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Shredded: ‘The pimp, the ghetto of fraud and the whorehouse of debt’

June 5th, 2014 (updated June 6th, 2014)

51X7rpKpfcL._ It has been nearly two years in the making, but Shredded: Inside RBS The Bank That Broke Britain was published by Birlinn today. It’s a look at the Icarus-like ascent of RBS under former chartered accountant Fred “The Shred” Goodwin, and examines many aspects of the bank’s spectacular rise and fall which have never before come under the microscope.

Unlike some earlier books about the RBS catastrophe, it contains a forensic analysis of the reasons for the bank’s failure, how former chief executive Fred Goodwin successfully blunted regulation by getting 10 Downing Street to intervene on his behalf, and an array of new anecdotes illustrating Goodwin’s despotic leadership style.

The book also lifts the lid on the astonishing failure of the British government (as well as the UK’s regulatory and prosecutorial authorities, and the bank’s supremely complacent non-executive directors) to do anything to change the bank’s rotten culture since it was handed a no-strings, £45.5bn bailout on 13 October 2008.

Everybody I spoke to at the bank insists that the bank’s corporate culture deteriorated markedly under Stephen Hester, its CEO from October 2008 to September 2013, and that things have got even worse since Kiwi Ross McEwan took the reins on 1 October 2013.

Among other things, I reveal that the government’s decision to introduce a top tier of superannuated City investment bankers both at UK Financial Investments and at the top of the bank was unlikely ever to bring the changes that the bankwhich also owns NatWest, Coutts, Ulster Bank, Citizens Financial, Adam & Company and a range of other financial brandsso desperately required.

The epitome of the multifarious cultural and ethical failures at the bank include the fact its investment banking arm, now due to be largely shut down, was only able to thrive by cheating, and that the arm, now called Markets and Investment Banking (M&IB), continued to rig various benchmarks, swindling investors and counterparties, for years after the bailout. Then there is the bank’s mendacious approach to litigation and of course the ongoing mega-scandal of the “financial terrorism” inclicted on scores of thousands of business customers by RBS, NatWest and Ulster Bank’s global restructuring group, known internally as the “grim reaper group“.

GRG has a track record of kneecapping viable business customers to which the bank has for some reason taken a dislike—or to whose assets it has taken “a shine”—before killing them off in a variety of ways in order to enable the bank to effectively make off with their assets. 

Then, of course, there is the fiddling of the group’s financial numbers by successive management teams. By giving a false impression of the bank’s financial health, the distortions have not only enabled the bank to hoodwink investors, regulators and politicians. It has also enabled its executives and traders to (just about) justify awarding themselves obscene bonuses, which they would otherwise have been denied. Luckily, however, the Prudential Regulation Authority wised up to at least some of the deceit last year, when it revealed the bank still had a £13.6bn capital black hole.

That came just a few short months after chairman Sir Philip Hampton and chief executive Stephen Hester first started trumpeting claims the bank was “sorted”, “a good bank” once again and ready to be reprivatised at any time!!

The bank also has a long history of under-providing for bad debts, litigation, criminal sanctions and customer redress, which means that the provisions it’s currently taking are almost ludicrously low. As I say in Shredded, the current provisions fall tens of billions of pounds below the reckoning the bank faces for past crime sprees — euphemistically referred to as “misconduct” by bankers and regulators.

However, as Mike Parker says in the tweet above, Shredded is not just a book about the catastrophic failures of one bank, or the reasons for these failures. It is really a book about what went wrong with the wider banking and the financial system in the UK and further afield from the mid 1980s onwards.

The book details a catalogue of political, regulatory and ideological failures — including blind faith in free markets, blindness to risk, wilful blindness to rampant financial fraud in the financial system and the love of debt — that culminated in the astonishing collapses of October 2008. I write that the UK’s lacklustre post-crisis attempts at sorting out these problems have left RBS and the wider UK banking system vulnerable and that further collapses are therefore almost inevitable in a decade or less.

There has already been a fair amount of media coverage of the book, including this article by Tom Harper and Nick Kochan in last Sunday’s Independent on Sunday. The piece, which describes Shredded as “an explosive new book” was the most read and most shared article on the entire Independent website on Sunday and most of Monday.

RBS could fail due to ‘£100bn black hole’ – with British taxpayers in line to lose their entire £45bn stake

 

There has also been some coverage in the Mail on Sunday, MailOnline, ITV News, The Herald, Daily Record and elsewhere, with significant further coverage planned for this weekend. There has  also been an article in ValueWalk in the US, and last but not least my appearance on the Keiser Report, recorded on Monday, 2nd June. My 12-minute interview with Max starts at 12 minutes 30 seconds.

Max Keiser comes out with some classic lines including:-

“Take a good look at this book because this is going to be skyrocketing up the bestseller lists around the world.

“I get the impression that [Fred Goodwin] becomes like a ghetto pimp, he becomes ghetto rich, you know these pimps, they make a few bucks, and they get the flashy car, and the fancy fur coat, and they strut around the ghetto. So here you have the ghetto of financial fraud, and there’s’ Fred Goodwin flashing his cash like a pimp, and the rest of the banking industry, they emulate that, they’re like ‘we want to be pimps too’.  [Goodwin was strutting his stuff as he lured all and sundry into RBS’s] whorehouse of debt …

“This is the definitive text, and I’m thinking of Barbarians at the Gate which came out about Kohlberg Kravis Roberts and the RJR Nabisco deal. This is an instant classic.”

There is also a more in-depth podcast avaible from the Keiser Report (but you have to be a subscriber to listen).

The book can be ordered from Amazon.co.ukBirlinn, WaterstonesThe Guardian and numerous other websites. It can also be purchased in most leading bookshops from today. An e-book will be available in a few weeks. 

There has also been a fair amount of twitter comment about Shredded. Here is a selection of tweets about the book:-

 

The book can be ordered from Amazon.co.uk, Birlinn, Waterstones, The Guardian and numerous other websites. It can also be purchased in most leading bookshops from today. An e-book will be available in a few weeks. 

Short URL: http://www.ianfraser.org/?p=10362

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