RBS - The Bank That Almost Broke Britain (Documentary)

ten years ago on the 7th of October 2008 Britain almost went bust we were on the very brink of Armageddon the stakes were incredibly High the giant Royal Bank of Scotland known as RBS ran out of cash they couldn't get to the end of the day the bank was finished and the government had just 24 hours to save the British economy we only had one shot here if it didn't work there was nothing else we could have done this is the story of how a small Scottish Bank became the biggest in the world RBS had assets of in excess of two point trillion pounds and the Relentless ambition of its boss Fred Goodwin who drove it to the top morning meetings Fred tournament morning beatings Fred was known as Fred The Shred he was quite ruthless in the way that he got rid of his people as Fred said himself my name doesn't rhyme with charming and considerate foreign for eight years it was a Non-Stop ride of multi-billion pound Acquisitions fast cars and private jets the money was flowing in and they were spending it as fast as they could earn it then the bank went from boom to bust threatened to take Britain down with it will that scale of catastrophe as your doorstep of course it's scary the worst could have been no cash in ATMs and hospitals not being able to function it was really the stuff of nightmares could have been one of those moments where you just sort of Turn the Lights Out get under the duvet buy a shotgun and some baked beans [Music] foreign [Music] there's more bad news on the economy it's looking very very Bleak at the moment it seems that the Motions running through the city are fright fear and panic at 8 A.M on Tuesday the 7th of October 2008 the chief executive of the Royal Bank of Scotland left his suite at the Ritz hotel and got into a dark blue chauffeur-driven Mercedes sir Fred Goodwin had selected the shade himself to exactly match rbs's corporate colors he was on his way to speak at a meeting of international banking investors a month earlier the giant U.S Investment Bank Lehman Brothers had dramatically collapsed and there were no real concerns about the stability of the global banking system it's a big event upwards of a thousand investors there my role on that day was to be on stage with the speakers I would introduce them they would give the presentation and then there was a q a session it was an audience of bank investors so particularly at a time when confidence was very fragile being able to stand up and give an assured presentation was really quite important Fred arrived and we brought him on stage but I don't remember there being any obvious signs of strain he had a prepared set of slides which talked about the growth aspirations and the opportunities presented to them as he was speaking I had no idea what was going on with the share price and I think the large majority of the audience had no idea what was going on it is rare to see markets so volatile Royal Bank of Scotland is now down 20 percent and it's fell on sharply in the past few seconds it just fell as as we were talking at the end of the presentation with someone with their hand thrust up very enthusiastically and he was looking at his BlackBerry as he spoke and he said sir Fred if the opportunities available to you are so exciting and if everything's going so well at the bank why is the share price Fallen 35 since you started speaking he went white and Fred was not someone who was often lost for words he mumbled something it was clear from the look on his face that he was stressed and he knew at that point we all knew at that point that the bank was in major major crisis mode he left the sage straight away he just stopped looked at me and said Manus I've got to go and walked out the door and I never saw him again thank you the extraordinary story of Fred Goodwin and the fall of RBS had begun 22 years before in Edinburgh at the historic headquarters of the Royal Bank of Scotland Royal Bank was just an icon its Executives played a huge and important role in the community they were all pillars of the society as that respectable area of banking that stood the Royal Bank in good stead for uh well almost 300 years back in the 1980s the people that ran the bank all had banking qualifications what came afterwards was very very different following Margaret Thatcher's deregulation of the financial industry which culminated in 1986 with the big bang Scottish Banks increasingly became a target for their larger English counterparts having survived one takeover bid the Royal Bank of Scotland decided to shake up its management team George Mathewson an engineer by training with no formal banking qualifications was brought in as director of strategic planning and development it was quite obvious that if we continued the way we were going that the bank would have to be taken over yeah this is the boardroom this is my S12 boss I went to the chairman and said I would like to be given a brief to change the bank Mathewson quietly began to recruit a new Young executive team around him I had never worked in a bank I hadn't worked in finance my background was maths and economics George phoned me he suggested I come and work in the Royal I wasn't a banker I was minding my own business in San Francisco the phone rang George Mathewson was on the phone and saying he was moving to the Royal Bank and would I like to join him George decided that it was necessary to look at a major reconstruction of the entire world bank group costs had to be got down the stock market was dumping the shares there was a real crisis something had to be done Mathewson got rid of many of the old RBS Executives and tasked his new team with an ambitious plan to modernize the bank called project Columbus [Music] Maria engineered all the payment systems we really engineered the Credit Systems we re-engineered the sales process we were the first bank to introduce telephone banking for an example you could Swan up