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Was Fred really 'the shred'?

Robert Peston | 13:01 UK time, Tuesday, 24 February 2009

When I was the City Editor of the Sunday Telegraph in 2004, we wrote about a private jet that was owned by the Royal Bank of Scotland and used by its executives.

We had chapter and verse on the plane: its make (a Falcon 900 EX with a list price of £17.4m); its registration number (G-RBSG); and its flight log.

But for several days before we published, RBS denied to us that it owned the plane and, finally, it only conceded its existence when I pointed out to a senior executive that the bank was in danger of looking a bit silly if we published everything we knew about the jet alongside RBS's on-the-record statement that the thing was a mirage (no pun intended).

I was reminded of the incident a couple of days ago, when I learned that the plane which didn't exist is now up for sale, by a new management team at RBS that wants to prove its penny-pinching credentials (there are rather a lot of used private jets on the market right now, so it's moot whether RBS will get a decent price).

Sir Fred GoodwinTo be clear, the reason we were interested in the plane all those years ago is that it struck an odd contrast with the reputation of RBS's chief executive, Sir Fred Goodwin, as a ruthless cost-cutter. The point about private jets - for shareholders who own banks - is that the expense of using them (let alone the capital outlay in buying them) is usually more than the price of first-class and business-class travel on a mainstream airline.

And there were other manifestations of a culture that didn't appear to be particularly solidly based on its stated and laudable adherence to the "mony-a-mickle" principle.

There was the employment of Sir Jackie Stewart, Jack Nicklaus and Sachin Tendulkar as "global ambassadors" and the sponsorship of the Williams F1 team, for example - which may well have added some kind of sparkle to the RBS brand, but whose value is tricky to measure.

RBS was a slightly odd organisation in those days. In many ways, it appeared remarkably successful. Having acquired NatWest and expanded massively in the US, it was one of the world's biggest and most profitable banks.

But it was always rather secretive and surprisingly defensive: I'm struggling to remember a single on-the-record interview given by Goodwin to a broadcaster or newspaper (even though in private conversation, he was always engaging and interesting).

It was more inward looking than most huge international companies, and was very prickly about even mild criticism.

That said, many in the City, and many journalists, admired the bank for its efficiency and Goodwin for his "Fred-the-shred" moniker - his reputation as perhaps the most fearsome and effective cost-cutter in UK corporate life.

So it's striking that the new chief executive, Stephen Hester, has identified some £1.5bn to £2bn of cost savings at the bank, which are apparently above and beyond what has already been disclosed. And Hester will announce as much this Thursday.

Some of those cost-savings presumably relate to the toxic rump of the giant Dutch bank, ABN which was foolishly acquired by RBS after the onset of the credit crunch in the autumn of 2007. And Goodwin too would doubtless have spotted them.

However a proportion of those savings - which may well lead to job losses of some 20,000 or so over the next two or three years (though RBS won't provide a precise number) - were available for some time and not reaped by Goodwin. Or, at least, that's what I'm told.

It's a bit odd.

None of which is to detract from Goodwin's initial achievement of integrating NatWest into RBS with remarkably little visible stress on customers or the organisation.

But it does perhaps give substance to the observation of those at RBS who say that - towards the end of his tenure - too much power within the bank was concentrated on Goodwin and that he did not delegate enough to other managers.

Goodwin must of course be right, as he said to the Treasury Select Committee, that it would be simplistic and naïve to place all the blame for the mess at RBS on him. To do so would be to ignore the collective failure of the bank's board and its owners, its shareholders, to rein in the banks' foolish expansion and to check its reckless investment in poisonous assets.

Even so, Goodwin was neither a bystander nor - perhaps - the UK's supreme "shredder".

Comments

Page 1 of 3

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    RP, this is a vaguely interesting sideshow but I think most people have already made their own broad conclusions about the ruling political, judicial and economic elite.

    i.e. we are all sick to death of their grasping, manipulating ways combined with a gauling unjustified superior attitude.

    We need some emphasis now to debate long term solutions that do not involve any of the above attitudes or people.

    Jericoa

  • Comment number 3.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 4.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 5.

    As ever another excellent thought provoking angle Robert.

    When will these guys actually come out and say sorry for their mistakes, rather than just apologising for the damage their mistakes made.

    Never mind repaying bonuses what about revoking their awards/knnighthoods etc. - not quite as succesful after all!

  • Comment number 6.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 7.

    Cost-cutting is a loaded term. It conveys an image of enhanced value but is usually a cover for management politics.

    It is easy to cut costs with an organisation but why were those allegedly costly things there in the first place? Probably there was a good reason but it has become inconvenient.

    Fred the Shred was an efficient cost cutter. He cut the bank down to size and it didn't cost him a penny. I believe the shareholders aren't too happy though.

    You don't add value by cutting costs. A business needs to be continually assessing its profitability and adding value. It costs to do this.

  • Comment number 8.

    Could is be said that RBS and Lloyds banking group are trading while insolvent? If they are it is illegal and is HMG allowing it to happen? Perhaps a complaint to the Serious Fraud Office or police is in order.

  • Comment number 9.

    The UK treasury don't understand the concept of cost-cutting.

    It's no surprise that, even if he's not the world's best, that he'd be revered by the Uk gov who clearly have no idea.

  • Comment number 10.

    Like all of these people who spend too long in one organisation in a powerful position, they lose touch with the real world, become stale in their mindset, arrogant, are adverse to any other viewpoint, become secretive and in the end ruin the very thing they have built up. In life it is important to be in touch with reality and he was just there too long, rather like this government.
    If someone is secretive you have to ask the question, what are they hiding and why? If it dosen't stack up then they are just covering their own backs. Why should the shareholders not know what their money is being spent on?

