CITY AND SUBURBAN
Money, brains, family John Major suffers the merchant bankers' revenge
CHRISTOPHER FILDES
Ido not share the general belief that John Redwood is an alien who comes from outer space. He comes from N.M. Roth- schild, which is not the same thing. John Major comes from Standard Chartered, and no gap in the City or the cosmos could be wider. Merchant bankers like Mr Red- wood and his first lieutenant come gliding down from the university and a few years later glide smoothly out again into public life. (Mr Redwood at least left an imprint on 'the cushions at New Court.) Commer- cial bankers like Mr Major have to do it the hard way. He started in the City as a 16- year-old clerk, he joined the homely Dis- trict Bank, he wanted to travel and so switched to Standard Chartered, which gave him dominion over palm and pine in Nigeria, home of creative finance and imaginative accounting. You can learn like that. You may also learn to resent the mer- chant bankers' condescension, as expressed in their maxim: Your money and my brains — or, 'in extreme cases: Their money, your brains and my family. It may induce a cer- tain chippiness, a thinness of skin, when you go into politics and meet them all over again, along with their dim friends who went into Lloyd's. It might even provoke you into wanting a classless society. In the City, this has been a dreadful year for mer- chant banks, with Warburgs, Barings and Kleinworts all knocked down and only Rothschilds definitely not for sale. At Westminster, the feud goes on and the merchant bankers' stock is rising.
Markets vote early
HOW desperately long a week in politics can be. A week ago John Major (so I wrote) was staring into the abyss. Now it threatens to swallow him. The Tory party, as in Peel's day and in Balfour's day, is split between free-traders and protectionists, and he set out to reassert his authority over both sides, only to find it under direct chal- lenge. Like Balfour, he must seek to bal- ance resignations from both sides, offset- ting Douglas Hurd's against John Red- wood's, and hope to carry on as best he can, if he can. The markets have been vot- ing early. Pressure on the pound and a shake-out in Government stocks and in shares all tell the same story: a loss of cred- ibility. Could a weakened Government now be expected to take an unpopular line on tax cuts, on public spending, on borrowing and on inflation? When the Governor of the Bank of England asked for higher inter- est rates and was refused, had he hit a polit- ical pain barrier? When the Chancellor fid- dled with his target for inflation, was he giv- ing himself breathing space? Governments which raise such doubts are apt to find that markets test their resolution and can force their hands.
Verdict on Barings
SOMETHING tells me that the House of Commons, in the three weeks before it goes on holiday, will not have time to worry about Barings — but I learn that the Board of Banking Supervision plans to report on the debacle before the holidays begin. The Commons can be touchy about being told things first, and so long as the report is pub- lished while Parliament is sitting, it will be covered by privilege. This will let it say that Mr X was crooked, Mr Y was negligent and Mr Z was asleep at the wheel, all without fear of being sued for libel. There were originally to have been two reports, one to say what happened, and one to say what sort of job the Bank of England did as Bar- ings' supervisor. This one (the tricky one) was the responsibility of the board's six `independent' members — the others being high officials of the Bank, headed by the Governor, and thus excused from being judges in their own cause. I gather that the two reports will be amalgamated into one, but I expect the independents to be critical. How else, after all, are they to show their independence? The Bank does not look forward to hearing from them. It could do without another supervisory whoopsie. Sir Thomas Bingham faulted its handling of the Bank of Cocaine and Colombia, and Nigel Lawson as Chancellor said that over Johnson Matthey Bankers, the Bank fell down on the job. Its best chance now is to arrange for a distraction to be staged at Westminster, and you must admit that it is making quite a job of this.
Friends of Bill
I WONDER whether the Governor would swap his political worries with his opposite number in Washington. Alan Greenspan of the Federal Reserve is coming up for another term of office, but so is President Clinton. Powerful central banker that he is, Mr Greenspan has four qualities not often combined in Mr Clinton's nominations: he is a white male Republican nearing his sev- entieth birthday. (Straight, too.) By those standards Mr Clinton might be expected to prefer Laura D'Andrea Tyson, the 'cau- tious activist' (trade warrior) from Califor- nia who is now his assistant for economic policy. He sent Alan Blinder from Prince- ton to the Fed as Mr Greenspan's deputy, and ever since then Mr Blinder has been jumping up and down, signalling that the Fed is being needlessly harsh and worries too much about inflation. Next week it has a close call to make on whether to cut inter- est rates. If it says no, Mr Blinder may choose to dissent. That should help him to catch Mr Clinton's eye. In this administra- tion's early days, the President and Mr Greenspan were the odd couple. They got on famously once Mr Greenspan had explained that if you were nice to the mar- kets, they would be nice to you. The couple came apart last year when the Fed started putting rates up. By next year — election year — Mr Greenspan may be trying to put them up again.
Sheikh out
I AM sorry to learn of the throne-room coup which has deposed Sheikh Khalifa Al- Thani, ruler of Qatar for 23 years and a man with the right approach to the modern world. (To Opec's meetings he sent a bored relation who acquired the nickname Lifo Last In, First Out.) When I visited his capi- tal, Doha, I met a Brit who was trying to sell him a communication satellite. The ruler had questioned him closely: 'You say that this object would be stationed in the sky above my kingdom?"Yes, Your High- ness.' Seventy miles up, you told me?' `That is so, Your Highness.' And you said that it would be covered all over with gold?' `Technologically, Your Highness, we find that gold is most effective . . . "Yes, yes, I quite understand. But shall we not require a very long chain?'
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