on Christmas Day and make a payment if you were so inclined we were one of the first Banks to talk about putting branches in supermarkets the boards are groundbreaking project and it worked mathewson's project Columbus transformed the Royal Bank of Scotland and by 1997 he'd tripled profits to over 800 million pounds a year the changes allowed OBS to survive because had the changes made in the early 1990s not being made OBS would have been gobbled up and become part of one of the other big National Banks but we moved to a view in which the bank really saw you as a source of cash how much can we get from this person can we sell them a mortgage can we sell them life insurance can we sell them unit trust it did make me wonder whether we had begun to create some sort of monster over which we had very little control on the morning of the 7th of October 2008 as the RBS share price collapsed the chancellor of the exchequer Aleister darling was attending a meeting in Luxembourg [Music] it was a meeting of the European Finance ministers they meet monthly he didn't want to go he knew that he should be in the treasury to handle the impending crisis however and if he hadn't end up he was frightened that it would spook the markets even more it's after he starts the meeting that events really get going in London in terms of the RBS share price collapsing it's dying about 30 at one point it's been suspended twice Christine Lagarde the French Finance Minister was asking what's going on I said that you know at some stage I was going to leave because I was going to have to go and sort this out while darling was in the meeting his received a call from London the chairman of RBS wanted to talk to Alistair directly which was always a bad sign when a bank chairman you know urgently wants to speak to the chancellor of the exchequer so Tom McKillip had been chairman of RBS for less than two years he'd come from the pharmaceutical industry and this was his first experience of a banking crisis it was clearly very very anxious and very agitated and he said look we're hemorrhaging money it was billions going out of the door what are you going to do about it and I said well how long can you last and there was a pause and I thought I heard him talk to somebody and he said well we're going to run out of money this afternoon Alistair said he did feel scared at that point of course it's scary will that scale of catastrophe as your doorstep the largest bank in the world about to collapse it took me you know a nanosecond to think we can't allow this to happen and so I went back to London to make sure that it didn't 19 98 George Mathewson had become chief executive of RBS and re-established it as Scotland's biggest and most successful Bank but at 58 years old he was looking to appoint a successor try not to look at the camera okay he had his eye on Fred Goodwin the 39 year old chief executive of the smaller Clydesdale Bank Fred was decisive very intelligent quite confident for a young man he was much younger than the other Chief Executives Goodwin had originally trained as an accountant and was marked out by his systematic approach to cost cutting Fred was known as Fred the shred and he got that nickname during his period with the Clydesdale Bank he was quite ruthless in the way that he got rid of his people there was nothing nice about it Goodwin's reorganization of the Clydesdale persuaded George Mathewson to offer him the posts of both Finance director and deputy chief executive at the Royal Bank of Scotland the day of his appointment I did get a call from the Clydesdale Bank they told me he'd been partying for three days and good luck they just had enough of the man and his rather rough and abrasive management style with Fred Goodwin on board he and Mathewson were soon confronted with a problem in early 1999 their Chief rival the plain old Bank of Scotland made an audacious bid for the much larger English Bank NatWest RBS really had a sense that if they didn't participate in that deal then their rival Bank of Scotland would become much larger than them and they would then be the small fryer and they would be swallowed up by someone else so it was quite a sort of it was it was a pivotal moment for RBS Mathewson and his new Deputy decided that RBS despite being less than half the size of nat West would launch their own hostile takeover bid there's a huge amount of traditional City skepticism and snobbery about as they see it a couple of relatively small Scottish Banks scrapping over buying this much bigger English Bank I don't claim because I run a corner shop but I can also run test cares and it's that situation I admire them I like them but I don't think they have the knowledge to run this business that really spurred on George Mathewson and Fred Goodwin they were determined to prove their critics wrong here you are about to take on the slumbering giant twice your size size you know some people call NatWest a great dinosaur and surely at least in a kind of five-year term it could do nothing but slow you down why we are so successful as we know the risks to take and we know how to manage the risks and that waste is an acceptable risk and it is a tremendous opportunity Fred Goodwin wrote the Takeover document and I think he did a remarkable job in that I've always said that was his magnum opus in our offer document we've set out 111 initiatives I think we would do to address cost issues more importantly we've set out 40 or did specific initiatives which we'd Implement straight away to address income related issues Fred was pivotal to the Takeover of NatWest and he was really quite brilliant he knew the detail he knew the numbers he was very much inspirational the best we can do is to explain our case and explain the facts to investors and let them make their mind up bidspan at West close on Monday night amongst the key decision makers on the NatWest takeover where the city's giant asset management companies it was