BOOK REVIEW x Making It Happen: Fred Goodwin, RBS and the Men Who Blew up the British Economy

by Iain Martin

Book review by Nicholas Dunbar

he collapse of the Royal Bank of This empire building made the now knighted in October 2008 and its £45bn bailout by Goodwin difficult to challenge at board level. the UK government was the most Martin reveals that RBS chairman, Tom McKillop, traumatic event in British banking for over felt uneasy about Goodwin’s management style as a century and heralded the start of a steep early as 2005 and considered replacing him, but recessionT and a period of austerity, triggering a public decided to do nothing. By this point both McKillop backlash against bankers that continues today. and Goodwin were out of their depth as RBS It has taken five years for the first book-length depended increasingly on account of RBS’s rise and fall to be published, far revenues to beat earnings targets. Here, another key longer than it took for books on Lehman and the figure in RBS’s collapse makes his appearance, US banking crisis to reach print. That may reflect Johnny Cameron. Cameron ran corporate and the political context behind RBS, whose balance investment banking and, according to Martin, was Published by Simon & Schuster 2013 sheet in 2008 was 30% larger than the UK’s gross the one RBS executive who intimidated Goodwin. domestic product. Such a concentrated impact by Yet Cameron was also out of his depth, as the one institution on a single national economy means bank’s RBS Greenwich subsidiary built up a that a relatively small number of people can be held subprime CDO business unchecked and without responsible for what happened: Fred Goodwin, RBS regard for risk. chief executive, and the bank’s board members Martin documents the one honourable executive along with its senior executives, major shareholders, to raise questions at RBS, risk manager Victor advisers, regulators and politicians. Some of these Hong. Hired from JPMorgan in September 2007 to people had a vested interest in not seeing a full look at Greenwich’s CDOs, Hong resigned six reckoning come to light. weeks later when he was blocked in his attempt to Iain Martin is well qualified to write a book mark down the bank’s positions. exploring the personalities and dynamics behind Hong’s resignation came just after RBS completed RBS’s rise and fall. A former editor of The its takeover of ABN Amro, increasing its CDO Scotsman, he describes the clubby world of exposure even further. That takeover is perhaps the finance and politics that led a staid most terrifying part of the RBS story. Key 300-year-old institution to grow into one of the stakeholders felt compelled to go through with the world’s biggest banks. Martin believes that RBS’s deal even as the subprime meltdown began, in effect failure was largely the result of a failure to stop signing the bank’s death warrant. At the end of the Goodwin, hence the book is as much a biography of book Martin asks whether Britain’s own too-big-to- him as RBS. fail bank was also too big and complex to exist in the An ambitious accountant from Deloitte, first place. Goodwin entered banking in the 1990s on the Since its bailout, RBS has continued to reveal strength of his obsession with detail and ability to itself as a repository of everything that was wrong drive through change. This obsession with detail with finance – misselling of payment protection extended to matters like the tidiness of bank insurance, mortgage-backed securities and branches, the colour of company cars and the shape interest rate swaps and, most notably, the Libor of filing cabinets, but not issues like risk or credit. rigging scandal. As giant banks continue to His other perceived strength, driving through surprise us, Martin’s book is the best argument change and integrating large organisations, led him yet for breaking them up and curtailing the Nicholas Dunbar is a into acquisition mania, culminating in the takeover wholesale markets that allow wrongdoing to financial journalist and author of The Devil’s Derivatives of ABN Amro. flourish.

Winter 2013 37