  • Comment number 11.

    ...It was more inward looking than most huge international companies, and was very prickly about even mild criticism.

    Sounds like the RBS had a very 'Scottish' mentality - as you have more or less just described the 'Scottish' psyche.

    p.s. I am Scottish, so I am allowed to say this - OK!

  • Comment number 12.

    Another manifestation of "snouts in the trough" methinks.

    Having worked in a number of organisations ranging from charity sector to business via the civil service in both large and small organisations the culture seemed everywhere to be "do whatever you can get away with" even if it's nothing more than raiding the stationery cupboard! Although it has to be said, sometimes this is more difficult than larger scams.

    Surely it's nothing more nor less than immoral when there are so many in the world living on less than 1$ per day and scavenging on rubbish tips.

  • Comment number 13.

    Who really cares?

  • Comment number 14.

    Fred has gone a long way towards shredding the British economy. We'll be paying for his antics for years, if not decades.

    But, of course, he is correct in declaring that it would be "naive" to place all the blame on him.

    Hello, Gordon.

  • Comment number 15.

    Please will you write about the fact that the FTSE has been falling non-stop for weeks now Robert. I think we got the picture about the mendacity of the bankers already. During the 1980s in my case.

  • Comment number 16.

    Mr. Preston, and many in his peer group, appear to be really 'savouring' the problems that this global financial downturn has caused the 'high fliers' in the City and on Wall Street, so that they can come out with their 'I told you so' stories, their finger pointing, and their or so very serious pronouncements.
    What none of them have however come up with, are any constructive ideas or solutions as to how these enormous problems (caused to a large degree by the very same people they point fingers at and tell their stories about) can start to be solved.
    Robert Preston et al have delivered some great soundbites (of which I'm sure they are all very proud), but soundbites are all they are!

  • Comment number 17.

    Robert,

    What exactly is the point of this piece? It resembles poking a corpse for signs of life.

    You (the Media) and the Great British Public have got what you want; no honest, blameless employee from bottom to top, regardless of work input and performance against their personal targets will receive a bonus for 2008 (unlike say, a Government, Northern Rock, FSA, or dare I say, BBC employee) , nor a "profit share. Any pay rise will be below inflation.

    12,000 people have now lost their jobs (inc me & my colleagues) with another 20,000 to go.

    As you hubristically survey how fantastically right you were about everything, just remember that when you talk of "shredding" you are actually talking about people lives and livelihoods.

    I hold no candle for RBS but please, can we just move on and bring back some respect into this whole matter ?

  • Comment number 18.

    The next F1 championship is going to be fascinating now that the 'global schmobal' ambitions of RBS are dead. Presumably the Williams car could be wrapped in a Union Jack? At least then it could act as an advert for the UK tourism industry rather than all that money whizzing around the circuits for no reason.

  • Comment number 19.

    When Fred ran RBS it was a fast expanding global empire. Now its a bust which threatens to bankrupt the entire country thanks to Gordon Brown's stupidity in taking on its liabilities. It is not surprising that it does not need quite as many staff although they should realise that they are in the public sector now...

  • Comment number 20.

    Anyone who has passed by the vast RBS campus at Gogarburn (photos of the inside are at http://www.edinburgharchitecture.co.uk/royal_bank_scotland.htm ) will know that whatever Sir Fred's reputation might have implied, cost control was not really his forte. This mini-town (it's rather more than just a bank headquarters) is so vast and employs so many that Lothian buses produce a special leaflet telling how to get there. So my reaction to the news that Stephen Hester has identified an additional 1.5 - 2Bn of savings is to say "is that all?".

  • Comment number 21.

    "none of which should detract from Goodwin's initial achievement of integrating Natwest into RBS".

    How successful was RBS/NW really Mr Peston?

    Has RBS ever provided a statement of the real benefits achieved compared to the potential benefits lauded by Mr Goodwin at the time?

    Mr Goodwin micro managed the move to 280 Bishopsgate then looked down the street and decided he wanted to extend into ABN next door?

  • Comment number 22.

    Meanwhile in the real world away from banks the FTSE 100 is under 3800. Maybe there is something else to talk about?
    Like how much of what is left of British industry is about to be made insolvent by their unfunded pension liabilities?
    Or how tax revenues are going to fall even further (is there anyone in the country paying CGT this year)?
    Or how the FTSE is dominated with international trading companies with a large exposure to commodities which are a good leading indicator of where we are going for the next year?
    Or what this means for Chinese growth?
    Or what is happening in Eastern Europe which threatens to undermine the stability of the Euro and what is left of the European Bank network?
    Please talk about something else.

  • Comment number 23.

    Yeah yeah yeah. We all know that Fred had his foibles and that he overreached etc etc. To keep harping back does not actually get us out of this mess. We need positive action- the time to pick over the ruins will come back I am sure.

    Robert can you not try and use your considerable influence to get something done - lets GET RID OF MARK TO MARKET ACCOUNTING. I know I keep harping on about this but it does not cost anything to do it. geeez

  • Comment number 24.

    Like so many bankers and traders who get caught up in the excitement, they end up losing the plot.

    This even includes their personal decision-making, to the detriment of their own finances: witness how many of these senior types lost large amounts of their own money when their banks went down - in clear contravention of the first principle of risk management, which is diversification !

    They can't manage other people's money & they can't manage their own ...

  • Comment number 25.

    Pity the plane didn't go down in a scottish mist...........They don't deserve the"Royal"tag one bit.

    Still..........too late for all this now.Perhaps the taxpayers will buy this as well,after all we've "bought"every other piece of c..p !

