As The Guardian reports this morning:
Fred “the Shred” Goodwin, the disgraced ex-boss of Royal Bank of Scotland, is estimated to be receiving an annual pension worth nearly £600,000, as the government prepares to declare a £10bn loss after selling its final stake in the bank as early as this week.
At almost every imaginable level, this article is crass reporting.
The story of the nationalisation of the Royal Bank of Scotland, now NatWest, is not about one man. It is about the systemic failure of banking in 2008. But you would hardly know this from the piece.
And the £10 billion loss is not analysed.
Admittedly, it is noted that:
By the time of the bailout, Goodwin had expanded RBS into 50 countries and grown its assets to £2.2tn – more than double the size of the UK economy that year. Had the government failed to step in, shock waves from the bank's implosion in 2008 could have led to a systemic collapse in the wider economy.
The government was concerned that its failure could wipe out the savings of everyday customers, and prompt panic about the health of other lenders across the UK, creating a domino effect of failures across the industry.
But, even then, this is more about Goodwin than the fact that banks failed, and right now, Rachel Reeves and the Bank of England are setting up the whole system to repeat the process sometime soon by relaxing regulation all over again.
Nor is the £10 billion loss compared to the massive public benefit from the spend.
And come to that, nor is it noted that in the case of future nationalisation, the lesson for valuations needs to be noted: the government overpaid for RBS when it was nationalised because the impact of the global financial crisis was not properly allowed for, and it should have been. If proper consideration had been made, there would have been no loss at all.
Lastly, the possibility of the massive gain to society from keeping RBS in state ownership, and using it as a new state bank to both support small business and regional policy as well as being a platform to deliver banking for all, whatever their means, and to maintain a branch network in places where all other banks are leaving, was totally ignored. The possibility that there may have been a successful and socially valuable non-market outcome was ignored.
Is this what we now call serious financial journalism, because if it is, things are going badly downhill at the Guardian?
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Agreed.
There seems to be a phobia in government to nationalisation. I’m happy with a mixed economy. But such an economy should observe proper commercial practices. One of those is that when a organisation, a bank or a water company etc, goes bust or becomes insolvent, it’s bond holders and share holders should foot the bill. They should not be bailed out with public money as has happened previously. The banks pulled a blinder with Gordon Brown and Alistair Darling convincing them to bail out the banks and rescue the shareholders. They didn’t have to do this and should not have done so.
Yes, the government had to rescue the financial system. But could it not have done this by immediately buying the bank, less it’s liabilities to bond holders, for £1, immediately the bank went into administration? It could avoid panic by announcing in advance that it would do so. This wouldn’t have cost the government more (much less I suspect) and then the government would have the benefits, as you described, of owning a commercial bank.
Surely the same should apply when Thames water becomes insolvent or goes bust, that the government should buy it for £1. Please let the government not pour money into failed businesses again without taking full control.
A lot to agree with
But we live in fear of ‘markets’
Agreed – it’s as if banking failure at this level and scale is perfectly natural – like the rain.
The UK needs a brutal law that confiscates assets of any major industry that fails the public: banks, water companies, energy companies, private equity, all are the same. If their owners know that gambling or using financial engineering to extract tithes from the pockets of the people would lead to zero-compensation nationalisation, they would think first. At the moment all such industries are incentivised to help themselves at public expense.
This leads to the need for a democratic revolution and written constitution.
The Guardian has gone all the way down the hill and has been sitting at the bottom of it for years.
If you remember the disgraceful way they reported on Julian Assange, the political hatchet job in the name of “anti semitism” on Corbyn and, most recently, their atrocious reporting on the Gaza genocide you probably know what I mean.
An establishment propaganda rag is what the Guardian is now.
The worry is that RR and Starmer have no idea about finance or banking and we are heading down the same path as Brown and Darling back then. But Freds increase in pension is an insult to all the pensioners who are being treated in such a way by the Labour Government .