the day which would decide the deal and Fred put his head around the door and said Mercury Asset Management mom have come out for us and I said plan bam thank you ma'am Brett is confident tonight that it'll soon be home to have made a new force in banking the Takeover of NatWest was a great moment of for Scottish banking you know after a hundred years and more of English banks owning substantial shares or trying to take over Scottish Banks he was a a rule reversal takeover of NatWest in January 2000 was seen as a great coup by the city and soon after George Mathewson was appointed RBS chairman at the age of only 42 Fred Goodwin became chief executive in less than six years he'd risen from unknown accountant to running the third biggest bank in Britain [Music] the main headlines here at 11 o'clock RBS shares plunge nose diving through the course of this morning by mid-morning on the 7th of October 2008 with the chancellor Alistair darling returning from Luxembourg responsibility for handling the crisis failed to Mervin King governor of the bank of England on the morning of the 7th of October I was able to return a call to Tom McKillip the chairman of Royal Bank of Scotland who basically said they could not get to the end of the day over the previous few months Marvin King had been made aware of the worsening situation at RBS Franklin would phone the bank and me personally to update us on the problems they were having they had been able to borrow money for three months and then it was one week and then quite quickly they were struggling to finance their balance sheet by borrowing overnight now just imagine yourself trying to run a business were the only way you could stay afloat is to borrow vast amounts of money tens if not hundreds of billions of pounds every night repay it the next day and try and borrow it back all over again now markets were simply not willing to lend to him even for a matter of hours they couldn't get to the end of the day the bank was finished [Music] when you've got a bank in a mess the bit that you can always do immediately and that you have to do immediately is the Bank of England simply lending a troubled bank money what's called emergency liquidity assistance to give one the space in which to sort out the permanent answer the bank of England had made liquidity loans before but rbs's huge size meant that it would need an unprecedented level of emergency funding we basically decided that we would have to extend whatever cash RBS needed to get through that day but to get through the next few weeks we had no choice the banking system as a whole was going to collapse the bank of England to meet John Cummings the Chief Financial Officer of RBS to discuss how much the bank needed to stay afloat and I drunk quite well he was he was quite stressed obviously and um you know this was an unprecedented situation so we talked about broad numbers uh I think John talked about a number up to about 25 billion pounds at that time and that could be needed very quickly the bank of England suspected that RBS would need much more liquidity than they were asking for but lending vast sums of public money to the struggling Bank created a new risk if we had simply say well today we are lending Royal Bank of Scotland 30 or 40 billion pounds I was worried that we would simply Trigger or run on the bank so I was determined that we would have to do this covertly the bank of England secretly transferred government bonds to RBS which you could then swap in the markets for cash it worked very successfully and the operations did solve their immediate liquidity problems total lending facility to RBS reached its highest level at just over 36 billion pounds it was a very big intervention I think it's one of the biggest interventions ever done anywhere but the billions lent to RBS by the bank of England was only the first step it was going to cost the British taxpayer far more money than that to keep the bank alive [Applause] [Music] eight years before in 2000 following the successful takeover of NatWest rbs's new CEO Fred Goodwin embarked on a series of major Acquisitions of businesses and banks in Europe and the US these are the staff magazines for the Royal Bank of Scotland this is the March 2002 Edition looking here at uh outstanding results for 2001 and you've got Fred Goodwin there George Matheson got that nice optimistic feel with the sky above there was a real belief in RBS that they were very good at Acquisitions they could buy things they could improve them they could make them more efficient they could run them better and then they would be on to the next one 2003 and this is when a winner car scheme came in for long-serving staff so a member of staff could win the car each month so you've got that month's lucky winner being presented to the car bye Fred we felt part of something really big and something that we wanted to be proud of great people in the great bank and it was a great place to be but not everyone enjoyed working at RBS morning meetings Fred turned them into morning beatings where a lot of people were taking the task in front of their peer group and given damn good thrashing on some occasions they really could get quite personal and quite nasty hello I was aware that his style was abrasive people have said it was abusive and I was sadly unaware of that I treat all such statements with a pinch of salt I had a half hour meeting with them shortly after we took over NatWest that he wanted me to save an extra 5 million uh he made his points forcibly and it had been a boxing match it would have been stopped after 10 minutes you just didn't know how to operate he gave you very few degrees of freedom I may have suffered slight post-traumatic stress syndrome that I wasn't in a war or anything although it felt like a war or something he created a fear and blame culture which I don't think helped RBS in the slightest I've met anybody in RBS that actually liked him and I've been