RBS purchase of ABN- AMRO
Discussion
On BBC2 now - RBS the bank that ran out of money.
Bought a share of ABN-AMRO for £27 BILLION and don't think much due diligence was required.
Bought mainly wish cash reserves.
Totally and utterly inept management.
Who buys a company with "due diligence light" to quote Goodwin
What a f
kwit.
Bought a share of ABN-AMRO for £27 BILLION and don't think much due diligence was required.
Bought mainly wish cash reserves.
Totally and utterly inept management.
Who buys a company with "due diligence light" to quote Goodwin
What a f
kwit. It seems beyond belief that Goodwin and board members lacked understanding in the kind of business his banks were involved in. They talk about complex products designed by mathematicians and physicists but the senior management didn't really understand them. Derivatives and derivatives of derivatives and nobody at RBS apparently realising how exposed they were to US sub prime until well after the ABN AMRO take over.
The Documentary stated that if RBS hadn't been bailed out it would have resulted in the collapse of the entire UK banking sector. Is that likely to be the case?
The Documentary stated that if RBS hadn't been bailed out it would have resulted in the collapse of the entire UK banking sector. Is that likely to be the case?
johnfm said:
The analysts grilling the board seemed to understand the risks more than the board.
I wonder if any of the board stopped to think "hmmmm , they have a point"
I used to do some work for a director of RBOS, and he told me in no uncertain terms that Fred Goodwin was a complete and utter sh@t who did not really listen to anybody, least of all an analyst, which is a pity given they were right and he was wrong.I wonder if any of the board stopped to think "hmmmm , they have a point"
I used to find it mildly amusing that this guy had a glass award for his work on the ABN AMRO deal on display in his toilet.
el stovey said:
The Documentary stated that if RBS hadn't been bailed out it would have resulted in the collapse of the entire UK banking sector. Is that likely to be the case?
I think so.Banks have to borrow from each other. If RBS had gone down, then inter-bank lending would have seized up.
Don
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el stovey said:
It seems beyond belief that Goodwin and board members lacked understanding in the kind of business his banks were involved in. They talk about complex products designed by mathematicians and physicists but the senior management didn't really understand them.
Most people didn't understand them properly, including the Ratings Agengies - but basic Risk Management is much simpler than all this. Goodwin, Fuld, etc. failed in basic risk management and value-at-risk - something than any Insurance specialist could have told them about. It's about carrying the right-sized umbrella which can handle a severe rainstorm - looking at the downsize first before considering any upside. RBS, HBoS and many of the Building Societies never considered the worst case. Lloyds (or at least before the clown hoodwinked them into buying HBoS) never entered markets which they had not completely analysed - often by which time it was too late - but they didn't lose anything on subprime. Other big players like Barclays, had suitable hedges in place. And some like HSBC just had a massive balance sheet behind them. As Tonker says RBS was just plain reckless, because they gambled bigger than the pot they were holding. Now, can someone offer me a job in Risk please.el stovey said:
The Documentary stated that if RBS hadn't been bailed out it would have resulted in the collapse of the entire UK banking sector. Is that likely to be the case?
No, i don't believe it was the only option. They could have nationalised the debts, sold off the profitable portions (and zero'd out the shareholders completely as per Lehman Brothers). But then RBS was ten times bigger than Lehmans and it would have been a massive unwind exercise. I also believe it was politically expedient to bail out RBS - remember the Treasury set the Capitalisation requirements a month or so before RBS imploded and Barclays needed offshore assistance. Things happened the way they did because certain people wanted it to happen that way.Edited by fido on Monday 5th December 22:59
What I do not get is the apparent stupidity of some in very senior positions, we are always lead to believe the brightest of the bright go into the city. If so, how does one go about being the top of the tree, or are they the ones that learnt the corporate ladder game better than their peers and have no actual understanding or regard for the business they are suppose to manage.
Is there such a thing as criminal negligence on their part in all this, say, could you claw back pretty much every cent they earned and make them live in poverty after a prison spell. It would certainly concentrate the mind and go towards making sure their successor's weren't so cavalier with money in the future.......
Is there such a thing as criminal negligence on their part in all this, say, could you claw back pretty much every cent they earned and make them live in poverty after a prison spell. It would certainly concentrate the mind and go towards making sure their successor's weren't so cavalier with money in the future.......
HarryW said:
What I do not get is the apparent stupidity of some in very senior positions, we are always lead to believe the brightest of the.....
I don't think it's as simple as that.To rise to the top or be placed at the head of any large organisation, get your nose in front of 30,50,100 thousand others....you've got to have something.
For sure, for all of us at some point Peter Principle kicks in, and you'll be found wanting at some point cresting through the atmosphere.
But in RBS case could the seeds of this have been sown in their recent past? With the NatWest heist out the way, what else couldn't be taken on? The team could go one better, couldn't it. All this accumulate and consolidate, merge and acquire isn't that hard surely!
It was all sandwich effect at the time for a lot of European banks. Wasn't it?
anonymous said:
[redacted]
That's what narks me about so much in the business world over the past decade - the idea that just because a lot of other people are behaving like idiots it's somehow OK to do the same in the name of "competition".It's not OK. That's why the world is in such a mess....
Ozzie Osmond said:
That's what narks me about so much in the business world over the past decade - the idea that just because a lot of other people are behaving like idiots it's somehow OK to do the same in the name of "competition".
It's not OK. That's why the world is in such a mess....
I'm not sure it's a recent phenomenon. One of the few things Keynes was right about is that the stock market is driven much more by sentiment, at least in it's large day-to-day swings, than by any underlying factors. It's not OK. That's why the world is in such a mess....
tigerkoi said:
I don't think it's as simple as that.
