NICK GARBUTT: The demonisation of Fred ‘the Shred’
BY the time I joined National Australia Bank Fred ‘the Shred’ Goodwin had already left. I never found anyone who had a good word to say about him.
He had been chief executive of Clydesdale Bank where he had a reputation for ruthlessness both in cost-cutting (hence ‘the Shred’) and an autocratic management style that left no room for alternative views from his own. You were either with him, or in deep trouble.
He left to join Royal Bank of Scotland where his reputation was transformed when he engineered the acquisition of the National Westminster Bank. At the time every banking analyst hailed this as a triumph.
Mergers and acquisitions are notoriously difficult to pull off and often end in failure. For banks the operation is hugely complex and fraught with risk. When Danske Bank took over Northern and National Irish Banks, for example, just one of the challenges was to migrate the Irish banks’ more than 100 antiquated systems onto a single technological platform over a single weekend.
Goodwin’s coup established him as the darling of the banking world – and triggered a wave of mergers and acquisitions.
At the time all experts, including those today who take the opposite view, argued that there were far too many banks around the world and it was a sector much in need of consolidation.
They would often contrast banking with the oil industry saying that whilst anyone specialising in oil companies would have a great grasp of the comparative performance of all the significant players in the market, in the case of banking that was impossible. There were far too many players, many of them regional, and on the European continent there were still banks that had only one branch.
The race for consolidation was on. At the time there was widespread comment that both of the Irish banks – Bank of Ireland and Allied Irish Banks – were too small to survive in the post-Goodwin world and there was constant speculation about their future.
Goodwin’s big failure was the £45 billion takeover of ABN AMRO, the Dutch bank which ultimately led to RBS’s collapse and its takeover by the government at a collective cost of £45 billion.
It was a catastrophic error on Goodwin’s part. But we should also remember that Barclays Bank was also in the running to buy ABN AMRO and that at 18 separate board meetings the bank’s directors’ supported the acquisition.
I am not for one minute seeking to defend Goodwin or to say that it was wrong to remove his knighthood. His main failing, as with so many powerful people, was that he began to believe in his own myth and became so arrogant that he abandoned common sense in pursuit of growth.
However, it does seem obvious that what is going on today is that the government, backed by all the opposition parties, is seeking a scapegoat to blame for the economic collapse which we are still enduring.
In a time when the cult of celebrity is so all-embracing, it seems that blame for everything has to be personalised. And in this context Goodwin has been demonised. Yes, he made a catastrophic mistake which the rest of us have to pay for whilst he enjoys a pension far in excess of our salaries.
However, he was just one individual who contributed to the mess. Others include the former Chancellor Gordon Brown, who was so fond of “light touch regulation” for city speculators; the board of RBS, who were ultimately responsible for the bank’s good governance, and all the other spivs and money dealers in the city of London and elsewhere whose greed and lack of foresight caused the collapse of global financial markets which has wrecked economies everywhere.
And where does that leave other miscreants, people who, unlike Goodwin, have broken the law and still enjoy their peerages and knighthoods?
People like Lord Jeffrey Archer, who was jailed after lying about sleeping with a prostitute? Or Lord Taylor of Warwick, jailed after swindling £11,000 of expenses out of taxpayers?
If Goodwin’s fate is meant to send a signal of disapproval for the culture that has built up around banking and the City, well and good. If it means that others who have also brought dishonour upon the honours bestowed upon them will receive similar fates, that is also welcome. But if this is intended to bring closure on what has been happening in the economy, and distract people from continuing to criticise the bonus culture within banks then it is not. This cannot be the end.
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