classified Fred as a friend that doesn't mean no regard them as Flawless by them by the way nor he me I'm sure while some found Goodwin a challenging boss George Matheson wasn't the only one who thought highly of his CEO many in the city were equally impressed I was quite pleasantly surprised when I first met him because he actually had a quite a sort of dry sense of humor he had incredible detail about the bank sort of at his fingertips in his mind he was clearly in charge in 2002 Fred Goodman was named International businessman of the Year by Forbes Magazine a huge Accolade in the highly competitive world of banking the growth in RBS was something which people took a lot of pride in where it was seen as a symbol of economic prowess RBS was popular with politicians too by 2004 the bank was paying more than 800 million pounds a year in tax revenue which helped to fund new Labor's huge program of government spending treasury enjoyed the tax revenues of the banking system and people like Fred Goodwin provided the regulation as a result was light touch the entire climate of the time was go easy these are engines of growth for the British economy and times were good and it seemed like it would carry on like that forever and under this government Britain will not return to the boom and bust of the past in June 2004 on the recommendation of the chancellor of the exchequer Gordon Brown thank you very much Fred Goodman was knighted for services to banking his charitable work as chairman of the princess trust was also recognized so Fred Goodwin is another person I want to thank because we couldn't do this without again such a hard-working chairman his contribution is quite remarkable thank you so much Fred for all your wonderful help under Fred Goodwin's leadership RBS had become a major player in World banking with operations in 27 different countries its growth in the U.S was particularly Strong having bought several banks that were profiting from the lucrative subprime mortgage Market growth of RBS was really blinding almost everyone across the political spectrum and across the financial establishment to what was really going on underneath the surface under the bonnet and what was happening was that RBS had effectively grown far too fast it was simply too big for any individual no matter how talented to understand and manage effectively the market some of Britain's biggest banks have seen their share prices plummet again at one point the value of shares in the Royal Bank of Scotland was down by more than 30 percent so we're just seeing anything a knee-jerk reaction this morning of panic Robert peston then the BBC business editor had been tracking the crisis in British Banking for over a year but even he was shocked by the speed of events on the 7th of October 2008. make no mistake there is an emergency out there we can't have too many more days like today I just couldn't believe that I was actually you know reporting this stuff it just felt so unreal share prices of our biggest banks tumbling all sorts of anxiety and money markets a solution has to be found the stakes were incredibly High it could have been the mother of all economic depressions we could you know it could have been one of those moments where you just turned the lights out get under the duvet buy a shotgun and some baked beans by lunchtime a bailout team reporting directly to Gordon Brown were already hard at work at the treasury prime minister was determined that we were going to have a preemptive comprehensive plan the treasury was in the front line in terms of implementation the treasury team was made up of leading Bankers government ministers and top civil servants they had no Illusions about the critical nature of the task they faced the likelihood of RBS failing would have been complete Panic amongst every human being in the United Kingdom and every other kind of RBS and the worst could have been no cash in ATMs and hospitals not being able to function it was really the stuff of nightmares we were on the very brink of Armageddon the treasury had been closely monitoring ailing Banks like h-boss for some weeks and preparing an emergency bailout plan for the whole banking system but the sudden collapse of RBS had caught them by surprise well the bailout plan wasn't ready it required quite a lot of calibration being in the treasury at that time felt like being with lots of people who were trying to gather information in a really fast-moving environment judgments that would have normally taken days had to be made in half an hour now how much money is the bank really short how much do they have to raise between now and four o'clock so just is this this stream of intelligence gathering the markets were incredibly fragile the plan needed to be preemptive ahead of the market that's a very narrow space we had to land in that space I was feeling physically sick it was terrifying to be involved in something so enormous I mean it's a disaster movie type stuff where is the superhero you know Gordon Brown asked Alastair darling to finalize the bailout Plan before markets opened the following morning the chancellor of the exchequer now had less than 18 hours to deliver [Music] 8 o'clock in the afternoon by the time we got back in from the airport all the team that dealt with you know this crisis they were all there Alliston was very calm and said you know he would deal with it he wasn't um panicking Alistair doesn't panic the treasury is pretty calm and actually the design of the building is such that it's extremely difficult to Foster any Panic even if you tried your best to do it it's the classic corridors of power the Chancellor's office is just off one of those Allison wasn't 100 confident the plan would work however it was the best plan they had we knew what we had to do and you know in my experience you shouldn't really Panic unless it's absolutely necessary the treasury's bailout plan was to address the crisis in the