    Perhaps even Jacqui Smith may wish to domicile herself in this and claim some more dosh......... ? A home on the move so to speak..

    The mind boggles.

  • Comment number 26.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 27.

    #6

    "Goodwin should be in jail!"

    Your evidence that he did anything illegal rather than just immoral is?...

  • Comment number 28.

    Its very hard not to agree with RP on this, RBS is (as are a lot of Scottish corporates) a very conservative business adopting the presbitarian stance of money is not for show - and never to be discussed. Additionally Scottish businesses consider which school you went to as more important than ability and if you came from south of Carlisle, you felt the heat.

    I was once a CEO of an RBS joint venture where the board consisted on Fred and the CEO of the partner business. Fred was alwasy on the attack towards my team and the partner!! Nothing personal I was told just his style.
    His reputation as someone who was obviously bullied at school and later got his own back, is very obvious. Hopefully the world of banking has seen the last of him...and no doubt has understood nothing.

    Trust me Fred, greed is not good.

  • Comment number 29.

    It won't be long before there are a lot of very angry people in this country. People are upset now, but not angry enough or united enough to march on Westminster or to start picketing the banks. But when that happens we'll need rather more than a mumbled apology from the likes of Sir Fred.

    For a proper response to the crisis I can do no better than to recommend the article by Sir Ken MacDonald in yesterday's Times ("Give us laws that the City will respect and fear").

  • Comment number 30.

    Desperation hope and crossing of fingers seems to be the order of the day.

    No way to run an economy is it?

    I suppose it's the old saying now ' in for a penny in for a pound' only this time it's not pounds it's billions of pounds.

    Earth shattering amounts of money which most of us could not even envisage being thrown down the pan in the hope that something might work.

    Another 'lets do something' manouvre.

    It's really getting to a stage now where you have to wonder if they had done nothing would we have been any worse off?

    Did we really have to rescue all of the banks or perhaps letting one go would have really woken everyone up much sooner.

    Next it will be the pension funds. Heaven knows the cost of filling those black holes.

    Or the insurance companies. Seems like the hedge funds are being blamed for shorting them now.

    Where to next?

    Perhaps it's time we called a halt to all of this madness and let nature take its course.

    We will probably end up in the same place only quicker and at much less cost. Then we can really take stock.





  • Comment number 31.

    QUESTION

    Why are the corrupt and incompetent being singled out one by one?

    ANSWER

    When the populace revolt they will need concrete targets. It is much easier to target individuals than ideas.


    The country needs a revolution of ideas but that is a bit difficult for the television soaked masses.

    Let us start with honesty.

    Closely followed by openness and disclosure.

    Robert, you are not wasting your time lining up targets.

  • Comment number 32.

    Sir Fred Goodwin.

    House of Commons Treasury Select Committee 10th February 2009:

    "No technical bank training and no formal banking qualifications"

    but that did not prevent his being President of the Chartered Institute of Bankers in Scotland.

    ....but then the Telegraph told us a while back:

    "his grasp of finance is in the alpha class"

    So what happened then, Sir Fred?

    Penny for your thoughts!





  • Comment number 33.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 34.

    Having spent much of my working life as a consultant advising on down-sizing, right-sizing, out-sourcing and many other so called cost cutting measures, I can attest that there is always more fat to be cut especially in large organisations.

    The reality is that we continue to believe, collectively, in the concept of work. It remains the substantive means of distribution for money and all that follows. Power and status, in corporations and especially government, too often goes hand in hand with headcount under management. I wonder how many readers recall the great problem of the 80s, how are we going to deal with all the leisure time?

    If there is a silver lining to the government and banking system induced depression it may be that many people will be forced to shred their own costs. Some may emerged less dependent on being chained to the treadmill of work and with a much higher quality of life as a result.

    It is also just feasible that the inflationary system of money creation that RBS and the rest participated in so enthusiastically will collapse completely to be replaced by a sound monetary system from which we can all benefit more equally than we could ever believe possible.

  • Comment number 35.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 36.

    so Robert are you back onto point duty as the chief gov't spokesperson and overseer of smokescreens

    trying to create a diversion away from our talking about the govt's difficulties in coming up with some practical remedies, by going on about bankers' excesses instead

    we all know everything we need to know about the treacherous Goodwin sands

    many ships have come to grief there, for sure, and she's covered with the skeletons of able-bodied RBS seamen, aarghh me lads

    but we'd like you to discuss one of the many urgent economic stories which face us all

    go on say something about manufacturing! we dare you

  • Comment number 37.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 38.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 39.

    #14

    "But, of course, he [Fred Goodwin] is correct in declaring that it would be "naive" to place all the blame on him.

    Hello, Gordon.


    Hello, Margaret (who, after all, started the ball rolling with her City 'Big Bang')...

  • Comment number 40.

    The identikit picture for a CEO is beginning to appear. It seems words like bully, hypocrite and reckless are all useful. However, what I find shocking is the delusional self-belief these people have and their ability to rationalise their culpability away. These are the same people who were taking all the credit when their organisations seemed successful.

    I believe that personal doubts about my own performance and abilities have always held me back. However, I am feeling more comfortable about these personality traits day by day.

  • Comment number 41.

    If they have any problems selling the plane, they could always try ebay.

    Reading some of the comments it's more shred the Fred than Fred the shred nowadays.

    The comment about shareholders responsibilities is a good one - plenty of commentators at the time said the ABN deal was a poor one, but shareholders, particularly the institutional shareholders didn't do anything to stop it.

  • Comment number 42.

    Scapegoating one individual totally misses the point. Integrating large companies takes time and skill. For many years now I have thought of writing to my bank and asking where in their Articles does it say that they will gamble with my money? We have been told that derivatives are essential for financial trading. By whom? Why the boys gambling with our money!!!

