There was a scary moment on last Sunday’s The Reunion when we heard that the derivatives market has ‘exploded’ since the collapse of Barings in 1995. Banking has become more, not less, dependent on the kinds of gambling on future (i.e., virtual) values that brought down Britain’s oldest merchant bank. When Barings fell, just over $1 billion went down the drain. Now, the derivatives market is worth $1.4 quadrillion — a figure that becomes more and more meaningless the bigger it gets, wafting through the ether like a cloud of poisonous gas.
Even more alarming (you can tell that I read Cranford at an impressionable age, upon which my knowledge of banking collapses depends) was to hear Peter Norris, the man who was technically in charge of the rogue trader who brought down the bank, concluding that ‘fraud is an endemic feature of commercial life. Three to four per cent of people will commit fraud, if given the opportunity…’ But, he says, you need ‘vigilance and luck’ to deal with it; regulation alone isn’t enough.
I listened to the first of Sue MacGregor’s new series, bringing together people involved in extraordinary episodes of recent history, intrigued to find out what the rogue trader, Nick Leeson, and his boss might have to say to each other when they met for the first time since Leeson’s trial and imprisonment (he was released in 1999). Would their conversation give us a clue as to how Leeson could have single-handedly destroyed a financial institution that had survived countless wars and earthquakes, frauds and floods since it first began trading in 1762? But I’m still as confused about the affair as ever.
‘I would offer an apology to Peter,’ said Leeson, ‘but whether an apology is going to make much difference to Peter at this stage I just don’t know.’ I’m sure I could hear him grinning as he said this, just as in that infamous snapshot of him arriving at Frankfurt airport after being on the run for a couple of months.
‘Thank you very much for your apology,’ replied Norris, as if Leeson had just cheated him out of the price of a cup of coffee.
Leeson had been sent out to Singapore as a star trader. But very soon he began making catastrophic losses, which he then tried to cover up by risking more money, day by day, hour by hour, minute by minute. A classic gambler’s mistake. The trouble was no one, absolutely no one, in the bank checked up on him for three years. Those in charge of the bank appear to have abandoned all common sense in the whirl of excitement that surrounded the transition to electronic trading in the late Eighties.
Nick Leeson confessed, not once but twice, that it was ‘the most embarrassing period of his life’. An odd choice of word — as if he still cannot bring himself to acknowledge that what he did was driven by ‘greed and fear’, the words used by Nicholas Edwards, who used to work for Barings as an investment banker.
No one else sitting round Sue MacGregor’s table challenged Leeson, or even sounded mildly annoyed. Weird. It was as if we were in an alternative universe where everything that was said was actually the obverse of what was true, and no one was reflecting on what they had done, or not done, at the time. The virtual bug is highly infectious, and deadly dangerous.
On Monday morning, Fi Glover began her Radio 4 series on Generations Apart (produced by Beth Eastwood), talking to a group of people who have just reached 65 and are embarking on their retirement years, and to those who at 21 are just starting out on adult life. It was a useful antidote to the unreality of Leeson’s conversation with the bankers.
Here were people dealing at the sharp end of life, surviving on a state pension, coping with Alzheimer’s, accepting enforced retirement. Alice, who lives in Grimsby, was obliged, aged 57, to go back to her role as a mother and take on the full-time care of her 11-day-old granddaughter, Olivia, whose mother was drinking at 9.30 in the morning. Social services were threatening to put Olivia into care and Alice stepped in to stop that happening. She’s had precious little help since then, and at 65 finds herself coping alone with the daily tantrums and tears of childcare.
Derek looks after his wife Jean for whom he has to do everything. She no longer recognises him after 44 years of marriage. She doesn’t understand what pills are, and won’t take them. ‘It’s no use shouting,’ he says. ‘No use complaining. No use being threatening. She just doesn’t understand.’ When things get too much, he walks off down the garden to his shed for a quick smoke. Because Jean can no longer dress herself, he has to do it for her, every morning. ‘It’s like trying to put a bra on a worm,’ he says, laughing at the weirdness of his situation.
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