markets with a massive injection of cash and government assurances the numbers involved were huge um there was loan guarantees of over 250 billion pounds for example and the asset protection scheme was of similar size if RBS failed the government feared it would create a domino effect bringing down other major British Banks and crippling the economy overnight to prevent that the treasury promised to underwrite losses of up to 500 billion pounds to secure the banking system scale of it was really quite important that people saw large numbers what it really identified was the British government was going to do whatever it took to actually protect the financial system of this country what we were trying to do was to say to the UK to say to the world the British banking system has been shored up it is safe it's robust it will be functioning as normal from the next day [Music] the most radical part of the bailout plan was a proposal to use billions of pounds of taxpayers money to buy shares and any Bank at risk of collapse effectively taking them into public ownership what we needed to do was first and foremost make sure that Banks had adequate Capital that's money behind them that they could draw on and so they could carry on functioning but also critically give markets and investors confidence that they had something to fall back on sheer scale and speed of the government bailout plan was unprecedented this is not an off-the-shelf scheme this is something that was Radical it could absolutely have erupted if people had responded badly we only had one shot here if the plan worked it would be fine if it didn't work there was nothing else we could have done and you do not get two shots at these things there was only one job to do get the thing done for Wednesday the 8th morning before markets open honestly nothing else was relevant at his headquarters in the city of London Fred Goodwin was waiting to hear the details of the bailout plan its key proposal that the government become the majority shareholder of RBS would spell the end of his career at the bank it was not a solution that he was likely to agree to [Music] only three years before RBS was flying high by 2005 thanks to Goodwin's constant Drive for International Acquisitions it had become the fifth largest bank in the world and more than a quarter of its profits were now coming from its U.S operations the money was flowing in and they were spending it as fast as they could earn it RBS has moved into the world of lavish corporate entertaining into the world of corporate Jets if we got a story that Fred Goodwin had a private jet we had chapter and verse on it we had the name of the jet we had its flight patterns I got one of my colleagues just to put in a courtesy called The Press office and say you know do you want to make a comment about this private jet and they went away and they came back and said there's no private jet the private jet even had a personalized number plate G RBS G eventually I then rang up and sort of got quite angry with them and they still came back with some some up utter nonsense about how this was a jet that the bank owned as a leasing thing and it was just nonsense this refusal to admit that they had this jet was sort of relevant of an organization that created its own reality but the feeling was very strongly that success and too much money had gone to Goodwin's head and to the head of those around him in July 2005 sir Fred Goodwin moved RBS from its historics and Andrews Square Basin Central Edinburgh to a new site at gogorburn on the outskirts of the city at a cost of 350 million pounds so this is a 50 pound note which had an illustration of gogaban it's a corporate gift item that was issued to VIP visitors and guests as part of the opening of gogaban it was a very Grand the case it was a royal opening of course you had the queen you had all of the political class coming to what was effectively the opening of of a Bank building even a prudent Bank needs to build a new headquarters once in a while you had fly passed by the RAF I mean this is something that's usually done for great Royal occasions not for the opening of a business office that was a bigger fly faster than the opening of the Scottish Parliament but look there was absolutely nothing wrong with that I mean to establish a major International headquarters of what was becoming a major International Bank was an unmistakably good thing it's quite extraordinary that are we country like ours could produce something that really is I think leading the world now I remember at this amazing uh you know mock street with lots of shops and reality where officers [Music] Scotland with this future with a sense of optimism the future is always unknown but we face it with a sense that the opportunities will be more than the challenges it was just Overkill welcome to Google [Music] [Music] Goodwin had personally overseen every aspect of the design of the new building [Music] executive Wing was massive and Fred Goodwin's room was like a tennis court with fantastic views over the hills that surround Edinburgh hit an eye for detail right down to the the color of the carpets the attention to detail there really tipped over into excess I've always regarded that degree of obsessions kind of a Fred foible rather than anything else he is a man for detail I think he should have focused in the big picture instead of the color of carpets some of Goodwin's more exotic design features and the private executive Wing attracted the attention of the press when the Sunday Times reported that there was a scallop Kitchen in there Goodwin objectives the scallop kitchen as he pointed out wasn't just for scallops it was for all forms of seafood which made him sound even more remote he didn't take kindly to any form of bad publicity I think if he'd been a more likable person the Press might not have had it in for him when the Sunday Times went on to claim that Goodwin was planning to