Tuesday, January 19, 2010

Fred the Shred is back!

Well, at least we now know why the Scottish parliament building project was such a disaster. The Edinburgh architects, RMJM or “Rumjum” as they're usually called, are clearly a few bricks short of a full hod. How else can you explain their astonishing decision to hire the world's worst banker, “Sir” Fred Goodwin of RBS fame, as an international adviser. It's like saying your ambition is to be regarded as the world's worst architects. Small wonder that the Holyrood project ended up ten times over budget three years late if this is the kind of person RMJM hires. 


Imagine the job interview: “Well Sir Shred, what skills do you think you can offer RMJM in this important post?”

Shred: “Well, I'm an expert at building complex structures on shifting sands without any proper foundations. I'm fully versed in fantasy finance and making huge sums of money disappear. But my real strength is that I'm a people person who inspires loyalty.  My public image is one that will surely enhance RMJM in the international arena. When your clients deal with me they'll know that they're in safe hands.”


And what a CV. This is the businessman who delivered the largest loss - £28bn – in corporate history, while paying himself £4.2 million a year in salary. Who bulldozed the $50bn merger with ABN AMRO bank in 2007, widely regarded as the most ill-advised single business deal in banking history. Under “Sir” Fred Goodwin's command, the Royal Bank of Scotland came within forty eight hours of shutting its ATM machines in October 2008 and had to be rescued by the injection of tens of billions of public funds, after which it was effectively nationalised. Take that to the local jobcentre and see what they come up with. RMJM employees, who recently accepted a 10% pay cut and hundreds of job losses, must be over the moon that their sacrifice has been in such a good cause. 


After being prised from his post, Goodwin was so unconcerned about his personal reputation that he prefered to become a national pariah rather than give up a penny of his £16m pension pot even as thousands were losing their jobs. He was eventually forced to hand back half of it.  Any sensible figure in public life would have pre-empted the row by giving half the money to charity after making a public apology to those whose livelihoods were destroyed. It's not as if he needed the cash since Goodwin's personal worth is thought to be well over £20m. But instead, Fred bolted to France after angry citizens located his £3m Edinburgh home and started hurling rocks at it. RMJM better have thick skins because they may find themselves similar targets of public discontent. 


RMJM does a lot of its work with the public sector, where attitudes are rather less tolerant toward amoral, grasping incompetents. Labour and SNP politicians have united in urging public sector bodies to stop awarding contracts to RMJM. Better postpone the Commonwealth Games for a start. The athlete's village is being build by RMJM. With Fred Goodwin on board, they'll probably out-source the work to the Cayman Islands, invest in collateralised debt obligations, and then go into public ownership owing vast sums of money after buying Nakheel Property Developments of Dubai. 


So what on earth possessed RMJM to hire the world's worst banker? Well, as so often in Scottish business, cronyism seems to have played a large part. RMJM's chief executive of North American operations is Sir Fraser Morrison, an old chum of Goodwin's from the days of the Clydesdale Ban. Morrison's son, Peter, is overall chief executive of RMJM. 


The deal will no doubt have been struck at the 19th hole of one of Edinburgh's many exclusive golf courses – the natural habitat of the Edinburgh financial elite. They look to their own, these people. Impervious to public criticism, they sweep in their limousines between George Street and their multi-million pound houses in the Grange. If anyone criticises them they are accused of perpetrating the politics of envy and undermining Scotland's “dynamic” financial services sector.


Yet, we should remember that it was precisely this coalition of building and banking that delivered the worst financial crisis in eighty years. Together, they fuelled an unsustainable construction boom, based on irresponsible lending, dubious valuations and often poorly-designed buildings, that finally collapsed in 2008. The credit bubble was partly a product of poor financial regulation and low interest rates, but it was principally the result of ruinous financial lending by institutions like Royal Bank of Scotland. Under the guidance of Fred Goodwin, RBS became one of the biggest financial toxic wasted dumps in the world.  The people responsible didn't pay the price – we did, the taxpayers, who picked up the pieces and refinanced the banks while shouldering the burden of the banks' bad debts. 


Now it might surprise you to learn that this is not how it is seen in the financial world itself. The bankers have largely excused themselves from complicity in the biggest financial disaster in eighty years. Indeed, many of them are saying that the whole thing was exaggerated and that there wasn't really a crisis at all – just a momentary panic caused by the collapse of the US investment bank Lehman Brothers in September 2008. If the US government hadn't allowed Lehmans to go under, many say,then things would have sorted themselves out and everything would have been hunky dory again within six months. 

   The Fred Goodwins remain unrepentant and unpunished.  His rehabilitation is not only an unflattering insight into the corporate culture of Scotland's largest architects, but also of the international business community as a whole.  RMJM presumably thinks that putting Sir Fred on their letter-headings will give them a tough, streetwise image. That the banksters of the world will recognise Goodwin as one of their own – a fellow rogue they can do business with. But if that's really the thinking behind their business plan, it's time they changed their name to Rumdumb. 

20 comments:

Strathturret said...

Iain,

I don't often disagree with you but I think this vendetta against Sir Fred is wrong.

Yes, he was a bit of a b..., but nobody who gets to the top in international business is likely to be a 'nice guy'?

Yes he made mistakes but he was not alone and what were all these non-execs round RBS board room doing? The struggle to get bigger and bigger was partly due to fear of takeover. This forced both RBS and HBoS into unwise moves. Would the government have saved them from unwelcome takeovers?

Does making a mistake prevent you ever working again? If a journalist makes a mistake and gets sacked should he never work again? John Macleod of the Herald comes to mind?

I know little of RMJM apart from their role in Scots Parliament. From memory on the documentary about the project the senior chap shown from RMJM seemed like a hard working committed man trying his hardest to make an extremely difficult project work. It looked like the stress was just about pushing him over the edge! To blame one company for the failings of that project seems a tad unfair.

DocRichard said...

Hi Iain

This one isn't a vendetta. It is a piece of argumentation.

Fred was paid his bonuses in recognition of his individual responsibility in exercising his unique personal entrepreneurial skills.

I cannot understand therefore why, when he used aforesaid individual initiative to purchase a foetid bag of festering debt tarted up to look like a bank, he should not be taken to court and made to accept his personal responsibility for at least part of the debt, and be made bankrupt, thus annihilating the debt that he bought. Rather than passing it on to us, the people.

More...

Fred the Ned said...

Fred purchased ABn Amro after the collapse of Northern Rock and against the advice of many people at the time. He rallied support for the deal at numerous roadshows around the country. Investors like myself have lost thousands and thousands of workers have lost their jobs. He walked away with a large pension and a pot of gold. How can that be right ? He was rewarded for failure just as much as he was rewarded for success.
And of course he made other poor investment judgements. Too many to list here but here's a couple.
The Dubai Holdings collapse - loss £3Bn
The subprime mortgages in the US - Losses £2Bn and rising.
The £12Bn rights issue where he hid the true cost of RBS losses from investors.
So to employ someone so hated in Scotland is very poor PR and an insult to many who have lost all of their savings.

Jeanne Tomlin said...

Actual news reporting in Scotland. Something you will not find in the MSM which prefers simply regurgitating Labour press releases.

http://newsnetscotland.blogspot.com/2010/01/look-back-in-anger.html

Off-topic, Mr. Macwhirter, but it had to be said.

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