April 22, 2008 – 12:20 pm

The Royal Bank of Scotland today reported it will take writedowns for U.S. mortgages, credit-related assets and leveraged loans, of 5.9 billion pounds, then announced that it will massively dilute future earnings with a $24 billion rights issue, in a desperate attempt to raise the cash it said for months that it did not need:

Britain’s second largest bank will record write-downs of $11.7 billion and raise $23.9 billion in new capital to cover exposure to toxic U.S. loans.

Today’s writedown includes 1.75 billion pounds in bond insurance, 1.9 billion pounds in collateralized debt obligations, 1.4 billion pounds in U.S. mortgages and 1.25 billion pounds in leveraged loans. About a third was accumulated by ABN Amro.

Maybe Mish asks it best?

If they had management ability why did they get so involved in subprime lending and why are they raising capital?

My question is: is this it? What can you believe from a company that said it was comfortable with its capital positions and raising the dividend a few months ago to a rights issue today? What did the insiders do with their extra dividend payments and how did they not know this train wreck was just down the track?

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