You are here:   Civilisation >  Books > Beware the Sanguine Banker
 

House of hubris: RBS built lavish new offices at the peak of the boom

Walter Bagehot got it right. The mistakes of a sanguine manager, he said, are far more to be dreaded than the thefts of a dishonest manager. Someone should have told the board of the Royal Bank of Scotland, where Fred Goodwin was the sanguine manager. "Making it happen" was his slogan, and when disaster happened and the bank imploded, he was vilified. Iain Martin shows how it happened, and who let it happen.

Clever, awkward, compulsive, a Glasgow graduate, a classic Scotsman on the make — Gordon Brown, surely? This was Goodwin. No wonder the two got on well. An earlier disaster had set him on his way. He came into banking as a receiver, sent in to deal with the wreckage of BCCI, alias the Bank of Cocaine and Colombia. Within a few years he was at the Royal Bank and looking forward to the top spot. 

This kenspeckle old stalwart of the Edinburgh establishment was nerving itself to charge over the border and bid for the National Westminster, a bank twice its size. This would mean outbidding the Bank of Scotland, which had got its border raid in first — making a bid credible, getting it accepted and, hardest of all, justifying it in action. The raiders could and did pillage NatWest's wine cellar, but that was only the beginning.  

Goodwin brought it all off, but it was not a trick he could ever repeat, though he tried, collecting banks in North America, where his rivals had so regularly burned their fingers. The Royal Bank must be biggest and best, and the Queen had to open its brand new head office, with its fountain and its easy access to the corporate jet. One analyst plucked up the courage to use the word "megalomaniac".

View Full Article
 
Share/Save
 
 
 
 
Paddy Briggs
November 11th, 2013
9:11 AM
The failure of RBS was like "Murder on the Orient Express" - multiple villains - Fred the Shred wasn't the only one. One of the villains (rarely mentioned) was David Cameron. His speech in 2005 (the one wot got him the job) accused Gordon Brown of being the "regulator in chief" - a popular and common line for the Conservative to take throughout the Blair/Brown years. It was dangerously wrong. Brown was "Light Touch" for three reasons: (1) The failure to regulate led to huge financial sector profitability which led to huge tax liabilities which funded huge increases in public expenditure. (2) By default because regulation was split three ways - The FSA, the Bank of England, the Treasury. This led not to "over-regulation" but to culpably failed regulation. (3) Political pragmatism. Brown could shrug off Cameron and the other Tory accusers because their "over-regulation" jibe at entry wasn't true. New Labour was the lightest-touch administration in post war history.

Rory Gallivan
November 2nd, 2013
2:11 PM
Gordon Brown is an Edinburgh graduate.

Post your comment

CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.