businessman of the year, praising him as an original thinker with a fast-forward frame of mind.

Inevitably, Fred found favour with New Labour. He was reportedly a regular visitor at Number 11 during Brown’s stint as chancellor, and sat on government task forces on credit unions and the New Deal. In 2004, he got his knighthood; that was for ‘services to British banking’, you understand.

Still the deals kept on coming, including the successful hostile break-up bid for Dutch bank ABN Amro at the height of the bull market in 2007. Even at the time, the £63bn price tag was open to question, and footing the bill left the bank’s capital position clearly stretched. Goodwin rejected the carping of the fainthearts, and paid himself £4.2m that year for a job well done.

Then came the credit crunch. The government was forced to step with £20bn of taxpayer cash to keep RBS afloat, prompting the resignation of the man at the top. And there was worse to come.

On Monday it emerged that over the last year, RBS has run up losses of £28bn, the largest deficit ever clocked up by a British company. Its share price fell by over two-thirds as the news broke.

Gordon Brown responded by announcing a further blank cheque lifeline for the banking sector and told a press conference that he was ‘angry at RBS and what happened’. He even went on to accuse its management of taking ‘irresponsible risks’. Yet somehow – maybe for old times’ sake? – he did not mention the one person who truly deserved to be named and shamed.

The state now owns 70% of RBS. Nationalised in all but name, it seems likely to remain in the public sector for decades to come. And Fred the Shred? Well, if he has been clever enough to salt away some of the money he legally looted in recent years, he probably won’t have to sell either of his Ferraris.

The question for the New Labour are what political lessons are to be learned from this morality tale. Nobody tried to make this particular deal junkie go to rehab, in the name of the free market, he was even allowed to fund the smack with borrowed money.

The result was dole queue misery for many thousands and the vast enrichment of an arrogant and privileged few. This should never be allowed to happen again.


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Comments

7 Responses to “RBS after Fred the Shred: some lessons for Labour”

  1. prianikoff
    on January 20th, 2009 at 17:04

    “I cannot think of a more popular policy than shooting the bankers and nationalising the banks.

    It might even win Mr Brown an election.

    Come to think of it, it could also be the way to get us out of this mess.”

    Philip Stephens, ‘Financial Times’

    January 19 2009

  2. frenetic
    on January 20th, 2009 at 18:08

    ‘Inevitably, Fred found favour with New Labour. He was reportedly a regular visitor at Number 11 during Brown’s stint as chancellor, and sat on government task forces on credit unions and the New Deal. In 2004, he got his knighthood; that was for ‘services to British banking’, you understand.

    The lack of scrutiny of the New Deal which has seen corruption and abuse on a massive scale, (even by its own very poor lights), by the media, civil society and the left has been astounding, and one day will be a seen as a massive deficit

  3. bill quango mp
    on January 20th, 2009 at 20:04

    The question for New Labour is “where do we get funding from now?”

    Celebrity friends feeling the pinch. Big business being bailed out.

    Who will be tomorrow’s Northern Rock.

    OK. We all know its the supermarkets.

    Let’s hope Cameron has learned the error of a tick box regulatory regime.

    Rumour is the printing presses are running tonight.

    Hidden by Obamamania the money is flowing back into the economy.

  4. John Palmer
    on January 21st, 2009 at 08:42

    Should not the demand be raised for a full public inquiry with powers to compel witnesses to appear, to come to conclusions on the basis for future prosecutions of named individual for potentially criminal charges (gross neglect of due diligence, fraud etc)?

  5. Letters From A Tory
    on January 21st, 2009 at 09:58

    Of course it shouldn’t be allowed to happen again. The government should be forcing these banks to declare how much bad debt they have because this drip-feed of extremely damaging news is crippling the markets and is destroying confidence.

    The sad truth is that we need to hit rock bottom sooner rather than later so that the rebuilding process can begin.

  6. prianikoff
    on January 21st, 2009 at 11:28

    We’re staring into the headlights of a “Reyjavik on Thames” scenario.

    Now is not the time to be thinking about taking the driver’s registration number.

    Now is the time to to avoid becoming roadkill – in a hurry.

    Which means compulsory amalgamation of all the British banks, their full nationalisation, sacking their boards of directors and replacing them with accountable elected officials.

    Their balance sheets need to be opened to public scrutiny to ascertain whether there are further losses in the pipeline.

    Instead of which, Brown and Darling are just feeding the same crooks money as if there’s no tomorrow.

    If that continues, the Tomorrow they’ll create will involve them riding to the IMF in a last ditch attempt to bail out the whole British Economy.

    Perhaps they should be getting out their old White Bicycle, because they probably won’t be able to afford the fare. The alternative Tomorrow being Revolution.

  7. Chris Fyfe
    on January 22nd, 2009 at 14:43

    Despite its pretensions otherwise Paisley Grammar is a comprehensive.