Tag Archives: Banking

On Tom Hayes, And A Loaf Of Bread

The story of the nine-year-old hanged in the 18th century for stealing a loaf of bread is probably just that – a story. But there was a significant toughening in penal policy over the latter half of that century, especially as regards theft, with a number of extra crimes added to the list meriting execution.

Deportations were also common for even fairly minor offences. They were troubled times. The French Revolution was playing out across the Channel, and the rich in the UK, who owned almost all the property, were worried about the masses one day coming for their share.

This is the way law and penal policy works. Sentencing reflects the social concerns of the time, which can sometimes seem bizarre and shocking to future onlookers. Two other examples. The harsh sentences handed out in the 1960s to mild drug offenders, especially in the US – several years in prison for the contents of a couple of spliffs.

Society was running scared of a counter-culture that did not share its values. One of the most obvious differences that set it apart from that mainstream was the use of drugs. Cf the Oz trial here.

Today, any racial element to a crime means it will be treated more seriously. If someone is beaten up for the colour of their skin, the perpetrator will be treated more harshly than one who committed the same offence after taking exception to, say,  their posh accent.

Both are a form of discrimination. But in a multi-ethnic, multi-cultural society where a lot of different races and religions have to rub along together, anything that makes the process more difficult is anathema, and treated accordingly by the courts. Probably rightly.

Tom Hayes worked for a number of City banks, and seems to have misbehaved at all of them. He has just been given 14 years for rigging the key Libor rate. The sentence is wildly disproportionate and will probably be reduced on appeal, perhaps to a more reasonable seven years.

He would probably have got less had he stabbed to death a colleague on the dealing floor. It is not even possible to work out who lost out because of his misdeeds, or by how much.

It does suggest that, seven years after the financial crisis started, sentencing policy is beginning to reflect the public mood towards those seen to have caused it. Hayes is largely blameless in this respect. His actions had nothing to do with the roots of the crisis, though his behaviour typifies the sort that went on elsewhere and did cause it.

Not a good time to be an errant banker, then. Though in that late 18th century, they and their sort would probably have ended up on the gallows.


On The Midland Bank

For some years now I have been operating, subconsciously, under the illusion that I have an account with the Midland Bank. One day shortly this may prove to be true again.

I took up with the Midland, as it then was, in the 1970s, mainly because my parents had banked at the same south west London branch for decades. In those days the acquisition of a bank account was something of a rite of passage, and not open to all comers.

The history of the Midland parallels the history of the British banking sector. It started in Birmingham in 1836, expanded by buying other regional banks and came to serve a cross-section of the country’s emerging industrial base, foundries, engineers, railways and local corporations.

At one stage one of the biggest banks on the globe, it bought an investment bank before most of the others, made a disastrous overseas purchase in California and was swallowed by an overseas bidder, HSBC, in 1992. The distinctive griffin and gold coins logo, in an act of flagrant vandalism by the designers, was ditched thereafter along with the name and the slogan “The listening bank” for the more anonymous initials HSBC. And a non-descript logo whose design does not easily come to mind.

Now the Midland name is likely to be revived, quite possibly along with the griffin, and the bank’s HQ will go back to Birmingham. I will one day, assuming they haven’t managed to ban them, be issued with a cheque book featuring the griffin, which will reappear on the high street to replace those anonymous initials.

It will never be quite the same, because banking has changed. I can barely remember the last time I visited my branch. We get our cash from ATMs that began to be introduced in the 1970s. Before that, you had to go along to your branch, write and hand over a cheque and take your money. In banking hours, which ended at 3.30.

You could try a friendly pub after hours, if you fancied a drink, but many of these used to display a printed sign. “We have an arrangement with our bank. They don’t sell beer, and we don’t cash cheques.” Ha bloody ha.

I went in mortal terror of the Midland and its staff. As a broke student, I would hand over the cheque to the university branch. The man would step into a back room, check my balance, and if it had fallen too far into the red, re-emerge with a sad shake of the head.

My manager once gave me the choice, in my twenties, of having the mortgage paid but being barred from taking out any money until payday two and a half weeks hence, or falling behind with said mortgage. I took the wise option, walked quite a long way to work each day, and lived on what was left in the store cupboard. It was an object lesson.

This is an idea, I imagine, inconceivable to today’s twenty-somethings, who would expect to be extended credit without question. Until they were so mired in debt that there was never any possibility of escaping it. Or to max out their credit cards until they reached the same impasse.

You tell me which was the better way of running a bank.

On Bankers’ Psychology, And FO Numbers

Here is the deal. See those stocks over there? Stay in those for a couple of weeks, with people throwing things at you. Then walk away with a few million quid, and we’ll put some other victim in your place.

In other words, endure a degree of public opprobrium for a period, secure in the knowledge that after a while the public eye will shift to someone else. In return, riches beyond the aspirations of mere mortals.

