It is fair to say that the Royal Bank of Scotland (RBS) has placed itself in a very deep pile of s**t. RBS announced today that its losses (due to be formally announced in February) could hit £28BN, partly due to its bizarre decision to spend billions acquiring ABN Amro last year. ABN Amro had exposure to US sub-prime mortgages, and invested directly in the American home loan market.
One wonders quite why RBS thought that this was such a great deal at the time, and whether the board had any real understanding of what was happening in the market.
Gordon Brown chose to vent his spleen on the subject (a political ploy no doubt, but it will resonate with the public), as per The Times:
"Yes, I'm angry about what happened at the Royal Bank of Scotland.
Now we know that so much was lost in sub-prime loans in the US and now we know that some of that was related to the purchase of ABN Amro, I think people have a right to be angry that these write-offs are happening and that these write-offs were caused by decisions that were made about international investments that were clearly wrong investments."
Despite being angry, Brown will increase the government's stake (ie ours) in RBS from 58% to 70%.
I wonder how many of the RBS board will resign for their folly, end eschew generous payoffs?
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