Iain Martin's "Making it Happen - Fred Goodwin, RBS and the men who blew up the British economy" is a fine piece of investigative journalism and a beautifully written and very readable account of this sorry tale of corporate misgovernance. Whilst Goodwin is the main villain - rightly - there is nevertheless a sense of "Murder on the Orient Express" to the story. In Agatha Christie's detective story, you will recall, the denouement was that ALL of the suspects were guilty! The fall of RBS was the same. Fred the Shred brought down RBS, but he didn't achieve this without the connivance, neglect, self-interested actions, greed and incompetence of many others. Martin points the finger at Fred, of course, and provides the evidence. But others do not escape - there were many guilty men in this affair.
"Everyone knows that business need deregulation to compete with China and India. Who is standing in the way? The great regulator and controller, Gordon Brown."In fact the opposite was the truth. Far from regulating and controlling Brown (a disastrous Chancellor Iain Martin calls him) stood back and let Fred Goodwin and his like get on with it! For a while it worked. In his "Mansion House" speech in June 2007 Brown said the Government would ensure Britain stayed a "world leader in stability... by ensuring [her] macroeconomic framework remains a world benchmark". That was "delusional drivel" says Martin!
Banking can be divided between the traditional retail and commercial segment, with its branches and its domestic and business customers (the Royal Bank's home territory for two hundred years), and "Investment Banking" the (comparatively) new kid on the block. The latter grew massively across the world in the 1970s and after - especially in Britain post big bank. It is in Investment Banking that the big numbers apply. The scale of the trades, the complexity, the innovation and - of course - the rewards given to the successful practitioners. In RBS's US investment banking subsidiary Greenwich Capital many employees had salary and bonuses in the high millions of dollars per annum! This company moved in a big way into collaterised debt obligations (CDOs) which, in theory, provided reliable income streams from repackaged mortgage securitisations. Iain Martin describes all of this in an illuminating chapter "Safe as houses". Mortgagees pay their monthly amounts and these find their way via CDOs to RBS, or its subsidiary. What could go wrong? Especially as Greenwich was at the upper end of the category with its AAA or "Super senior" portfolios. "RBS does not do sub prime" said Sir Fred. Well actually they did, and he didn't know. Probably.
“Making it Happen: Fred Goodwin, RBS and the Men Who Blew up the British Economy” by Iain Martin
350pp, Simon & Schuster, £20.