Howard Davies: The MT Diary

Howard Davies on the repercussions of the Goldman Sachs whistleblower, frittering time in Rochdale, and French politics.

by Howard Davies
Last Updated: 06 Nov 2012

Spam spam spam spam, spaaam, wonderful spam. I haven't thought about spam since I tried to explain to a rather solemn Norwegian (a tautology?) why a group of Vikings singing an ode to processed meat in a transport cafe was one of the funniest things ever to appear on British television. You try it. The whole gruesome experience came back to me as I sat in the Wine Press, a sophisticated hostelry on the edge of Hollingworth Lake, which, as readers will know, is one of the most visited beauty spots in the whole of Rochdale.

In the list of starters, nestling among the insalatas tricolores and the spicy chicken wings were 'Black pudding and spam fritters with curry dip'. I tried to persuade my mum to order them, as my cholesterol count did not need topping up, but she was having none of it, and her dog was put off by the curry dip. There were some bearded bikers at a nearby table but no Vikings, so no takers. My sons are going to have to be the guinea pigs next time we go Up North.

It is safe to assume that the bankers of Goldman Sachs (who do not yet have a Rochdale branch) do not windsurf on Hollingworth Lake. But they do sail close to the wind elsewhere, according to Greg Smith, a former head of US equity derivatives in Europe whose explosive resignation statement in the New York Times berated the firm's 'toxic and destructive' atmosphere, where clients were often described as 'muppets' for buying its exotic products.

The 'kiss and tell' departure is a nightmare for any firm. A disaffected former employee always has enough material to make anywhere sound pretty bad. There was one at HBOS, you will recall. Morgan Stanley (where I am on the board) had one in the late 1990s - Frank Partnoy, who wrote a book called Fiasco, about his time on the trading desk. He has gone on to write some interesting stuff, but Fiasco was disingenuous. I reviewed it years before I had anything to do with the firm and described it as 'a nasty little book'. The publisher put the quote on the cover of the paperback, and it flew off the shelves. That taught me.

It is hard to know how Smith's expose will play in the longer term. Will people just shrug and say: 'We knew all these investment bankers were unscrupulous sharks' and move on, or will it resonate particularly with Goldman clients? I guess Goldman must be hoping for the former. They should try George Osborne's line: 'We're all in this together.'

It is not clear, however, that this description applies to the Coalition, or even to the Cabinet itself. Vince Cable and assorted Lib-Dem peers have taken to the media to advance their interesting views. Perhaps they have not always done so deliberately; Cable's letter to the PM on the Government's non-existent (to him) industrial policy came to us courtesy of Robert Peston, from whom no secrets are hid.

The disappointing thing was how little the long letter contained in the way of policy ideas. There was one proposal, for a British Business Bank to be carved out of RBS, but the Treasury had already sat on that one. The rest was a mishmash of pious wishes and hand-wringing.

On procurement policy, it called for 'joined-up thinking' (that phrase is a telltale signifier of its absence). Cable then wrestled with the troublesome question of how far the Government should have an active and interventionist strategy at all. Given many past failures, should it be trying to decide where investment should go, or leave well alone?

After a tour round the historical houses, a few references to his time on scenario planning at Shell, and some name-dropping (Ratan Tata seems to be round the Cables' place for tea most Sundays), he reaches a firm conclusion. 'Without in any way picking winners' - a strategy that has been tried and failed in the past - the Government should be 'willing to identify British success stories and explicitly get behind them at the highest political level'. Is that clear to everyone? Well then, off we go.

It is almost a relief to get back to France and the presidential campaign. The candidates say equally vacuous things, but in more elegant language. Nicolas Sarkozy is trying desperately hard to play both sides against the middle, criticising Francois Hollande for leaving the centre ground of European politics by calling for the new fiscal treaty to be renegotiated while simultaneously reaching out to the National Front's voters and threatening to leave the Schengen pact if immigration is not reduced.

That earned him widespread condemnation. He was behaving like a British prime minister, the press thundered. It is the worst insult one can throw at a French politician. You can accuse him of corruption, even of pimping, but behaving like a perfidious Brit? Hold on now, you'll be hearing from my avocats.

And that is in spite of the explicit support Cameron has offered Sarkozy. We have moved into a new era in Europe where one leader campaigns for another. Merkel has been outspoken in her support for 'Cher Nicolas', and both she and Cameron pointedly refused to meet Hollande when he visited Berlin and London.

I preferred the old days when the line was 'it is not for me to interfere in the choice of the French people, and I look forward to working with whichever tiresome character they choose'. What's wrong with that? Hollande might well win, and then we will have to get along with him somehow. Picking a winner now looks as unwise in French politics as in British industrial policy.

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