    This is the core of the problem which must be sorted. All instruments gambling on movements in anything must be stopped and or linked to something physical which is owned. The complexity of instruments interlinked to other derivatives which are then crosslinked is why a property problem in the USA has multiplied into a world crisis. This is not matter of better regulation just commonsense. Get rid of artificial ambling tools and we will have chance.

  • Comment number 43.

    #16

    [ re 'finger wagers' and the "I told you so" people]

    Does the truth hurt then? Oh, and by the way, it's not the job of people like Mr Peston to 'come up with ideas', it's their job to be critical (in the review sense of the word) of those whose job it is to come up with the ideas.

  • Comment number 44.

    A serious misunderstanding by Robert of the nature of management decisions!

    It might have been the right decision last year to have a private plane, and the right decision this year to sell it. Or maybe not.

    The real reason they are selling it is nothing to do with whether Goodwin or Hester is better at cutting costs. I think we all know the real rationale - read the article below to see if you got it right:

    http://www.knowingandmaking.com/2009/02/misunderstanding-management-decisions.html

  • Comment number 45.

    Sir Fred BadLoss ?

  • Comment number 46.

    Goodwin wouldn't cough up a penny to sponsor any local Scottish racing drivers including a few that worked for him.

    He was in effect a motorsport snob not a motorsport fan. A real fan would have taken pleasure in helping young drivers at both club and national series level.

  • Comment number 47.

    was Fred really 'the shred',
    was Gordon really 'Superman'
    is Mandelson really corrupt
    are there any MPs really fit for government?

    Does anyone even care any more?

  • Comment number 48.

    There is yet another big area to be addressed before we can consider banks as (almost) morally sound businesses: the issue of tax havens and the trillions of dollars and pounds hidden away in Switzerland, Liechtenstein, Bermudas and many other similar places. Now is the time to recover those looted trillions. Where are the morally upright political leaders that will serve the people not the looters and bring those trillions back?
    Where are those true global leaders with a moral compass that will use this moment of opportunity to finally unmask the
    impunity of those banks who helped to hide away trillions, with no questions asked. Can we expect Gordon to take this decisive step forward? You could do humanity a great favour Robert, if you would call for a re-patriation of those looted and untaxed trillions.

  • Comment number 49.

    Come on Robert......get real.

    Sir Fred did not want everyone to know he regularly used a private jet. The Inland Revenue might want to know more about its use for a start.

    When you have your snout in the trough, tell too many about it, and you might find that suddenly there is less room for yourself or you might have it taken away.

    I bet when he attended an event the rich and famous with whom he hobnobbed were fully aware of how he arrived.

    I bet you also there were few free event tickets going to the lower paid workers of RBS.

    As #3 correctly said " They are all ruthless cost cutters of other peoples perks and money..........."

    Don't be so naive!!

  • Comment number 50.

    #27
    I rather think he might have a difficult job definding the half-year results he issued in early September before the Fraud Squad. Quote for RBS half-year:
    Profit before tax was £988 million compared with £4,721 million in the first half of 2007. The results have been adversely affected by credit market write-downs of £3,997 million (see Note 2 on page 8). Adjusting for the credit market write-downs, operating profit was £4,985 million.

    Really?

  • Comment number 51.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 52.

    I have a friend who is a middle manager with RBS - was with Natwest till it was taken over.

    The unit he's with had the number of managers cut from 12 to 6. (Probably the work could have been done by 10 before the takeover.)

    So for some time now he and the others that have been left have been doing 60-hour weeks to get the work done. The only alternatives were either to skimp the job (and invite inevitable problems when something screwed up) or leave. A typical cautious banker, he won't leave - but a number have. And the service to customers has suffered.

    As regards the things Fred didn't shred, it seems obvious it was a case of 'do as I say, not as I do'

  • Comment number 53.

    To No. 6

    Fred the Shred shouldn't be in jail - yet -
    not before a large domestic cesspool, is placed in a public square , the victims of Fred the Shred and his ilk are provided with ducking stools and invited to' come and have a go.' Once a confession and full apology are extracted from
    Fred then let him escape to jail

  • Comment number 54.

    G Brown might want the Jet..... As one upmanship to Briar....

    BrownForceOne has a nice ring to it

  • Comment number 55.

    Lets be honest the shareholders have paid a hell of a price as their shares are now worthless compared to when they encouraged Fred to go after ABN AMRO.

    However his sycophantic board are still in place fawning up to Mr Hester and claiming to only having been following orders (Where did I hear that before) If they had any honour, and some did like Jonny Cameron of the ill-fated GBM division they would have fallen on their swords.

    I can only ask Robert how can a man like Roden the HR Director who has signed off and is still paying individual ABN AMRO bankers in excess of £4 million pounds each in retention and guaranteed bones payments yet who has cut his own managers salaries by at least 10% still be in place?

    Mr Hester must look at his board and remove Fred’s lackeys

  • Comment number 56.

    Cost-cutting my ar*e! When I worked for RBS I saw money thrown around like it was going our of fashion (perhaps it was?) during the integration of NatWest. A few examples - staff allowed to take taxis to meetings in other buildings when they could have easily walked, meeting rooms booked in hotels because the office ones were all fully-booked - despite being empty, contractors recruited to boost managers empires (the more people who report to me, the more important I must be), staff flying between London and Edinburgh (taking a working day out) to attend short meetings which could have been done by video-link, etc., etc...

  • Comment number 57.

    Too late for recriminations........The plane took off leaving us in the departure lounge.Didn't even wait for us all to get on board.........worse service than easyjet.Nice to see it grounded at last I guess.

