CITY AND SUBURBAN
A Downing Street fix comes unstuck, and Rupert loses his job at the Bank
Iopposed Rupert Pennant-Rea's appointment to the Bank of England. In this column two years ago (`Rupert gets a job at the Bank', 30 January 1993), I said that this was a job for a banker and a man- ager, and that he was not evidently quali- fied as either. He might, I said, be a splen- did fellow, a fountain of ideas and a breath of fresh air (everybody said so) but this would no more qualify him to be Deputy Governor than to fly a Boeing 747. He had been plucked from the Economist, which, I thought, had been wrong on the major issues of policy with which the Bank had been concerned — but that was another story. Though we both lived in the small world of financial journalism, it happened that our paths had scarcely crossed. It was the appointment, not the man, that worried me. Formally, it was made by the Queen on the advice of the Prime Minister. In prac- tice, it was a disgracefully scamped piece of work at 10 and 11 Downing Street. No one, as we can now see, took the time to ask questions. Eddie George, as Governor-des- ignate, and Mr Pennant-Rea himself first heard of it on the day, and the Bank's directors read about it in the next day's papers. It looked like an attempt to plant a trusty in the Bank — Black Wednesday was still a recent memory, and tempers were sore. Even on those terms it was an arbi- trary choice. I smelt patronage. In the event Mr Pennant-Rea settled down to the unfamiliar job of a chief operating officer, under a dominant Governor. He was little seen outside the Bank's windowless walls. He carried through its re-organisation, which, though painful, was at least swifter and defter than the Treasury's. He might have been remembered for it, until now. Now he has been brought down, not on any issue of public policy or competence, but by private folly (as he says) and personal vengeance. The result is a humiliation, for Mr Pennant-Rea and for the Bank of Eng- land, and I regret it for them both.
Code of misconduct
TO AVOID any repetition of this incident, I understand that the Board of Banking Supervision is conducting an inquiry and will be publishing a code. It is already clear, as the Bank's supervisory director Brian Quinn says, that there was a severe and rather dramatic breakdown of control. Headings from the new code will, so I learn, include: (i) Not in the office. (ii) Well, not in the boss's office, or his dressing-room either. (iii) At least 18 inches above floor level. (iv) What's wrong with the good old blotter? (v) Not with financial journalists. (vi) Certainly not with obscure free-lance financial journal- ists who need to make a bob or two. (vii) Former financial journalists should not need to be told this. (viii) The standard principles of banking prudence — large exposures, four-eyes monitoring — will apply to those transactions. (ix) Self-regulation makes you go blind.
Champion de France
JEAN-YVES Haberer, sometime president of Credit Lyonnais, is the man who made the Barings look prudent. This was the country's biggest bank, publicly owned and, in the French style, a national champion. Keeping national champions, like Air France and Groupe Bull, can be an expen- sive hobby. Mr Haberer was the man for it. He came up the fast track: the Ecole Nationale d'Administration, the inspec- torate of finance, the Treasury, political favour, and seven years ago (as Pierre Beregovoy's choice) command of the prospective champion. This was to be a European bank, so it bought its way into six neighbouring countries and spread branch- es far and wide. It was to be an industrial bank, so it bought stakes in big or suitably connected companies — Bernard Tapie's stake in Adidas, for instance. (Mr Tapie, now in court, is having trouble with his alibi.) It was an aggressive lender, which was just what Robert Maxwell liked to hear: he was an aggressive borrower. It inadvertently found itself in the film busi- ness, having chosen to back a doubtful Ital- ian who wanted to bid for MGM with bor- rowed money. Last year Mr Haberer fell (or was pushed) on his sword. His successor has now unloaded £17 billion of bad and doubtful debts onto the shoulders of the state. Britain's big banks find themselves tempted to giggle, but then, no one asked them to be national champions.
Circular arguments and.. .
`MONEY is made in difficult places,' says the candidate for president. 'Salary and expenses are not a motivating factor for me. Before heading Lonrho I owned a crackingly good emerald mine.' Tiny Row- land still writes a crackingly good circular. The message is, as always, that a trusted associate has turned out to be a bitter dis- appointment. This time it is Dieter Bock, conjured from obscurity — a hero from zero, as Tiny would say — on to the Lonrho board, where he cleared out the praetorian guard and went on to knife the emperor. At this week's meeting Mr Rowland plans his comeback and will have the pleasure of forcing Mr Bock to vote for him. The odds must be against him, all the same, and tit may be time for him to settle down and publish his collected circulars. (Tiny, he said, I feel that I could be your son. . . After lunch in Moscow he returned to the sub- ject. . . The name of Krupp was of immense value, except possibly in Britain. . . Bon- homie was now over.') What I enjoy most is the unwritten sub-text: 'If not true, sue.'
. . .magic carpets
THERE must be something in the genes, for I now learn that Tiny's father, William Frederick or Wilhelm Friedrich, came out with one of the most innovative business ideas of his day. You could use seaweed, he thought, to make carpets. My man in the mill gives me a potted version: seaweed, he says, gives you alginate, which makes a sticky jelly. You lay down fibres in a long thin bath of alginate, and slice them very thinly onto a moving belt, which is rolling underneath them. You then have a lot of little fibres standing up on end. Pass them through something warm, my man says, and what you have or should have is a carpet. Listers, the velvet makers, and Homfray, the carpet weavers, took the idea up and sank much money and time into its devel- opment, but in vain. I wonder how it would have stood up to heavy wear on the floor of the Governor 's dressing-room.