Emails show RBS bankers joked about crashing US housing market before 2008

A
sign is seen at the head office of the Royal Bank of Scotland
(RBS) in 2014.

REUTERS/Russell
Cheyne

• Emails released by the US Department of Justice (DOJ)
  show RBS bankers joking about destroying the housing market
  before the 2008 crash.
• RBS’s chief credit officer described the products he
  was selling to investors as “total f****** garbage” loans with
  “fraud [that] was so rampant … [and] all random.”
• The DOJ said the bank made “false and misleading
  representations” to sell more mortgage-backed securities,
  adding that senior executives “showed little regard for their
  misconduct and, internally, made light of it.”
• 
  RBS paid $4.9 billion earlier this year to settle the
  investigation.
  

LONDON — Royal Bank of Scotland (RBS) bankers joked about
destroying the US housing market and senior staff described the
loans they were trading as “total f***** garbage,” according to
transcripts released by the US Department of Justice.

Email and call transcripts in a
DOJ report released on August 10 as part of a $4.9 billion
settlement with RBS show the bank’s chief credit officer in the
US said the loans they were selling were “all disguised to, you
know, look okay kind of … in a data file.”

He went on to say that the products being sold were “total
f****** garbage” loans with “fraud [that] was so rampant … [and] all random.”

The US Department of Justice criticized the bank for its conduct
and trade in residential mortgage-backed securities (RMBS), which
played a central role in the crisis.

The DOJ said
the bank made “false and misleading representations” to sell
more RMBS, adding that senior executives “showed little regard
for their misconduct and, internally, made light of it.”

When the contagion in the housing market became clear, the head
trader at RBS got a call from a friend who said: “[I’m] sure your
parents never imagine[d] they’d raise a son who [would] destroy
the housing market in the richest nation on the planet.”

“I take exception to the word ‘destroy.’ I am more comfortable
with ‘severely damage,'” he replied.

The bank disguised the risks to investors while making hundreds
of millions from a housing market that a senior RBS banker
described as broken, incentivising bad loans that meant lenders
were “raking in the money.”

Employees who might raise the alarm about the risky practices
“don’t give a s*** because they’re not getting paid,” he said.

The transcripts reveal that as the banking system started showing
signs of break-down by early October 2007. The chief credit
officer at RBS wrote to colleagues saying that loans were being
pushed by “every possible … style of scumbag,” and it was “like
quasi-organised crime.”

“Nobody seems to care,” he said.

A senior bank analyst at RBS also described the bank’s due
diligence process on loans as “just a bunch of bullsh**,”
according to the DOJ.

In May 2018 RBS chief Ross McEwan
said the deal with the DOJ to end the investigation was a
milestone for the bank. “Our current shareholders will be
very pleased this deal is done. It does help the government sell
a cleaner bank,” he said.