    Me thinks its underbelly got too fat and the engines packed in.......declared unairworthy just like the people it served.

  • Comment number 58.

    Bit of a non story really Robert, unless you were actually going to make a comment on the split of RBS and then the repatriation of profits to pay off the debt to the taxpayer.

    May all just be a matter of subjection anyway after the way the government is behaving in the bond market

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4789111/Creditors-fear-new-losses-on-Northern-Rock-bonds.html

    Could that "dabbling" have effects on Treasury Bills? After all both Northern Rock and Bradford and Bingley are nationalised.

  • Comment number 59.

    You cannot just compare the cost of using a private jet against that of mainstream airlines. The cost element is more than like for like pricing. If you travel on a private jet you can hold the meeting while you travel, you cannot do this on mainstream airlines. You can travel at your times and not those of the Airlines, thus avoiding wasted time at Airports or additional hotel stays. I am sure if you add all these elements up, it would be more comparable. If you calculate the hourly cost these guys get paid, hotel costs, wasted days travelling to meetings, the private jet actually would have been a cost effective option. I really wish the media would report stories in true context rather than fabricate the story to get public opinion up.

  • Comment number 60.

    The public needs to look for individuals who are to blame. Scapegoating is just natural. But it is true to say that the problem is way bigger than Sir Fred and his ilk.

    Ultimately the ongoing slow-motion train crash is a moral problem as much as a financial/economic event.

    It is about priorities and values and about what you believe human rights really are. Lip-service democracy talks about rights but never convincingly about responsibilities.

    Good firms employ good workers and understand their customers. Bad firms sell bad products and deserve (a moral judgement) to go down.

    Bad money drives out good money.

    A truth as old as the hills.

    How the social contract broke down over 20 years is a matter of history.

    The key force at play is, of course, the economic super-power which through its domination of the post Bretton Woods world set the agenda with its fiat reserve currency to live off and dominate of the rest of the planet in its own interest and has demonstrably over-reached itself. UKplc trotted along. If you can't beat 'em join 'em (after UK lost out to the dollar in 1931.)

    Lesson: Finance can be a Good servant but a bad master.

    Super-powers are not above the laws of economics.

    The phenomenon of Sir Fred has no place in a sound finance architecture.

    PS He was a good fraud chaser in the Caymans once! Promoted out of his field. Happens a lot.

  • Comment number 61.

    Glasnost, Transparency
    As someone said I'm not sure if this was or wasn't the right decision at the time, but it should be open and transparent.
    Openess and transparency seem to be the only antidote to the excesses. If there is (was a plane) then it's advantages should have been defended and clarified early? why should it be ever hidden?
    This is quite frankly a very small part of the "Malus" that Goodwin is accruing and quite frankly with the several millions in his account I hardly feel any pitty. The whole country is poorer because of his mismanagement (even if he wasn't the only one)

  • Comment number 62.

    F1 is actually proof of Mr Goodwin's thrift, not his profligacy.

    If you wish to expand awareness of your brand worldwide in a very short time F1 is the best answer, putting your name in over a dozen countries across the globe and going out to tens of millions of viewers twice a month.

    F1 also offers a great opportunity for corporate hospitality for the people you need on your side in each country you visit.

    Jackie Stewart is expensive - but he always delivers. Sponsorship of Ferrari or McLaren is expensive but Jackie delivered with Williams - under a tenth of the price and just the same corporate hospitality opportunity.

    RBS was a fairly honest thrifty bank - it just decided to have global ambitions at the wrong time.

    Go after the real bad boys like Halifax and Northern Rock who were backing UK mortgages with funny money.

  • Comment number 63.

    Why are some of you saying this is all Gordon's fault?

    As another contibutor said all this started with Margaret Thatcher in the 80s when we were told there is no such thing as society, everyone should be out for themselves and greed was good. Most of you probably agreed at the time if you are old enough to remember.

    Now we are reaping what was sown then and in spades. 20 years later we are living with the consequences. All political parties adhere to the Thatcher principles in one way or another and all those harking for a change in government will find the same beliefs in whoever comes to power. Conservatives haven't changed that much and the present government didn't believe it could be elected without subsribing to some of the same thinking.

  • Comment number 64.

    32 wrote:
    ....but then the Telegraph told us a while back:

    "his grasp of finance is in the alpha class"

    As the alpha character resembles a fish I think the quote is particularly apt as his grasp of finance has been shown to be a bit fishy in hindsight.

  • Comment number 65.

    Somewhere, tucked away in my desk, lie two bank notes issued by RBS, bearing Jack Nickaus's image, issued in commemoration of his final appearance at The Open Championship. I was told it was the first instance ever of a UK banknote bearing the image of a non-British subject.

    Time to frame them, preserve them, and bequeath them to my son, as an object lesson in hubris.

    If only RBS had embraced Mr. Nicklaus's values of hard work, dedication, honesty and loyalty, instead of just printing his face on a bank note....

  • Comment number 66.

    Is it significant that the new RBS uniform brochure that arrived this week contains no tartan!

  • Comment number 67.

    OF COURSE!

    Whenever any company talks about cutting costs it's talking about:

    1 - Workers wages
    2 - Workers hours (extending)
    3 - Cutting workers benefits
    4 - Redundancy

    Come on Peston - tell us something we don't know.

    The Capitalist pigs don't share from their trough - they simply reduce the amount in the workers laps.

    Were you born yesterday?

    This story is about as revealing as the next one

    "Ministers exploit expenses system at huge cost to the public"

    The greed simply goes on and on and on and on....

    How about this one.

