Howard Davies: Thankfully my heroes don't have feet of clay

MT Diary: Last month Davies was lucky enough to meet Colin Bell and Paul Volcker, two of his biggest idols.

by Howard Davies
Last Updated: 20 May 2015

Unimaginative magazine editors struggling to fill their pages (doesn't happen here, Ed) often resort to the 60-second interview format, whereby vaguely famous people are asked fascinating questions like 'which book is on your bedside table?' or 'who is your greatest hero?'

Once you struggle out of your teens, the practice of hero worship becomes less attractive, and over time the slings and arrows of outrageous fortune conspire to show that many people you begin by admiring tend to have feet of clay. But, perhaps in a subconscious attempt to stay young at heart, I have retained two heroes over 40 years, and last month I was lucky enough to talk to both of them.

They were not together, as it happens: the worlds Paul Volcker and Colin Bell inhabit rarely collide. Volcker lives modestly on the Upper East Side, and his natural habitat is the kind of financial conference where central bankers huddle in corners talking indiscreetly to each other about their latest bout of quantitative easing. Bell lives in Cheshire and is at home in the Chairman's Lounge at the Etihad stadium, explaining the reasons for Manchester City's latest European misstep. But, for me, they inhabit the sunlit uplands of Mount Olympus, where higher mortals end their days.

Colin Bell is as regular a bloke as you could hope to meet, what cockney slangsters call a diamond geezer. He hasn't made a second career as a TV 'analyst', saying penetrating things like 'well, Gary, he hit it first time and there it was in the back of the net', but is as acute as anyone in his understanding of the modern game. And at 69 he looks fit enough to inject more dynamism into City's midfield than some of the incumbents do from week to week. There are johnny-come-latelies in Manchester who advance the claims of Yaya Toure and David Silva, but for me Bell remains the greatest player to have pulled on the sky blue. I still feel all wobbly at the knees when we meet.

Paul Volcker is, in a very real sense, a bigger man. If they had offered rugby at his US school he would have been in the second row. Even at 87 he is a very imposing physical presence. He came to public attention as the chairman of the Fed under Jimmy Carter who jacked interest rates up to 20% and squeezed inflation out of the system. For a while, that made him Public Enemy Number One, but in retrospect it was a decisive move, which created a trend break in inflation, which had been on the rise for two decades. And for more than 40 years he has been one of the most acute, humane and penetrating commentators on the US economy and the financial system.

After the crisis he invented his eponymous 'rule', which prevents banks from punting their own capital in trading commodities and other assets, which has now been legislated in the US as part of the Dodd-Frank Act. The banks have mixed feelings about it, as you might expect, but it is one of the more impactful changes post-crisis. And now, with all the impatience of a man a quarter of his age, he is embarking on a crusade to reform financial regulation in the US.

It is wrong to describe the American system as Byzantine, as the Empire had quite a tidy and efficient administrative structure by comparison. It is a bizarre mix of state and federal agencies, with several competing bank regulators, and separate Commissions for cash equities and derivatives thereof, which makes no sense at all. But so far all attempts at reform have fallen at the Congressional fence. Each regulator has its own protective committee, highly attached to its particular responsibilities, and the campaign contributions that come with them. If Volcker can make an impact on that, he will go up even further in my admiration, though that is hardly possible.

On my travels this month I lost a couple of jobs and picked up a new one. Taking on the chair of RBS will involve giving up the chair of Phoenix Group, saying a sad farewell to Morgan Stanley, where I have been on the board for 11 years (longer than is kosher in the UK these days, but that's another story). So my regular reader (I am told there is one) may learn more about Edinburgh than Manhattan in future.

When I told the students on my central banking course in Paris about my new appointment, one asked if RBS was the Scottish central bank. Not yet, I told her.

I will still be going to Paris in my new manifestation. The city is recovering from the Charlie Hebdo attack. The security presence is very heavy indeed, especially in the Marais, traditionally the Jewish quarter. Small groups of heavily armed soldiers, including some mean-looking women, are on every street corner. The number of French Jews emigrating to Israel is rising sharply, and the government is very sensitive about it. The prime minister, Manuel Valls, is working hard to reassure the community that its place remains in France.

Meanwhile, Francois Hollande, who behaved with great dignity when the shootings occurred, has reverted to type. The French press reports that his actress girlfriend Julie Gayet (the destination of his scooter trips) has been hosting private dinners at the Elysee Palace for him to meet other stars of stage and screen. Unemployment continues to rise, the National Front is consolidating its position, the budget is out of control, but what is important, really? It is good to see the President asserting that the French life force is as powerful as ever.

Howard Davies is the chairman of the Airports Commission. Follow him on Twitter at: @howardjdavies

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