build a private road from his new HQ to Edinburgh airport he began legal proceedings hubris is really set in RBS has achieved a lot of course but it has a chief executive who will not accept criticism [Music] Britain's big Banks under sustained attack on the markets as we go on air there are crisis talks about how to stabilize the banking system by early evening on the 7th of October 2008 just over 12 hours before markets opened the government team now needed the banks to sign up to the bailout plan having briefed the prime minister at Downing Street Alistair darling returned to the treasury to meet sir Fred Goodwin and Britain's other top bankers all the biggest banks in the country were there Fred Goodwin came about seven o'clock I'm very impressive it's calm collected he could very well have been your proverbial duck that looked calm on the surface and was paddling like mad underneath but it wasn't obvious however cool Fred Goodwin appeared he and his bank were clearly at the center of the crisis if RBS had failed the consequences for the other banks in that room would have been very severe so they were all in this together they were not used to be in the position from being the Masters of the Universe to very much coming as supplicants some of them were ashant faced they were all scared but at that stage they didn't really know you know what the government had up its sleeve at the center of the bailout plan was the request that to come the markets all the banks signed up publicly to a 50 billion pound package of capitalization in reality while hboss was also in trouble RBS would be by far the largest recipient and the government would become its major shareholder there was no agreement from the banks to sign up to the collective deal they wanted to negotiate on that issue of the shareholdings one of them said what if we don't agree to it and I said well tomorrow morning when everything crashes you can explain to your shareholders that you didn't fancy doing what were what we asking you to do so that was the end of that conversation and so Alistair darling said try and understand the deal better it's like you don't understand once you understand your sign I was just trying to sort it out because the Clock Was ticking all the time if we did not have a done deal by seven o'clock the following morning that was it so the bank's all trooped out and I was sent down to explain it to them and in that meeting it was clear the pressure was moving around the room and at some stage somebody said come on Fred we all know it's your issue his fear was that if we'd announced eight Banks 50 billion and the minute we announced it seven back said it's not us what is him with the bailout negotiations set to run into the night treasury officials decided to send out for food it was actually a very good Curry House just on the south of the river which I'd been going to for years and somebody hidden the idea why don't we get them to bring some curry in there was this enormous order place which was actually piled high in in little containers next to the Chancellor's office it's available really to anyone that evening to come in and take well it's a sore point the balti because I didn't get any of it by the time I'd made my way back from this meeting with the CEOs the bolt you'd been completely hoovered up as midnight approached Goodwin and the other CEOs were still refusing to sign up to the bailout plan I worked out if I stayed in the building there was always a chance that I might relent so I told them much at about 11 o'clock that I was going to my bed it was a very bold move and a very good move because if he hadn't left the building the banks would have chiseled away and tried to make adjustments as they saw fit by 2 am all except one of Britain's major Banks had agreed in principle to the conditions of the B load Fred goodin was resisting until the end the need for RBS to have any Capital we didn't say we are forcing you we said the banks need capital and this is the money that is available he didn't have a choice [Music] only 18 months before the bailout in February 2007 Fred Goodwin's RBS looked invulnerable the Royal Bank of Scotland has announced the biggest profits ever made by a Scottish company RBS made more than 9 billion pounds rbs's record profits owed a lot to the performance of their U.S banks in particular the Investment Bank Greenwich capital Greenwich Capital had substantial operations in mortgage markets they had a reputation for being quite aggressive in terms of of the risks that they were taking it seemed like a good idea at the time subprime lending writing home mortgages to people who just a few years ago might not have qualified for one it was clear that there were potential problems building up in the U.S housing market and in the subprime segment of U.S housing in particular HSBC issued a profit warning at the beginning of 2007 which was one of the signs that you know this was really going wrong with with us subprime I don't think anybody had the sense at that point or very few people had the sense at that point that there was a major crisis in the offing but it felt like a correction could be could be coming despite the ripples of concern about subprime Fred Goodwin and his new chairman sir Tom McKillip were confident about the outlook for their bank and here at at RBS business is very good indeed I can't predict the future uh something we have in common none of us can predict the future we do uh operate within an economic environment that is positive and Luke's set to remain positive foreign 2007 Goodwin's RBS joined forces with two other European Banks Santander and Fortis and launched a hostile bid to buy the huge Dutch bank ABN Amro John Varley the chief executive of Barclays Bank was already in talks with ABN over a possible merger the decision to buy avian Amro is very much driven by Fred Goodwin's determination to beat John Varley who he'd come to see as a great rival