    "Journalists print lies in order to generate paper sales"

    ....surely not....

    or maybe...

    "Government do what big business pays them to do"

    How about this one Robert

    "Democracy is a sham system to make the people feel like they have a say - when in fact once the Government gets in, it does what ever it pleases"

    At the next election I will burn my voting slip after wiping it on my backside as that is about all it's worth (ash and pooh)

    I will have my say at the upcoming riots this year - I mentioned it a few weeks ago on this very blog and incredibley (according to the BBC) - the "police are preparing for a summer of anger"

    Don't wait for Peston to break a story - I'll tell you what's going to happen next..

  • Comment number 68.

    #8 & others who have suggested that trading whilst insovent is illegal - I believe that whilst it may be illegal provided the directors can demonstrate that they continued to trade having reasonable belief that they were improving the position for creditors then they are not personally liable for debts incurred whilst trading insolvently - HMG are currently providing that reasonable belief.

    Also I don't think the accounts show them with a negative balance sheet (and hence they are not technically insolvent anyway)but I may be wrong? Whether that balance sheet reflects reality is another question altogether.

  • Comment number 69.

    I think Robert that I have heard enough about the banks and bankers. Just when I think it can't get any worse - it does!
    At least the Government will be able to buy the private jet, offer the bank £10 billion for it, to bring some more of our boys back from Cuba!

  • Comment number 70.

    i personally think their needs to be a public enquiry over this whole fiasco at rbs and hbos.

    1)-how can bossess such as andy hornby at hbos be allowed to take a post such as cheif exective without any recognised banking qualifications,the guy worked at a glorified supermarket for gods sake so how does that qualify him to take such a high profile job at one of the britains largest banks.


    2)-there also needs to be an investigation into how the fsa investigated hbos and their apparent risk procedures,because if they had done this properly the disaster at hbos could have been avoided or at least not be on the grand scale it is now.

  • Comment number 71.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 72.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 73.

    Is it possible to have a business post about something other than banks. Just a thought.

  • Comment number 74.

    #29 David_Kilpatrick.

    Oh, it's far too late for that, I'm afraid.

    Giving the UK new laws that "the City will respect and fear" will take far too long and need far too much debate and probably wouldn't change very much anyhow.

    On Robert's previous blog #135 you'll find a link to an article suggesting that banking experts are now demanding better wages, on the open job markets - from potential employers to compensate them for the loss of the contracted bonus packages.

    Laws won't change the ways of the greedy or grabbing.

    And just who will effectively implement these wondrous new laws anyhow? No-one seems to have any great track record of keeping appropriate eyes on things in the run up to this disaster. Not shareholders, investors, regulators nor politicians.

    Sadly, it is very likely to end in tears before bedtime. That is, in civil unrest and the breakdown of law and order.

    And such outcomes seem probable to happen faster than anyone in HMG, the Treasury, the FSA, the banking industry, or Uncle Tom Cobbley will achieve putting in place any regulatory or legal 'solution' of any sort.

    Increasing numbers of people seem to be talking about stockpiling food and fuel in anticipation of societal collapse.

    And from the ashes of riot and destruction will come just what?

    Well, isn't that 64 million dollar question?!

    The banks lost the trust of everyone - including themselves - through greed-driven ways of doing business. And HMG and all the politicians are rapidly losing the trust of the common man through an inability to actually do anything that makes any real perceived and significant difference to the ordinary man in the street. By that I mean the one who is losing or has lost his job / house / hope of sending his kids to a decent school or university / pension / hope of paying for his relative's care, etc., etc.

    As for Fred, these famous and rich ex-bankers (and others) have left you and me with such a wonderful legacy from all their professional efforts, haven't they?

    So just what is left to the ordinary man or woman to do to try to secure some quality of life for themselves and those near and dear to them? The cows have all been over-milked, so as to speak.

    Where's the hope for the future for the masses?

  • Comment number 75.

    #56 pickup01

    I completely agree - I too have worked in the banking industry for 15 years now and their attitude to costs are:

    "Make hay while the sun shines"

    I too have seen the excess - and it doesn't stop there. Get a copy of the free paper 'City AM' in there they regularly have a copy of 'biggest bar / restaurant bill' - which frequently tops the average annual income of this country.

    ...and no, I'm not joking, £10,000 on a lunch is nothing to these people.

    If Peston wanted to out the true excess of the city he would simply need to publicise that regular piece and the rest of the country would be up in arms.

    The attitude is born from a risktaking culture, in the same way a gambler will buy a porsche today with his winnings, because tomorrow it might all be gone.

    ....but at least a gambler has the 'honesty' to gamble his own money - and not use the Government to persuade us all that private pensions are a good idea, to provide funds for the gamblers...

  • Comment number 76.

    63 Ladyedingirl

    Why blame El Gordo

    It is a long and winding road and the current driver of the bus is the driver who has driven us here, who has crashed the bus. The fact that a couple of decades ago there was another driver is neither here or there. The current driver took the route he did in the last 5 or 6 years.

    Incidentally I never agreed with Thatchers policies, anynore than I agree with the current son of Thatchers recent policies. All that a UK politican needs is a minority of the population to agree, sufficient to give a majority in parliment, about 25 percent of the whole population based on the almost always low GE turnouts I believe. It is even worse when you consider the concept of safe seats so the floating voter in the non-safe seats determine outcomes, less than 10 percent. Feel better now. I believe these figures are roughly in the right area although somebody who knows better may correct.

  • Comment number 77.

    You can look into any large organisation and find significant cost savings depending on your point of view.

    It is profoundly unsurprising that the new CEO can see potential, if he couldn't he would be the first new CEO ever not to see savings potential in a business.

