April 18, 2008 – 7:16 am

The shares down the drain, that is.

The fevered pace of acquisition reached a crescendo last year marked by Royal Bank of Scotland’s historic takeover of Dutch bank ABN Amro for 71 billion euros. But it was the epic implosion of the US subprime home loan market and subsequent forced writedowns and losses of $3.6 billion in 2007 which sent RBS reeling toward insolvency, self-dilution and dissension:

Royal Bank of Scotland Group Plc, the U.K.’s second-biggest lender, is considering a share sale to shore up capital depleted by credit-related writedowns and its part in the acquisition of ABN Amro Holding NV last year, according to a person with knowledge of the plan.

Colin Mclean, who oversees about 498,000 RBS shares, according to data compiled by Bloomberg, said:

“…,this acquisition-led strategy has run down the capital and derated the shares.”

For a bank which has repeatedly insisted that it is content with its capital position and denied that there was a need for any capital-raising initiatives, it smacks of more than just a little hypocrisy — it sounds a bit criminal. When things like that happens someone has got to be the fall guy and a CEO will do quite nicely, thank you. Fred Goodwin is a high enough up sacrifice to make the appearance of the company trying to correct itself:

The rights issue could also lead to pressure on Chief Executive

Fred Goodwin to quit, the newspapers reported.

The Times said at least one large shareholder has said privately it would call for Goodwin’s departure if the fund raising goes ahead.

That sounds stern enough, but it’s all just part of the scam:

“Had RBS known at this time last year the extent that the credit crisis would evolve, they would have been more cautious about what they would have paid and how they would have structured it,” Dolmen Securities analyst Stuart Draper told Forbes.com

Yeah– uhuh. Well Stuart, they did know it. We all knew it, but they made the deals that made no sense and collected the fees that made billions for the direct participants — but saddled the bank with mountains of debt which it could not carry. Classic mania behavior. The executive’s frowns at bankruptcy court may fool city folks all right, but my shares of the illustrious Royal Bank of Scotland are and will be held SHORT to my chest.

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