I'm always a bit skeptical of these kind of explanations to say it was all down to one person's ego but in this case I think that did bear a big big part in it to put off RBS ABN Ambrose CEO reichmann hoonig sold its prestigious U.S Investment Bank LaSalle which Goodwin had identified as one of his key targets you can't get LaSalle anymore um what from your perspective from RBS really makes a possible deal with Serbia number interesting to you we would like to have but there are shareholders are very clear that the residual attractions are significant not just financially in any you know Financial attractions or the least of it all be they are very financially attractive you could sort of feel the RBS team convincing themselves that it still made sense for them to do this deal what's most curious about it though is that as the deal progresses when it becomes more apparent that there's something serious happening in the financial markets there aren't efforts made by The Regulators or some of the main shareholders to pool the emergency brake thousands of anxious Savers pressing at the doors of many Northern Rock branches waiting to get their money out in September 2007 a growing credit crunch in the financial markets caused the first run on a British Bank in 150 years as Northern Rock dramatically collapsed even that didn't deter Fred Goodwin a month later on the 17th of October his RBA sled Consortium won the battle for ABN Amro paying a record 71 billion euros for the Dutch bank most of it in cash when I heard it was a cash offer I really thought poor guy had taken leave of his senses buying ABN was just catastrophically hubristic arrogant wrong in order for the acquisition to work they were operating at the absolute minimum amount of capital that they were allowed to by regulators clearly that was a very risky position if this goes wrong you really have nothing left in the tank with very low Capital reserves RBS were now dependent on being able to borrow billions of pounds from other banks on a short-term basis coming too dependent on short-term Finance was suicidal for this bank at precisely the wrong moment in the cycle ahead of a financial disaster across the West RBS becomes with the purchase of ABN Amro the biggest bank in the world by balance sheet with assets of in excess of 2.2 trillion pounds this year alone more than a million Americans are expected to lose their homes to foreclosure's hit a record last quarter Rising even among borrowers with good seeing uh continued subprime ripples uh working their way around the world as the crisis in the U.S mortgage Market gathered speed in late 2007. Financial analysts began to suspect that rbs's giant new balance sheet contained significant amounts of toxic subprime mortgage packages known as cdos one of rbs's key U.S banks Greenwich Capital which specialized in cdos was now starting to lose tens of millions of dollars a month by April with rbs's reserves depleted Goodwin now desperate for cash was forced to turn to the bank's shareholders because the Royal Bank has just got out the biggest begging ball in the history of British business plan was to raise 12 billion pounds by selling cut price shares in the bank through a rights issue so RBS basically sold new shares to its investors which was hugely embarrassing given that you know it was less than 12 months since they'd made this massive acquisition encouraged by their chief executive many RBS employees invested heavily in the rights issue the feeling at that time was that Royal Bank shares wouldn't go below two pounds so it was a was a good deal to take up so um I took up my full allocation former RBS chairman Sir George Matheson who'd retired from the bank in 2006 also took up the offer as far as the rights issue is concerned I I thought the bank still stable and solid and supported how much money did you invest in there let's just say a lot foreign nobody was thinking I could lose all my money here in six months the idea that a big Bank like RBS would suffer losses of such a scale that it would have no Capital left was was something even at that point that people weren't really contemplating indeed the giant U.S Investment Bank Lehman Brothers collapsed sending shock weaves through the financial system stock markets are falling here and around the world as one of America's oldest and biggest banks files for bankruptcy point about Lehman Brothers is you just knew if a bank like that is allowed to fail any Bank could fail by the beginning of October fears that another major financial institution could collapse paralyzed lending between the banks and the final lines of credit that RBS needed to survive were cut off [Music] in the early hours of Wednesday morning Britain's biggest banks finally agreed to sign up to the treasury's bailout plan I got up at five o'clock when you're in 11 Downing Street the flat is just above the work of your life so it doesn't long take long to come down but what I had arranged the night before was I wanted a meeting at five because I wanted to know where the negotiations had got to but at 5 30 he was taking this briefing I was told by a lead official that our proposal to put 50 billion pounds it's a lot of money into the system to provide capital for the banks would shock the markets because they'd think it got us worse than we thought and it would be better to do 25 so we eventually agreed you know after about 10 minutes we'll announce 25 billion pounds and I will say there's 25 more to come and everybody's happy because apparently they weren't going to add 25 and 25 but it still came to 50. he read the announcement made a few tweaks we got confirmations from the banks before seven to say they'd sign up as we were about to acquire substantial shareholding in RBS I have to sign off literally sign off and I remember sitting overlooking Saint James's park in Central London just as it was getting light and I studied a historic moment here you know