Martin Vander Weyer’s Any Other Business
‘Does anyone remember David Laws?’ a former City colleague asked me during the brief interlude between the Lib Dem MP’s debut as financial secretary last Monday and his descent into hell on Friday. Judging by the sketchy accounts of his banking career in the weekend papers, with their references to a ‘billion-dollar gamble’ that made him a ‘multimillionaire’, few journalists bothered to track down City sources who really knew him in those days. But in fact he held the same title of managing director of Barclays de Zoete Wedd (BZW, the forerunner of Barclays Capital) that I once held myself. Laws joined BZW from JPMorgan shortly after I made an unexpected exit, so we never met, but several chums of mine worked alongside him. They remember a bright but cold fish who kept himself to himself (for reasons we now understand) amid the swaggering machismo of the trading floor.
Being called ‘managing director’ of an investment bank does not necessarily mean you manage or direct anything — it just means, as my boss growled shortly before he fired me, ‘the stakes are higher’. Laws was one of two senior lieutenants to the head of the bank’s money market operations. His role (deploying his Cambridge first in economics) was to inject analytical rigour into the team’s trading strategies, but he had the good fortune to be there at a time when it was relatively easy to see which way markets were going. Sterling interest rates fell from their Black Wednesday ERM-crisis peak of 15 per cent in September 1992 to 5.25 per cent by early 1994: as a result, huge profits could be had by buying sterling instruments in anticipation of further rate falls. Legend says Laws once placed a huge bet on Morgan’s behalf in the futures market ahead of a US rate cut, though it would have been a carefully hedged bet and probably well short of ‘billion-dollar’.
Laws was a smart trader with an acute grasp of markets, my chums say; and that was a CV for a financial secretary to reassure the City. But the more cynical reason why bankers are sorry to see him fall so swiftly is that he also grasped how to work the bonus system to advantage: he used it to fund his entire political career and could never have positioned himself, like Vince Cable, as a righteous opponent of it. He would likely have collected a low-six- figure annual bonus from JPMorgan for 1991, then negotiated a guarantee of at least as much the year after when he moved to BZW. At the end of 1993, his immediate boss was one of BZW’s so-called ‘magnificent seven’ who broke the million-pound-bonus barrier, so my sources reckon Laws should have collected upwards of £800,000. Having banked it, still only 28, he left to work for the Lib Dems — not a ‘multimillionaire’ but a man of sufficient means, you might think, that he would never need to work the parliamentary expenses system to advantage as well.
In the line of fire
I wrote here a month ago that I hoped the Deepwater Horizon disaster would not cost BP chief executive Tony Hayward his job, but I have to say it’s not looking good for him. While the oil spews into the Mexican Gulf and BP’s shares plunge, the unspun and clearly exhausted Hayward keeps saying things that enrage Americans and offer free ammunition to their politicians, including the daft observation that the volume of spilled oil is tiny in relation to the total volume of the ocean. If the shares fall so far that BP becomes a takeover target, Hayward may have to be sacrificed. In that case, the next man in the line of fire could be managing director Bob Dudley, who has the advantage of being an American and whose roving brief absolves him of direct responsibility for the spill. Dudley is, I’d guess, having met both, psychologically tougher than Hayward: he survived what he described to me as the ‘difficult but interesting’ experience of leading BP’s troubled Russian venture, TNK-BP, when the local oligarch partners decided to drive him out of the country. At one stage he had to run TNK-BP by email from a secret location in central Europe. If the bidders for a broken BP turn out to be those same oligarchs or some of their friends, at least Bob Dudley will know how to handle them.
Granola to gruel
I’m beginning to worry about inflation, and I see the Organisation for Economic Co-operation and Development agrees with me. The Paris-based institution’s view is that the UK base rate will have to rise from 0.5 per cent to 3.5 per cent by the end of next year to counteract the inflationary impact of all the monetary fuel poured into the economy in response to the financial crisis. OECD forecasts have often produced gloomier predictions than those of our own Treasury, particularly when the latter was under the Goebbels-like control of Ed Balls. My own forecast is based, more simply, on the price of breakfast. The Retail Price Index has blipped to 5.4 per cent, its highest level since 1991, and even Gordon Brown’s fudged Consumer Prices Index is at 3.7 per cent, almost double the Bank of England’s target. But such numbers only become meaningful when you experience what Americans call ‘sticker shock’ — when you hurriedly put back on the shelf something you were about to buy, after spotting the price. In my case, it was a £6 jar of local honey in one of Helmsley’s two excellent delis, and a large bag of Yorkshire Dales Granola at a staggering £13.40 in the other.
Now, you may say it serves me right if I’ve come over all Lib Dem and started eating granola and honey for breakfast, instead of the black pudding on fried bread that sustains the true-blue Yorkshireman. But I challenge you to note the prices of your own preferred breakfast comestibles and tell me they haven’t shot up, like your train fares and your insurance premiums and your school fees. Right now, tax rises are uppermost in the public mind, especially the prospect of an enterprise-crushing, Lib Dem-appeasing Capital Gains Tax grab; but this time next year, it may well be the impact of a sustained bout of inflation that will be troubling us, along with the depressing effects of costlier mortgages and reduced business investment that come with rising interest rates. And I’ll be starting my day with dry toast.
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