    It is also no surprise that Shred had some less than amenable personality traits. Shrinking violets just don't get to the top of the greasy pole no matter how clever they are (though they can and do form their own companies) - corporations are not pure meritoracies.
    These people have to be very competitive to achieve the heights - often in this day and age however the political skills required to climb are more valued than any ability to actually do the job which is acquired with them.

    Hence we find many imported CEOs who fail as they really have no idea what their business does and how their business actually works, visiting with the regal "and what do you do" routine. Serial entrepreneurs are usually focussed in an single area they understand utterly (the Philip Greens of the world).

    A failing in Shred and co exposed at the TSC when all the prior encumbents had to admit they had no qualifications in banking - simple really, they didn't understand banking enough to know how badly wrong they were getting it.

  • Comment number 78.

    RBS achieved its results with leverage that makes hedge funds look conservative. Fantastic when the market is going in the same direction as the bets. Disastrous if there is even the slightest bump. Even a regular recession would have done the trick. They ended up with a 68% taxpayer stake before anything really bad had happened.

  • Comment number 79.

    Aaah! Good!Ever so slightly later than expected but this'll do for a start.For a while now I've been expecting the 'revised' views of Goodwin et al to start creeping into view.After all,haven't these poor men suffered enough already? Didn't think you'd start the ball rolling Mr Peston,but this is certainly a notable contribution to the revisionist portrayal of The Downfall Of The Banks.I eagerly anticipate more nonsense along those lines.Ultimately I'd hope that the propaganda barrage can reach the lofty heights of presenting their incompetence as facilitating a wonderful opportunity to reassess our economy! Saviours! Visionarys,even!
    It ill behoves those of us who are concerned with mere facts and details to carp and cavil around the ankles of such giants as they.Mr Peston-be braver next time!We must have our heroes restored,renewed and re-presented,untarnished by the petty gripes of lesser men!

  • Comment number 80.

    #73 glanafon

    Agree, it would be nice to have something different to discuss than banks.

    How about a series on UK manufacturing for those items which we seem to believe we don't make but do and the converse those we think we do but actually don't.

    Sure there would be some surprises in such an endeavour and more interesting than further bank bashing.

  • Comment number 81.

    I reckon that most "thinking" people are in a state of shock at the moment.
    The realisation that...
    The government is inept,
    The economists are inept,
    The bankers are inept,
    The advisors are inept,
    The consultants are inept.
    None of them saw it coming, or what caused it. Collective property madness, on both sides of the Atlantic.
    It's a once-in-a-lifetime collapse.
    What's to be done?
    Well, the same as they always do when there's an economic earthquake...."print" money, and blast the consequences.
    If taxation is the only way out, we'll be paying for decades, and they may even bring back Super-tax at 90%, or may be looking to take 20% tax on every house sale.
    Whatever it is, it will have to be drastic.

  • Comment number 82.

    mebbe in the not too distant future-we will become the "slumdogs" ?

    Got 2 tins of sprouts and a few cup o' soups in the old cupboards..........not to mention a few old sticks of spaghetti that are probably past their best.

    Plenty of paper though thanks to the "junkie post".......should burn well 'cos it's all in colour and unopened.God how I will miss the post..........I know I have "friends"when these arrive.Think I might nip out tonight and cut down next doors fence....some good lumber there(ex B & Q).

    Next door but 2 keeps rabbits as well and lets 'em out at weekends for a little munch-have to keep my eyes peeled for these beauties.

    Yes-the good life beckons !

  • Comment number 83.

    What is being revealed in your blog today is that you have had it in for RBSfor many years, and boy have you had your revenge.....you have brought the most successful bank to its knees and well and truly slaughtered it......I do not think you should be crowing about this Robert,I think you should be apologising.

  • Comment number 84.

    Apparently wood lice taste nice as well(if you can catch enough of 'em).

    Be ever resourceful my friends........you never know

  • Comment number 85.

    Most PLC parasites (often described as directors) who pay themselves a fortune, approved of by of course our also parasitic fund managers, who are supposed to represent the real shareholders interests (mainly our hard earned pension savings), are long past their sell-by dates, become lazy and are interested in only their egos and how much they can procure from the company.

    Who should remove them? - equally parasitic non-execs, appointed because they can be relied upon to be tame, or asleep-at-the wheel fund mangers.

  • Comment number 86.

    Sir Fred would seem like a suitable Brown appointment as financial regulator.

    There has got to be a film in these appalling stories surely!

    I see Brown as scurrying about grunting in a belfry like the hunchback of Notre Dame.

    Who will bail out the Labour Party when the election crunch arrives?

  • Comment number 87.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 88.

    After reading all of the above .......Will the last person to leave kindly turn out the light?
    Thankyou.

  • Comment number 89.

    Oh joy - I expect us economy class private travellers will have to put up with Bankers complaining about the cost of champers or whatever on Ryanair.

    Still I expect the bankers will love the speculative investments that Ryanair sell (scratch cards to the rest of us).

  • Comment number 90.

    Note to Moderator .... please check i didnt send this a few minutes ago as my PC threw a wobbly.

    Robert, this has the potential to be discussed til doomsday and no doubt you'll mention again when RBS announce FY results later this week.

    This needs finished with sackings, bonus' withdrawn, any honours (knighthoods) removed and criminal charges raised.

    Please get back to reporting on 'new' developments such as the looming east-european debt bubble, how the Swiss banks are involved, why the Dow Jones
    is removing companies under $10 from the DJIA, why the Govt has removed laws so as it doesnt need to 'announce' when it prints money etc

    There is loads of other news stories out there and its people like you who are needed to bring it all into the spotlight.

  • Comment number 91.

