RBS crashed in 2008, costing taxpayers £45.5bn to bail it out. The FSA (Financial Services Authority) report published today (482 pages long!) indicts everyone – Blair, Brown and Balls for insisting on ‘light-touch regulation’ (i.e. the bank could do whatever it wanted), Cameron and Osborne for demanding even less regulation, and itself – the FSA supervision was ‘flawed’ and ‘provided insufficient challenge’ to the bank (i.e. it let the bank get away with whatever the bank wanted to do). It’s an appalling story of incompetence, arrogance, and anti-regulatory ideological prejudice. So who’s been punished for costing the country £45bn?
Nobody – neither the politicians, nor the FSA, nor Goodwin himself, the main culprit who walks away with a pension of £6,586 a week. That tells you a lot about Britain today: the power-holders don’t do punishment, only the victims. Taxpayers are still £20bn out of pocket for what they’ve lost on their 83% stake in RBS.
This story of banker greed, political complicity, and regulatory submissiveness virtually asks its own questions. Why wasn’t Goodwin stripped of all or most of his pension, why wasn’t he disqualified from holding any senior managerial position in future in any finance or corporate undertaking, and why wasn’t he fined to the level of a significant proportion of his ill-gotten gains during his tenure as chief executive of RBS? In case anyone might think that is a bit harsh, all of those penalties hardly amount to a fraction of what he has cost the nation – £45bn.
There was a time when debtors were thrown into Newgate until they had paid off all their liabilities. The only thing that saved Goodwin from spending the rest of his life in Newgate gaol is the legal artifice of ‘limited liability’, which was designed precisely to free up directors in shareholder equity capitalism from having to take any responsibility for debts run up by their reckless misallocation of capital. That get-out-of-jail card needs to be reviewed since the Goodwin case demonstrates it can be grossly abused. What brought down RBS was Goodwin’s overweening arrogance in driving through a £50bn takeover of the Dutch bank ABN Amro at the height of the boom. He should be made to pay for this, if need be by being stripped to the limit of his assets.
But that raises another question: how did he get away with it within the RBS board? The FSA says there were deficiencies – an under-statement if ever there was one – in the management, governance and culture of RBS (i.e. the non-executive directors were feeble and the executive directors and management were bullied and railroaded into submission by Goodwin himself). Question: how should authoritarian and dominant chief executives be held to account? Quis custodiet ipsos custodes? Best answer: by ensuring they pay the full consequences for their abuses when they step down or are forced out.