To rise to the top or be placed at the head of any large organisation, get your nose in front of 30,50,100 thousand others....you've got to have something.
For sure, for all of us at some point Peter Principle kicks in, and you'll be found wanting at some point cresting through the atmosphere.
But in RBS case could the seeds of this have been sown in their recent past? With the NatWest heist out the way, what else couldn't be taken on? The team could go one better, couldn't it. All this accumulate and consolidate, merge and acquire isn't that hard surely!
It was all sandwich effect at the time for a lot of European banks. Wasn't it?
I think "mergers and acquisitions" became RBS' "thing". They stopped thinking as a bank and began thinking as a global business "acquirer". I would guess that if Goodwin had halted the acquisitions, he would have been removed as CEO by the board as he would not have been accused of not doing his job properly.To rise to the top or be placed at the head of any large organisation, get your nose in front of 30,50,100 thousand others....you've got to have something.
For sure, for all of us at some point Peter Principle kicks in, and you'll be found wanting at some point cresting through the atmosphere.
But in RBS case could the seeds of this have been sown in their recent past? With the NatWest heist out the way, what else couldn't be taken on? The team could go one better, couldn't it. All this accumulate and consolidate, merge and acquire isn't that hard surely!
It was all sandwich effect at the time for a lot of European banks. Wasn't it?
And once an entity embarks on a particular path, it collectively does not want to be deflected from that path - even if the warning signs are there that perhaps the path has run its course and its time to call a halt to what had once been a successful strategy but is now too risky.
Eric Mc said:
I think "mergers and acquisitions" became RBS' "thing". They stopped thinking as a bank and began thinking as a global business "acquirer". I would guess that if Goodwin had halted the acquisitions, he would have been removed as CEO by the board as he would not have been accused of not doing his job properly.
And once an entity embarks on a particular path, it collectively does not want to be deflected from that path - even if the warning signs are there that perhaps the path has run its course and its time to call a halt to what had once been a successful strategy but is now too risky.
So in essence he and the board lost all sense of reality and became very very very expensive rabbits in headlights. Your saying that Goodwin valued his position more then he valued the well being of the Corporation then. Unforgivable. And would you say the acquisition strategy was successful more due the over riding and overblown confidence in the market? In a less frenzied atmosphere would he or the board been able to hold down such a high responsibility laden job.? Seems he and his pals were simply in the right place at the right time to fool us all.And once an entity embarks on a particular path, it collectively does not want to be deflected from that path - even if the warning signs are there that perhaps the path has run its course and its time to call a halt to what had once been a successful strategy but is now too risky.
No - did you miss the word "collective" in my post?
The entire board AND the shareholders were more than happy to support Goodwin and his strategy because for quite a few years it seemed to be an extremely successful strategy.
The failures at the top of these banks were not down to the aberrant behaviour of some "evil genius". They were failures brought about by a culture of expectation and reward that existed throughout the ENTIRE financial sector AND ITS MAIN INVESTORS.
These guys emerged as the leaders and figureheads because of these expectations and their ability to see that the expectations were met.
The entire board AND the shareholders were more than happy to support Goodwin and his strategy because for quite a few years it seemed to be an extremely successful strategy.
The failures at the top of these banks were not down to the aberrant behaviour of some "evil genius". They were failures brought about by a culture of expectation and reward that existed throughout the ENTIRE financial sector AND ITS MAIN INVESTORS.
These guys emerged as the leaders and figureheads because of these expectations and their ability to see that the expectations were met.
HarryW said:
What I do not get is the apparent stupidity of some in very senior positions, we are always lead to believe the brightest of the bright go into the city. If so, how does one go about being the top of the tree, or are they the ones that learnt the corporate ladder game better than their peers and have no actual understanding or regard for the business they are suppose to manage.
Is there such a thing as criminal negligence on their part in all this, say, could you claw back pretty much every cent they earned and make them live in poverty after a prison spell. It would certainly concentrate the mind and go towards making sure their successor's weren't so cavalier with money in the future.......
Would make for quite an interesting study for psychologists (although I'm sure its been done already). Clearly, the RBS board believed that there were top notch boffin type creatures operating in RBS Greenwich (doing the slicing and dicing of securitised mortgage portfolios) and I would guess that the staff there would probably be 'brighter' than those on the board. So, raw ability would appear to be not sufficient to make it to the top.Is there such a thing as criminal negligence on their part in all this, say, could you claw back pretty much every cent they earned and make them live in poverty after a prison spell. It would certainly concentrate the mind and go towards making sure their successor's weren't so cavalier with money in the future.......
Although Goodwin appears to be no dimwit, interesting comments were made by those who worked with him which, to cut a long story short, made him out to be a bully and little short of a sociopath.
Imho, many of those who make it 'big' in large organisations have sociopathic tendencies.
Ali G said:
Would make for quite an interesting study for psychologists (although I'm sure its been done already). Clearly, the RBS board believed that there were top notch boffin type creatures operating in RBS Greenwich (doing the slicing and dicing of securitised mortgage portfolios) and I would guess that the staff there would probably be 'brighter' than those on the board. So, raw ability would appear to be not sufficient to make it to the top.
Although Goodwin appears to be no dimwit, interesting comments were made by those who worked with him which, to cut a long story short, made him out to be a bully and little short of a sociopath.
Imho, many of those who make it 'big' in large organisations have sociopathic tendencies.
Gillian Tett, who was interviewed last night, and is the New York editor of the Financial Times, is a qualified Social Anthropologist, not an economist.Although Goodwin appears to be no dimwit, interesting comments were made by those who worked with him which, to cut a long story short, made him out to be a bully and little short of a sociopath.
Imho, many of those who make it 'big' in large organisations have sociopathic tendencies.
Her book, "Fools Gold" is well worth reading.
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