    R.B.S. = Signs of danger?

    Respectability - "it appeared remarkably successful. Having acquired NatWest and expanded massively in the US, it was one of the world's biggest and most profitable banks."

    Publicity (Bullxxxx) - "added some kind of sparkle to the RBS brand, but whose value is tricky to measure."

    Secrecy - "secretive and surprisingly defensive."

    Just another example of "Demand that others do as they are told, not as you do" which socities are following.



  • Comment number 92.

    Some very rough working statistics on the Falcon: costs about 15k an hour to fly, and it's quite a bit slower than a commercial jet. If you pack'em in, you might get 20 on board, but usually 10 or so. That's going to cost about 60k for a return flight Edinburgh-London, so there's quite a cost saving by ditching the thing. Almost as slow as the train, in fact, by the time you've got through airport checkin etc.

  • Comment number 93.

    Ref 76 Glanafon

    Your breakdown of our "democracy" is broadly correct.

    At the last election, less than 21% of those eligible to vote voted for NuLab, led by Blair. Which is another way of saying that almost 79% didn't vote at all (I wonder why?) or voted for another party.

    No one has ever voted for a NuLab party led by Brown.

  • Comment number 94.

    Robert, you are a Pest. Have you bothered to undertake any research into the ABN acquisition? The 'toxic rump' is RBS itself. ABN was a much cleaner bank in terms of problematic assets (much less US subprime and economic exposure than RBS, much less leveraged finance loans on the balance sheet, etc, etc). I actually work within the enlarged group and do know what the reality is. So before you wax lyrical blog after blog about 'toxic ABN', get your facts straight.

  • Comment number 95.

    #59

    "You cannot just compare the cost of using a private jet against that of mainstream airlines"

    Yes one can.

    What is wrong with fax/email (for documents) and video conferencing where 'face to face' meetings are concerned - on the rare occasions that a true face to face meeting has to take place it's unlikely to be done at 35000 ft as it's most likely new business thus scheduled air travel could be used.

    I know of someone who works in commercial air-craft leasing, I have never heard him talk about having a business meeting mid flight over the Atlantic (or where ever), so how come a company that leases aircraft still uses scheduled air travel if it would be cheaper to use one of their own (private) aircraft?

  • Comment number 96.

    No you dont say, howay bob get your thinking cap on.

  • Comment number 97.

    #83 onward-ho

    Come on now, blame the people who ran the bank, the regulators, the shareholders or even the Government, if you like.

    Don't blame external commentators.

    CEO's like Fred were paid a vast amount of money to direct and oversee, amongst other things, RBS's Public Relations and how its corporate press office did business.

    So, if Robert did cause any significant harm to RBS then Fred was even worse at his over-rewarded job than even I thought.

  • Comment number 98.

    Now that we own a number of financial institutions, RBS, Lloyds, Northern Rock etc, surely it is both incompetent and morally reprehensible for the government to allow them to sack workers employed in the UK (of what ever nationality).

    Any profit the government gets from dividends from its shares has to be weighed against the cost of having extra people on benefits, so its better to keep them in their jobs even if it means these banks make a bit more of a loss.

    Indeed, surely it should be conditional on any firm in whatever industry, that if they receive a bail out from the government, they don't reduce their UK employees.

  • Comment number 99.

    In the article, you write "None of which is to detract from Goodwin's initial achievement of integrating NatWest into RBS with remarkably little visible stress on customers or the organisation.".

    In the early 1990s, the previous regime at RBS were concerned that they didn't have project managers with adequate skills. I was part of a team of around 8-10 project management trainers that a major consultancy sent in to pass on project management skills to RBS staff. By my reckoning, the smoothness of the integration of Nat West into RBS had a lot to do with the people we trained, perhaps (I hope) a little to do with the training we gave them - and a substantial amount was to do with the foresight and legacy of those leading the company in the early 1990s. They looked at what would be needed in the future, and spent money on it.

    STRATEGIC THINKING by the leadership of RBS in those early 1990s led to the success and made Goodwin look good for a while - but don't give him the credit for something that was in place long before he arrived. It wasn't HIS achievement - it was RBS project managers who delivered.

  • Comment number 100.

    Robert,

    If you want to start a fire - then go and ask the banks how many of the following they have on their books.

    ABS's (Asset Backed Securities)
    MBS's (Mortgage Backed Securities)

    This is why the banks are wetting themselves at the moment, a lot of figures have been about CDO's - which have an estimated 2 trillions (USD) worth in 2006

    However the mush ignored ABS and MBS markets are being ignored because the general feeling is that they are 'safe'.

    Regardless of how safe they are - take a look at these figures (from Wikipedia)

    Issuances of ABS's

    * 2004: USD 857 billion (1,595 issues)
    * 2003: USD 581 billion (1,175 issues)

    ....after that they lost count...

    and for the specific MBS's

    * 2005: USD 967 billion
    * 2004: USD 1,019 billion
    * 2003: USD 2,131 billion
    * 2002: USD 1,444 billion
    * 2001: USD 1,093 billion

    Remeber, these are merely the amount issued each year - NOT the amount in circulation.

    We are in it deep - and the banks think if they play 'hear no evil, see no evil' then they can get away with it.

    ....and it's all about to be backed by the taxpayer!

    Best of all , despite there being a clear and present danger in the pricing of these assets - and their structure. The US still issued $250million of each ABS's and MBS's last year - despite the banks being in real trouble by that stage.

    I don't think anyone actually realises how bad this could be. The men at the wheel have no idea what direction to drive in. the only viable solution is a massive de-valuation on a Global scale - never seen before in World Economics.

    The summer wil be very hot for politicians.

 

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