This is the bargain accepted by those in the world of business who want to make a lot of money quickly. Back in the days when bits of our infrastructure were being privatised, the various heads of the resulting public companies became rather richer than they could have conceived of being as mere public servants. In return, they endured public opprobrium. For a while. The word fat cat was usually used.

Bankers are different for two reasons. As I have written before, they live in a hermetically sealed world, mainly meeting only other rich people, corporate lawyers, captains of industry. The only ordinary people they meet are generally ministering to their every need. They don’t get the public mood because they are not often faced with it.

Second, their psychology seems quite different to the rest of us. Most of us have a figure in the back of our heads, what I call the FO number. Were you to reach that level of riches, then you would tell the world just what it could do with its nine to five. (Though I don’t recommend retiring entirely. I know several people for whom idleness and the bottle have not proved a happy mix.)

I digress. Bankers seem to have no FO number. That part of their brains doesn’t exist. They go on and on earning more and more obscene sums, much of which can never be spent, long after you and I would have given it all up.

Maybe they really enjoy it, though it is not that fun a business, from my observation. This week we learnt of an American bonds trader who made £170 million in five years working for Barclays. £170 million is, I think, significantly larger than most people’s FO number

He is suing for yet more. Because enough is never enough.

The People’s Bank Is Deepest Red

Every now and then someone pops up to explain that what this country needs is a People’s Bank. One not run by typical bankers, but by those with the customers’ interests at heart. One of Labour’s policies is the creation, presumably by requiring existing banks to sell properties, of two so-called “challenger banks”.

We now have a pretty clear idea of what a People’s Bank might look like. The official report into the collapse of the Co-Op Bank has been published. It paints a horrifying picture of a bank that was indeed run by people other than bankers, who were supposed to be acting out of altruism and in their customers’ interests.

They seem to have known rather less about banking than I do – and possibly you do, as well. Discussions over whether the bank had enough money to survive appear to have taken second place to those on ethical issues. The former chairman of the bank, the disgraced Paul Flowers, seems to have been popular mainly because he ran meetings well. He knew virtually nothing about the bank and could not even get close to an accurate estimate of its size, as his appearance before Parliament made clear.

The acquisition that sent the bank under, of the Britannia Building Society, was not subject to the sort of checks as to its financial health that would have applied if the purchase had been by a quoted company. The auditors were not given proper access to its books. Had this happened with a quoted bank, it is almost inconceivable that the deal would have gone ahead.

I have no huge time for the banking sector, as other blogs will have made clear. But the rank amateurs at the Co-Op are hardly a good role model for a People’s Bank.

Incidentally, I notice one of Ed Miliband’s first speeches on banking, after he became Labour leader, talked about banks’ responsibility to serve the real economy and to build a long-term, trusted relationship with customers. It was delivered in 2012 – at the London HQ of the Co-Op Bank.

On Bankers, And Bashing

The days are getting longer, the magnolia blossom is on the trees and it is time for the annual banker bonus bashing season. This comes around every year as the banks publish their annual reports, which are required to detail the transcendentally huge amounts their senior staff are paid

Meanwhile, a survey only this week suggests 40 per cent of City workers are dissatisfied with their bonus. One question I am often, as someone who knows a few bankers, asked is, how can they? Have they no sense of shame?

Here is a clue. One of the most successful investment bankers of his generation, and one of the best remunerated, is called Rich Ricci. Pronounced “Ritchie”. An American, he has a number of horses running at Cheltenham this week. Like you do.

Now, if you or I were a fabulously rich banker called that, you and I would probably use the Richard form of our name. It might seem a little less provocative.

It is also a weirdly hermetically sealed industry, more so, I guess, than lawyers or engineers or dentists. We had a couple of bankers for neighbours for a couple of years. They invited us to their housewarming. Pleasant enough people. But as I made polite small talk about the City, I was greeted with the same question over and over. Which bank did I work for?

It seemed inconceivable to those in the room, all bankers save neighbours like us, that anyone could do anything else for a living. They don’t get the criticism because they don’t meet anyone, or hardly anyone, who hands it out.

Then there is simple human nature. The row over executive pay really kicked off after the privatisations that started in the 1980s. Former civil servants, on appropriate salaries, were suddenly transformed into titans of industry with pay packages to match.

Every week some former regional electricity board chairman or someone of that ilk would be dragged, blinking, through the press and pilloried for their “obscene” salary. One paper even went to the trouble of sending a photographer down to the modest  French holiday home of one miscreant and snapping it though a fish-eye lens, to make it look larger and more palatial than it was.

You had to ask whether it was worth it. Until you think, here is the bargain. You get to spend a week or so in the public stocks, in return for riches that would have seemed unimaginable in your earlier, civil service job. Then the dogs stop barking, the caravan moves on, and someone else gets their turn.

If I were to find myself earning, ooh, twenty million a year, I would probably work until about mid-August, bank the lot, and then never work again. But I am not a banker.