When a politician’s speech is spun ten days in advance, you know there’s trouble behind the scenes. Next week’s Mansion House dinner will be seen by City attendees principally as a farewell to Sir Mervyn King — and journalists present (including your columnist) will be timing the ovation to see how it compares with Eddie George’s full five minutes in 2003. But we learn that the Chancellor is ‘poised’ to use the occasion to ‘signal’ a public offer of Lloyds Banking Group shares that could raise up to £17 billion and mark a turning point in the post-crisis clean-up of the banking sector. By giving discounts to small investors, it might also swing votes away from Ukip. But we learn that UK Financial Investments, the entity which manages the Treasury’s shareholdings in Lloyds, RBS and the rump of Northern Rock, has been advising against a quick sale of the Lloyds stake, lest the share price soars afterwards and UKFI is accused of failing to maximise the taxpayers’ -interest.
Meanwhile the failure of Project Verde, the sell-off of 632 Lloyds branches to the Co‑operative Bank, is developing into another potential scandal. The bigger the black hole revealed in the Co-op Bank’s balance sheet, the more it appears Verde was politically driven in defiance of evidence that the Co-op was never strong enough to go through with it. Here the finger points at Vince Cable, who is accused of favouring the mutually owned Co-op for ideological reasons over a rival bid from Lord Levene’s ‘City grandee’ consortium NBNK, and has admitted, ‘I was really hoping this would happen.’
What’s worse is that small investors who hold Co-op Bank bonds and preference shares may be forced to take a 30 per cent ‘haircut’ as part of a capital reconstruction to fill the black hole — having been encouraged to hold them not only on the strength of the parent Co-op group but on the understanding that the bank was a favourite of the government. Readers with long memories may hear a plaintive echo in this of the pensioners who lost £100 million of savings on Barings’ ‘perpetual subordinated notes’ in 1995, having bought them in the belief that the Bank of England would always stand behind a historic member of the financial establishment.
But the Chancellor, we’re told, hopes to deflect our attention from these matters with news of a share sale from which we’ll all make a few bob and think a bit better of him. And the retiring Governor may like to include in his own speech a recitation of the Wikileaks cable which revealed him advising the US ambassador before the 2010 election that Osborne, Cameron and their circle ‘had a tendency to think about issues only in terms of politics, and how they might affect Tory electability’.
Unpleasant and unimpressive
I’m sorry to see the Treasury select committee being so unpleasant to Dame Clara Furse, the former London Stock Exchange chief who was being scrutinised as a nominee for the Bank of England’s financial policy committee. The panel were reportedly more impressed by two male candidates from what we might call ‘the usual suspects’ list: the ex-Goldman Sachs partner Richard Sharp — one of the few City people in recent years willing to defend bankers’ pay on public platforms — and Martin Taylor, who resigned abruptly as chief executive of Barclays in 1998. Given that two committee members, Andrea Leadsom and Jesse Norman, used to work in part of Barclays to which Taylor took an axe — putting his faith instead in Barclays Capital led by Bob Diamond, who he later claimed always to have had doubts about — you’d think they might have given him a fiercer grilling.
But instead, members competed to express scorn for Dame Clara and her track record — Norman winning by announcing that she was ‘amazingly unimpressive’. A serious, un-spun, Canadian-born professional who speaks the truth as she finds it, Furse has often had a hard time from men in suits over the years. Headline-hungry MPs should remember that the public thinks the Treasury committee’s performance — its memorably feeble interrogation of Diamond, for example — has too often itself been amazingly unimpressive.
Too close to the sun
To Majorca, for the first time in 30 years, to attend a wedding party and complete my Mediterranean eurozone fact-finding tour. Of course the place has changed after such a long absence: massive development, lavish new highways, more tourist flights from Moscow than Luton and Leeds. But it’s still the same charming island, and despite the bust, it feels relatively prosperous — partly because this is one holiday and second-home destination where the Germans and their money are still welcome. That’s in sharp contrast to Greece, where a memorable moment of my recent visit was a tour guide’s furious tirade about the cruelty of the bailout terms insisted upon by Angela Merkel and the failure of Germany either to compensate for Nazi atrocities — such as the massacre at the village of Distomo, which our bus happened to be passing through — or to acknowledge how Germany prospered from the rest of Europe’s willingness to forgive in the post-war decades. The Spanish have a different place in modern history, and if they finally succumb to a state bailout it will perhaps win them more sympathy from Berlin.
Meanwhile, among the wedding group I find an old friend from the City. We discuss a mutual acquaintance first encountered in the 1980s, who neither of us would have tipped to rise as high as he did in the banking world before suffering an Icarus-like fall. ‘How much would you guess he made for himself?’ I asked. ‘About a hundred.’ ‘That would be millions?’ ‘Of course.’ ‘And how much d’you think he lost for shareholders when it all went pear-shaped?’ ‘About 20.’ ‘And that would be billions?’ ‘Of course, do keep up.’ ‘Any idea what he’s doing these days?’ ‘I hear he’s running another bank.’