IN TODAY'S seemingly completely crazed world of banking, there is no more sobering statistic than this: yesterday, Scotland's mighty Royal Bank of Scotland, the great titan of the country's financial services industry, was worth £7.4 billion. That's about a tenth of the value it peaked at just under two years ago. And it is three quarters of the sum it paid – £10bn – to buy its share of Belgian-Dutch bank ABN Amro just a year ago.
What must Sir Fred Goodwin think when he sees figures like this?
His world must seem totally unreal. In his nine-year reign as chief executive, depending on how you measure it, RBS was in the world's top ten league of banking behemoths, the fif
th biggest bank in the world on one count.
And in the most turbulent year that the financial industry has seen since the Wall Street stock market crash of 1929, RBS has shrunk and shrunk. Reputation has gone down the plughole, confidence has utterly disappeared, and value has been comprehensively destroyed.
What does Sir Fred think? You and I may have experienced some of life's economic up and downs. The worst, in my case, was losing my job which has happened a couple of times, once through a company collapse and once through "redeployment of resources" as it was nicely called.
Both events were terrible and depressing at the time for me. But none of that can remotely compare with the carnage of a career and lifetime achievements so comprehensively wrecked as those of Sir Fred. I have tried to think of some sort of analogy to put it into an everyday context – like spending ten years labouring to build your own house and then impotently watching it demolished bit by bit over a year by fire, flood, and hurricane – but nothing seems to quite compare.
Perhaps it was the genteel circumstances of the Assembly Hall of the Church of Scotland that did the trick, or Sir Tom McKillop's fulsome apology, but yesterday's gathering of impoverished shareholders seemed rather more baleful than vengeful. Indeed, one shareholder even offered thanks to Sir Fred for the preceding years in which he delivered a succession of rising profits and fattening dividends. Only towards the end did another shareholder demand an apology.
Sir Fred was lucky. Eight years of achievements have been swept away by an all too horrible perfect storm. Men who have delivered miracles are, unfortunately, expected to keep on delivering miracles. After eight years of turning water into the finest champagne, the ninth year when vinegar turned up instead doesn't just make people choke, it turns them into ravening blood-seeking mobs.
As John Kenneth Galbraith wrote in his outstanding history of the great crash: "As the ghosts of numerous tyrants, from Julius Caesar to Benito Mussolini, will testify, people are very hard on those who, having had power, lose it or are destroyed. Then anger at past arrogance is joined with contempt for present weakness. The victim or his corpse is made to suffer all available indignities."
Sir Fred can thank his lucky stars, if he has any left, that he lives in relatively civilised times and will not be impaled on a butcher's hook and strung up on the nearest lamppost. He can also be grateful that he does not live in America where he might have the FBI grubbing through his drawers looking for incriminating evidence and almost certainly would be facing a merciless televised grilling in front of baying politicians.
But what does he think? Galbraith had an observation on what that might be too. He wrote: "If one has been a financial genius, faith in one's genius does not dissolve at once."
Has Sir Fred's faith in his own genius dissolved? Probably not. Just a few days after he and his chairman, Sir Tom McKillop, were forced to crawl ignominiously to the government and accept a £20bn hand-out (almost three times more than the bank is now worth on the market), he was still justifying the ABN Amro deal to journalists. RBS, he said, had paid £10bn to get £1.5bn of profits.
Put in those terms, the RBS board must have thought it a pretty good deal at the time. And there may be still some profits to come, which at least will come in the form of euros rather than devalued pounds, though they won't be enough to stop RBS from having to declare the first loss in its 281-year history.
But it is still the worst-timed takeover in history. And although Sir Fred will probably fire back at such criticism that hindsight vision is always perfect, my understanding is that there were plenty of internal reports coming from RBS executives onto his desk saying: don't do this, it is a bad deal.
Sir Fred swept them all aside, confident in his own genius. And that's where the flaw in his style of governing was really exposed and where he has to take all the blame now pouring down on him.
For his management style was brutal. One former senior executive told me that he came to loathe the regular Monday morning group executive meeting because, he said, you knew that somebody was going to get a bollocking, deserved or not.
In that kind of environment, what executive enjoying a huge salary is going to risk all that by saying to the chief executive that he is wrong? It would take a very brave person, willing to endure dreadful humiliation among all his or her peers.
But what does Sir Fred think? Right now, he probably has little time to think. I understand that he has been condemned by Stephen Hester, the chief executive brought in by the government to clean up the mess and retrieve what can be saved from the rubble, to work every last day, hour, and minute of his contract alongside Hester in his old office doing the sweeping and shovelling.
Again, the former executive told me that Sir Fred was the ideal number two to Sir George Mathewson, whose record of judgment in banking enterprise still stands undiminished. Sir Fred would loyally and zealously carry out the boss's wishes. But as a number one, he was flawed.
Hester will keep him labouring away until the end of January as they slash and sell everything they can until the government's £20bn is repaid. Sir Fred will be back to being number two. Shareholders need to hope that he will be as good as he was under Sir George.
• Comments and criticisms welcomed at: pjones@ednet.co.uk.
