13 JANUARY 2001, Page 36

It's no coincidence a fortune has been lost so someone must have lost it


Goldfinger said it: 'Mr Bond, once is happenstance, twice is coincidence, but the third time is enemy action.' He could say as much to Mr Greenspan. One morning the chairman of the Federal Reserve Board is relaxing in his bath when it occurs to him that the American economy is slowing down. So he reaches for a towel and the telephone, rings round his fellow governors, and knocks half a point off interest rates by lunchtime. Well, what a happy happenstance. The markets cheer, and far away in London a trade union leader compares him to the driver of a high performance car. A couple of days later, trading in the shares of Bank of America is suddenly suspended. The market has picked up a rumour that this bank is overexposed to the flickering power companies of California. Rubbish, says Bank of America. Switch those share dealings on again, immediately. That market blackout was just a coincidence. It is a little harder, now, to take these explanations at face value. A central bank is a limo and does not respond to being driven like a racing car. If the driver jams the brakes on, he has reasons. The weakening economy can wait, but avoiding a financial accident may need prompt action. All may be well in California, but Bank of America's bad debts have continued to rise, and other banks must have losses which are known to Mr Greenspan but not, or not yet, to the public at large. The dot.coms crash and burn and their bankers and backers are scalded, a fortune has been lost in the ten months since the new economy began to look more like the old one, and somebody must have lost it. That means pain in the financial markets, and casualties, too. They are to be expected, at moments of enemy action.

Sign of the Lemming

PETER COOKE of the Bank of England had a recurring dream in which a procession of international bankers turned up at a conference hotel, riding in vast cars whose bumper stickers read: Two million lemmings can't be wrong,' Bankers are like that. When they saw new markets for money and capital bubbling up in London, they all clubbed together to form new banks which could join in — so many of them that there were not enough names to go round. The brightest constellation was Orion, led in dashing style by David Montagu, the merchant banker who, when asked why he had flown first class, replied that no private jet was available. Take Your Partners, by Richard Roberts with Christopher Arnander (Palgrave, £30) is Orion's story. As a new specialist bank for a new market, it made perfect sense. As a club, its trouble was (as I seem to have said at the time) that it could only be successful by competing with its backers. Some, like the Anglo-Yugoslav Bank, had no chance in the first place. The lemmings were wrong.

The City's missed chances

ORION'S troubles were honed by the jealousy and resentment always humanly likely between dealmakers (typecast as showy and costly) and lenders (typecast as worthy and dreary). NatWest was a backer, and Robin Leigh-Pemberton as chairman rang up proudly to reveal that he had bought the National Bank of North America. 'Never heard of it, Robin,' said Montagu. Soon after that, NatWest chose to put in its own man (more precisely, its own viscount) at Orion, and no wonder. After that, the constellation faded. The Royal Bank of Canada, another backer, took Orion over, ran it down, and shut it. Now it must count as a missed opportunity, a test case for the City's recurrent failure to build an investment bank which could compete with the world. At one point Montagu suggested that NatWest should own Orion, which would then mop up County Bank, NatWest's in-house attempt at merchant or investment banking. The combined operation, he said, would be the world's number one international merchant bank. Jealousy saw that one off. A pity, though. Orion might have got there, and NatWest would have been spared its subsequent disasters in investment banking — County NatWest, NatWest Markets — and might still be with us.

Business is booming

I HAVE had a soft spot for Wilde Sapte, the lawyers, ever since I used to take short cuts across the City through their offices. (In from Old Broad Street and out to Threadneedle Street — just the thing on rainy days.) Now they have Denton in front of their name, and are experts in the booming business of financial regulation. Their latest monthly bulletin lists 77 new rules, bills, statutory instruments, consultation papers, press releases, surveys, responses and fact sheets. The European Commission, the Treasury, the Department of Trade and Industry and the Financial Services Authority are eagerly pumping them out. All look forward to N2, the mysterious day when the Financial Services and Markets Act comes into force and puts unprecedented powers at the regulators' disposal. Meanwhile they are getting on with grandfathering, with a rulebook for mortgages, with a new species of European company to be known (in Latin) as Societas Europea, with safe harbours for market abuse, and with a suitable structure of fees to keep the FSA's thousands of mouths fed. Even the Equitable Life makes a token appearance under item 38. We are also promised a Regulatory Reform Bill, to refine the Deregulation Act of 1994, which (as Roger Opie said of the Bank of England Quarterly) has had all the impact of a feather falling lightly upon a blancmange. I cannot think that the boom will have much to fear from this promised successor, so Denton Wilde Sapte, at least, will be happy.

Air Mail Zulu

I WONDER when the first Consignia van driver will be reprimanded for using incorrect language, like 'Royal Mail' or 'Post Office', or wanting his van painted red. His bosses think that their business's new name is splendidly modern and international. Bosses like that always do. That is why they pay out silly money to consultants and badge engineers and advertising agencies for non-solutions to non-problems. Better than facing the real ones. Behavioural scientists know this as substitution activity. So British Airways rebranded itself as Air Zulu and then reprimanded the pilot who spoke disrespectfully of its designs. I do not suppose they would look any better on Post Off — I mean, on Consignia vans.