- The Barlow Clowes Affair by Lawrence Lever
Macmillan, 278 pp, £17.50, February 1992, ISBN 0 333 51377 0
- For whom the bell tolls: The Lesson of Lloyd’s of London by Jonathan Mantle
Sinclair-Stevenson, 358 pp, £18.00, June 1992, ISBN 1 85619 152 4
- The City of London: Continuity and Change, 1850-1990 by Ranald Michie
Macmillan, 238 pp, £30.00, January 1992, ISBN 0 333 55025 0
The City of London has always had a streak of lawlessness, partly because great fortunes could be made and partly because regulation has been relatively light. Advantage has repeatedly been taken of the latter, and certainly the past few years have seen a series of scandals, notably Lloyd’s, Guinness, Barlow Clowes, BCCI and now Maxwell. Indeed, Maxwell bids fair to be one of the best. Robert Maxwell was a rogue of the first order, but no one can say that we were not warned: in 1971 the Department of Trade and Industry warned that he was ‘not a fit and proper person to have charge of a public company’. Not the least interesting question is why, with that sort of record, banks were so eager to lend large sums of money to him.
To say that, in this case, regulation failed would be an understatement. Historically, it was the City’s practice to regulate itself, which was acceptable as long as scandal and losses were largely confined to those who could look after themselves. But once innocent people began (metaphorically) to throng the City’s streets in increasing numbers, and to get hurt, external regulation seemed the answer. But what then happens if regulation fails? Someone must be blamed: but whom? And beyond that, should someone pay?
Originally, the City of London was primarily a geographical area, and ‘the City’ referred to all of the activities that went on there, whether fishmongering or finance. It was the Second World War and its aftermath, according to Ranald Michie, which drove a furrow between the geographical and the functional Cities, as traditional City activities migrated further afield, driven thence by bombs or high rents. Nowadays ‘the City’ in common parlance tends to mean finance only. His short, wholesome and enlightening book makes clear how limited a vision this is. First the City traded; then it provided credit for trading; then it provided investment capital; and now it provides services. Among the most important of these are insurance and reinsurance, and the provision of investment opportunities, particularly for pensions.
It is within these service areas that two of the biggest public brouhahas of the last decade took place, the Barlow Clowes affair, now brought to a close, and the congeries of Lloyd’s scandals and disasters, still very much running. Barlow Clowes purported to be a firm specialising in investments in gilts, which are British government securities and thus by implication a very safe (if unexciting) investment. The firm cheated nearly from the first, and its victims were preponderantly pensioners who were threatened with the loss of their life savings. It was meant to be licensed and therefore externally regulated by the Department of Trade and Industry (DTI), with the Bank of England and the Stock Exchange in due course taking an interest. Lloyd’s of London, on the other hand, has always been self-regulated. What is at issue here is whether insiders in Lloyd’s (the working underwriters) took advantage of their position to subject outsiders (external Names) to excessive risk, or even actually to defraud them. If not, Lloyd’s have no case to answer; if so, who will force self-regulators to regulate themselves? For the victims in both cases, the question became: who will compensate us? For Barlow Clowes, it was eventually the Government; for Lloyd’s, the answer is no one.
Lawrence Lever’s book on the Barlow Clowes affair combines biography and City journalism. Peter Clowes must be at least faintly charismatic to have convinced so many people of his ability and rectitude, but Lever fails to convey this. On the other hand, had he tried, he would have been undermined by the photographs in the book: saying that Clowes looks like a used-car salesman would be an insult to that much-maligned breed. He was a lonely, intelligent, intense and hard-working child, who left school in the middle of A levels to make money, first in the family business selling paraffin, and then on his own, running a market stall, and after that, a landscape gardening business. In due course he joined an insurance company which was part of the empire of Bernard Cornfeld, shortly thereafter revealed as one of the more spectacular fraudsters of the Sixties.