3 okt

Finished book about Fred Goodwin, the villain former chief executive from RBS. He definitely would have benefitted from a little bit Cistercian austerity in his life, is my impression.
The author finds two faults. Goodwin was too much focused on acquisitions and he was not a banker. I have to laugh when I read the last verdict. This meant I had to laugh a lot, because it was repeated endlessly in this book that is not meant to be funny. Because really, what is a banker. I mean in the real world it is somebody who judges risk well, I suppose. But then, in the middle naughties – is this how you spell that, that is also funny!- risk was treated like something from the past. The smart use of derivatives made risk obsolete. For many years money was free, to be a banker was pretty much useless in those days.
And then, to value risk, when there is risk to be valued, is not that hard. In good old England the boys – this is old days, no girls allowed – that were not able to finish their college – too drunk, not smart enough, or both – were sent to the City. And there they did remarkably little harm.
No, the fact he was no banker was hardly the reason things went so spectacularly wrong with RBS. It was probably the obsessive need to acquire bank after bank, including the massive ABN Amro at a moment when the financial system was heading to spectacular crash.
But RBS would not have been saved, if it would not have bought (parts of) ABN Amro. The most interesting detail in the book is from the current RBS chairman Philip Hammond. He claimed that the net borrowing of British companies was zero in 2002. In 2007 it was close to £700 bn, almost half of GDP. Of that amount, RBS was responsible for £300 bn. I mean, these were numbers that had nothing to do with ABN Amro, nothing to do with acquisitions, and probably nothing to do with Fred Goodwin, who had other things at his mind than dealing with the boring (!) English business. I forgot who, but probably a real banker was in charge there. This astronomical rise is a major reason for the following crisis, I would suppose. The light-headed use of credit will always cause troubles. It was this spectacular rise that was responsible for most of the losses RBS made, although most people might think it had to do with the fanfare around subprime mortgages.
Goodwin was not as bad as people believe these days, his successor Stephen Hester tells in the book. And he was not as good as people claimed in the hayday of RBS. From saint to sinner. It is good for Goodwin he didn’t live in the 12th century. He would have been killed. It is a painful but quick process, that makes many a sinner a martyr. But then, to be a martyr is a good reason to become a saint again, someone whose relics become an invaluable weapon for tackling diseases and a sort of medium between earth and heaven. It requires the believe in a life after death to think that this would have been the preferrable option for Fred Goodwin.