you are acquiring a large chunk of the world banking system signed off the deal at 7am am darling left the treasury to present the bailout to the media at 9 20 he arrived at Downing Street to make a joint statement with the prime minister good strong banks are essential for every family and for every business in the country and extraordinary times call for The Bold and far-reaching solutions that the treasury has announced today I just say this that we are going through a period of extraordinary turbulence in every part of the world every single country is being affected when I look back now there's not many occasions when you can honestly say what we did made a difference uh and this is one of the occasions it did make a difference if we had not done what we did then the banking system would have collapsed and the consequences would have been kilometers it was never really about saving the banks it was about saving the economy from the banks the condition of the government out of RBS so Fred Goodwin was forced to resign as chief executive but not before he attended an extraordinary meeting of the bank's shareholders who'd seen the value of their shares Fall by over 90 percent I would like to hear sir Fred Goodman actually say sorry Mr Black he wouldn't wanted to be any doubt in anyone's mind at all other than I'm extremely sorry this has come about I Echo entirely the sentiments that the chairman expressed on behalf of all of the board earlier on this is a something about which I am extremely sorry despite his apology Goodwin insisted on keeping his considerable RBS pension put seven hundred thousand pounds per annum index linked as long as he lived to me was obscene I mean it was absolutely obscene for having destroyed a business I can understand the Outreach but in order to get people into a job like that that time that was the that was the deal wouldn't it be fair to other pensions in Britain that your pension was linked to the Share value of the bank that you ran you know my pension is the same as everyone else in the bank is an undefined benefit pension scheme it's the same as it is determined in the same way as anyone else and anywhere else who's in a defined benefit pension scheme under pressure from the government Goodwin agreed to give up almost a third of his pension but he remained the focus of public anger over the bailout and in 2012 he was stripped of his Knighthood he still lives in Edinburgh and declined an invitation to take part in this program Fred Goodwin got a lot of the blame but a lot of other people deserve a share of the blame too the RBS board didn't do its job properly The Regulators paid insufficient attention the government was high on tax receipts from these booming Banks and didn't ask the right questions about what was really going on I don't defend what he did in terms of expanding Royal Bank of Scotland but if you're not careful you start to think if only that terrible man Fred Goodwin hadn't been there then we wouldn't have a problem and that's wrong it was a system as a whole that failed not one individual following an official inquiry into the fall of RBS the head of its investment division was banned from taking another top City Job but otherwise no further action was taken against Goodwin his management team or the RBS board over the last decade the bank has been caught up in a series of financial scandals and disputes with customers and recently paid a record fine to the U.S authorities for its role in the subprime crisis but under the leadership of CEO Ross McEwen in 2018 the Royal Bank of Scotland announced a profit for the first time since 2008. any financial service business must always hold two things dear firstly it's Financial strength and the second is its reputation we lost both of these we fell the furthest we've also we have changed the most we are a different bank now the government has now begun to sell its shears in the bank slowly returning it to private ownership it's unlikely however that we will recoup all of the 45 billion pounds invested in RBS in all the government bailout of the banking system cost the British taxpayer well over a trillion pounds the economy has yet to fully recover and Britain has endured one of the most turbulent political decades in living memory I think that we're still dealing with the aftermath really of of that whole crisis a system where Banks took risks and they went wrong and nobody was really punished for what happened is still the source of a lot of anger amongst ordinary people who don't quite understand how that was possible the gain over decades was privatized to the bankers and then the pain was nationalized to the country so much of what's happened since then the erosion of confidence in Business Leaders in politicians stems from that crisis in bailout because it crystallized in people's minds that this place was not being run for most of us it was being run for a privileged few and people are still angry that many of those privileged few kept the money and most of us are continuing to pay the price [Music] foreign

Channel: TradingCoachUK

Views: 465,040

Keywords: Wall street, fx, forex, stocks, oil, trader, warren buffet, trading, investment, options, finance, currency, markets, news, stock market, hedge fund, business, top 10, billionaire, documentary, wealth, documentaries, 2023, stock market for beginners, investing tips, technical Analysis, forex trading, market crash, housing market crash, inflation, fed, tesla stock, nifty prediction for tomorrow, cnbc, bitcoin, ray dalio, yahoo finance, recession 2023, investing, stock market crash, federal reserve

Id: W_ZWGuQ07Q8

Length: 58min 47sec (3527 seconds)

Published: Wed Jan 04 2023

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[u/HopFarminScientist]

It makes you want to get under a duvet cover

with a shotgun and a can of baked beans…

[u/ddt70]

Is that Fred the Shred?

Fckin twunt.

[u/KidQuap]

This shit is sicking