House of hubris: RBS built lavish new offices at the peak of the boom

Walter Bagehot got it right. The mistakes of a sanguine manager, he said, are far more to be dreaded than the thefts of a dishonest manager. Someone should have told the board of the Royal Bank of Scotland, where Fred Goodwin was the sanguine manager. "Making it happen" was his slogan, and when disaster happened and the bank imploded, he was vilified. Iain Martin shows how it happened, and who let it happen.

Clever, awkward, compulsive, a Glasgow graduate, a classic Scotsman on the make — Gordon Brown, surely? This was Goodwin. No wonder the two got on well. An earlier disaster had set him on his way. He came into banking as a receiver, sent in to deal with the wreckage of BCCI, alias the Bank of Cocaine and Colombia. Within a few years he was at the Royal Bank and looking forward to the top spot. 

This kenspeckle old stalwart of the Edinburgh establishment was nerving itself to charge over the border and bid for the National Westminster, a bank twice its size. This would mean outbidding the Bank of Scotland, which had got its border raid in first — making a bid credible, getting it accepted and, hardest of all, justifying it in action. The raiders could and did pillage NatWest's wine cellar, but that was only the beginning.  

Goodwin brought it all off, but it was not a trick he could ever repeat, though he tried, collecting banks in North America, where his rivals had so regularly burned their fingers. The Royal Bank must be biggest and best, and the Queen had to open its brand new head office, with its fountain and its easy access to the corporate jet. One analyst plucked up the courage to use the word "megalomaniac".