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Sir Fred Goodwin: Imprudent capitalist who risked and lost the respect of his friend Gordon Brown

Guardian Economics 21st January 2009

Prime ministers can be evasive at best of times, but it is rare that Gordon Brown has been asked to pronounce on the fate of a true friend and adviser - until this week.

At a press conference on Monday, held to explain the government's second financial rescue package, Brown said he was "angry" about the goings on at Royal Bank of Scotland but avoided the next question of what should happen to the man who ran the troubled bank - Sir Fred Goodwin.

Though he talked of irresponsible behaviour by bankers, on the specific issue of the fate of lanky, vintage-car loving Sir Fred, Brown said it was up to the Financial Services Authority. But Brown will be hurt that it is Goodwin, someone who had been described using the same adjectives as the prime minister - abrasive, rigorous, presbyterian, Scottish - who has presided over the decline of the Royal Bank of Scotland.

Like Brown, Goodwin was supposed to be a details man, known for his attention to the every word of a City deal.

He was part of the so-called prawn cocktail circuit so assiduously courted by Blair and Brown, and the ultimate acceptance of the pair by bankers such as Sir Fred was crucial in allowing Brown and Blair to claim for the Labour party the mantle of being trustworthy with the economy.

It was Blair who knighted him for his services to banking in 2004, but at no stage did Goodwin himself pledge a party affiliation in public.

By 1999, Brown had the banker involved in the kind of charitable work mixed with policy reviews he so likes to bestow on friends: Sir Fred chaired a government task force on the work of credit unions and the New Deal programme, talismanic New Labour projects.

In 2001, Goodwin was in the contingent of businessmen who attended a pre-election lunch at Chequers aimed at securing the backing of the bankers for that year's poll. This was despite Goodwin disliking the limelight and dismissing "networking".

At the height of its success, it will not have gone unnoticed by Brown that RBS channelled £3bn in taxes into the Treasury. Brown and Goodwin did not diverge when RBS performed the takeover of the Dutch bank ABN Amro, the biggest European financial takeover, that proved the undoing of the Scottish bank.

But the two fell out last autumn when the government needed banks to own up to the extent of their losses, and Goodwin refused. When RBS was one of three banks recapitalised, Goodwin was sacked.

Though the banker is supposed to be as modest a man outside work as Brown is - quiet and publicity-shy - he is unlikely to visit Chequers again soon.

The injury done to this friendship must mirror that done to the one Brown once had with the former US federal reserve chairman, the arch deregulator Sir Alan Greenspan.

Knight bankers

Bankers knighted by Labour

  • Fred Goodwin Former chief executive, RBS
  • Peter Burt Former deputy chairman, HBOS
  • George Mathewson Retired chair, RBS
  • Victor Blank Non-executive chairman, Lloyds TSB
  • Brian Pitman Former chairman and chief executive, Lloyds TSB
  • Tom McKillop Outgoing chair, RBS
  • Nigel Rudd Outgoing deputy chairman, Barclays
  • John Bond Former HSBC chairman
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