03/21/09 The Downfall Of RBS Greenwich Capital And It's Parent Bank

Sir Fred Goodwin: RBS Chief Executive Sir Fred Goodwin

Photo: DANIEL JONES

RBS was 'disaster waiting to happen'
Telegraph.co.uk

When the outgoing board of directors at RBS met for the final time in January, the scale of the business disaster they had overseen was abundantly clear.

The bank was preparing to announce the biggest British corporate loss in history; the Treasury was about to underwrite £325 billion of RBS’s questionable assets; and even the Prime Minister had “gone white” when given details of the bank’s trading activities.

Gathered around the table at RBS’s luxurious corporate headquarters, each member of the board was asked where they believed the mistakes had been made.

“You never stood a chance,” said one non-executive director to the executives in charge of the day-to-day running of bank. Another complained how the board was not given the information required to have questioned what are now seen as disastrous business decisions......

.....At RBS Greenwich Capital in Stamford, Connecticut, the bank established what is reputed to be the “largest trading floor in the world”. Those in charge were earning up to $25 million a year in cash bonuses.

Another unit of RBS was also embarking on an equally risky strategy to move into sub-prime mortgages.

Citizens Bank was a well-established New England institution which had not engaged in the more risky mortgage businesses.

It had been owned by RBS since the 1980s but during the past decade it took over several US regional banks.

In 2007, it is understood to have begun buying up sub-prime mortgages from other banks.

Although Citizens, headed by Larry Fish, was not offering sub-prime loans itself, it quickly amassed billions of pounds in sub-prime exposure.

It is not known why it adopted this strategy, which was not authorised by the RBS board. It went disastrously wrong and Citizens is understood to have about £14 billion in “toxic” loans....

PLEASE SEE:

RBS traders hid toxic debt
Telegraph.co.uk

... disclosed in a Delaware court that it had agreed to sell 2000 existing sub-prime mortgages to a unit of RBS – RBS Greenwich Capital Financial Products. ...

BUT WAIT THERES MORE ....

RBS sued by City of Cleveland
Telegraph.co.uk

RBS Greenwich Capital is described in the claim as a company that “underwrote more than $180billion in securities backed by sub-prime mortgages”. ...

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