Book review: Making it Happen by Iain Martin

When the next crisis hits, and it will, that frustrated public is likely to turn, not just on politicians who have been negligently lavish with public funds, or on bankers, but on the market system. What is at stake now may not just be the future of finance, but the future of capitalism.

This quote, by Professor John Hay from 2009, is quoted in the afterword of Iain Martin’s book (full title: Making it Happen: Fred Goodwin, RBS and the men who blew up the British economy). Martin is primarily a political journalist rather than a financial one, and so it is unsurprising he turns towards the political implications of the banking crisis.

The book was published in 2013, five years after the government bailed out the Royal Bank of Scotland, and six years after BNP Paribas froze $2.2 billion of funds exposed to sub-prime mortgages in the USA, regarded as the start of the global financial crisis.

In 2013, the coalition government was in power in the UK, Barack Obama had won a second term as US president, and the political establishment in many European countries was still holding up.

Four years on, many link the current political convulsions to the global financial crash. The effect of the crisis on jobs and wages, the austerity introduced in its wake, and the sight of bankers avoiding criminal charges has created a seething mass of anger, the argument goes. This is directed at establishment politicians, and populists of all sorts have capitalised on it to gain prominence and power.

The unifying factor between Donald Trump, Bernie Sanders, Nigel Farage, Jeremy Corbyn, Emmanuel Macron, Marine Le Pen, Geert Wilders, Pablo Iglesias and Beppe Grillo is neither age nor political stances, but that all have positioned themselves against their country’s existing political establishment.

Is this because of the global financial crisis? Certainly to an extent, but the fragmenting media landscape online, globalisation more generally, and perhaps even complacency about past conflicts can all stake a claim to have upset the apple cart.

Still, the financial crash was one of the United Kingdom’s major crises in the post-war period, and the collapse of RBS was the apex. Martin chronicles the RBS story, and the Goodwin story, with an eye for juicy detail and an ability to link the technical aspects of 21st century banking with the wider picture.

We begin around the turn of the 18th century, when the Royal Bank started out in Edinburgh as an institution with Whig sympathies. Yet in 1745 the bank acquiesced to pressure by Jacobite force to hand over coins before the forces attacked England. The Royal Bank “had now shown that what really mattered to the bank above all else were its interests and its survival,” Martin writes. For most of its history, RBS was a prudent, Scottish-focused bank held in good esteem.

Yet under chief executive Goodwin and Sir George Mathewson – chief executive before Goodwin, then chairman, and an advocate of Scottish independence – the bank had bigger ambitions. Fred Goodwin comes across in the book as an ambitious and tenacious accountant turned banker, who was obsessive over small details and ruthlessly picked apart colleague’s faults in meetings, but who ultimately failed to control his bank.

At the turn of the century RBS beat its long-time rival Bank of Scotland in a raid south of the border for NatWest. RBS feared that if it lost out it would itself be a takeover target. The Bank of Scotland did then merge with Halifax after failing to buy NatWest, with much of the influence in the new firm going down south. Goodwin pioneered an integration strategy for NatWest to reduce costs, which was seen as a model for future expansion.

The most notorious deal was to buy ABM Amro in October 2007. RBS joined Santander and Belgian bank Fortis to take over the Dutch bank, dividing part of it between them.

RBS took over the investment arm at exactly the wrong time, given that it was weighed down with risky assets just as the credit crunch was biting. Santander, meanwhile, made a big profit on the deal in just three weeks by selling Italian bank Antonveneta, which had been owned by ABN Amro, for €2.4 billion more than the price at which it was valued when the deal was closed.

A year later, Gordon Brown and Alastair Darling announced the rescue of the bank. Goodwin left with no pay-off, but for a long time was reluctant to accept a cut to his £16.9 million pension pot.

Debates abound about how to stop a similar crisis. The book identifies a myriad of faults. The senior team at RBS were either too risk-happy or too reluctant to stand up to Goodwin. The investment banking side took on too much risk, perhaps partly due to a badly designed system of incentives through bonuses. The bank lent poorly on commercial property. The British regulators were ineffective. Politicians like Gordon Brown and Alex Salmond cosied up to RBS when it was seen as a national (British or Scottish) success story.

This is not a book to offer detailed prescriptions to avoid the next crash. It is a thorough account of what went on at RBS, but it is still very much relevant today.


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