Martin Vander Weyer

Amidst the gunfire generated by Stephen Hester’s bonus — on which I’m glad to say he took my advice and did the decent thing, so like Stephen Wraysford at the end of Birdsong he deserves a few days’ rest — I was intrigued by the week’s other RBS story. Hester is reported to be selling the troubled bank’s corporate stockbroking arm, Hoare Govett, to Jefferies, a US securities house. This will be the third change of ownership in 30 years for a firm whose name is so redolent of the pre-Big Bang era that many of us had forgotten it still operates at all, albeit from the death ship which is RBS’s investment banking division. Its history is, in effect, the history of the modern City writ small.

I thought editors came on a bit strong with  the ‘Jailbird Honours’ headlines in response to New Year gongs for ex drug-dealer Chris Preddie (OBE) and former HMP Ford inmate Gerald Ronson (CBE), the property tycoon who was convicted of theft and false accounting in the Guinness share-support scandal in 1990. But what was interesting about responses to the list was that by far the largest helping of hostility was aimed at the hedge fund manager Paul Ruddock — who was knighted for donating large sums to the V&A museum and other charities, but damned for making £100­million (for his firm, Lansdowne Partners) by betting on the fall of Northern Rock and other bank shares, and giving £500,000 to the Conservatives.

About ten years ago, over a good lunch, I had a debate with the late Giles Worsley about Battersea power station. The distinguished architectural writer said Battersea was an industrial icon that should certainly be conserved but — like its sister station turned gallery at Bankside — found a new purpose. If an industrial icon had ceased to serve the very specific purpose for which it was built, I countered, there’s no need to strive at enormous cost to save its impotent hulk, especially if we’ve kept another just like it a mile or so downriver. Assuming it’s physically possible to knock the brute down, why not create a new, fit-for-21st-century-purpose landmark in place of the old one?

A consolation of the financial crisis is that it is producing a bumper crop of fiction, the best of which will be read long after all the hefty works of investigative non-fiction have been forgotten. Last year I praised Sebastian Faulks’s A Week in December, and my Christmas reading this year will include Justin Cartwright’s Other People’s Money and Robert Harris’s The Fear Index. The ‘silo mentality’ of the hedge-fund manager offers a rich psychological seam, the drama of the trading floor provides all the McGuffins to sell the film rights, and the contrast between the financiers’ lifestyle and that of the people whose livelihoods they damage is the 21st-century zeitgeist captured in a few keystrokes.

I’m picturing you reading this in your armchair beside a blazing log fire on Friday evening, Christmas tree lights twinkling over your shoulder, spaniels steaming at your feet, beaker of mulled wine in your hand. ‘Quite exciting while it lasted,’ I hear you say, ‘but thank God it’s all over. Here’s to Angela and Nicolas and the FTSE through 6,000 by New Year’s Eve. Might even have another pop at those Italian government bonds on Monday. Pass the ski chalet brochures.

I admire the Chancellor for his clarity of mind and his coolness under fire, but I don’t believe a word of his forecasts. I didn’t even believe the forecasts he read out on Tuesday from the independent Office for Budget Responsibility, and I’ll hazard a guess that the Chancellor wasn’t really putting much faith in them either. The key predictions of 0.9 per cent growth this year and 0.7 per cent next year, and all the borrowing numbers that flow from them, depend, he was careful to point out, on whether the eurozone finds a way through the current crisis: ‘If they don’t then the OBR warn that there could be a much worse outcome for Britain.

I wrote here in July that I was hoping to see history reversed at Northern Rock. Shortly after that, Swiss boffins declared that time travel really might be possible, after discovering they could fire neutrinos through an Alpine tunnel at a fraction faster than the speed of light. But the idea of propelling the privatised remains of the Rock backwards through several decades — to emerge as a mutually owned and socially responsible provider of mortgages to sensible savers in the north-east — was never high on the Treasury’s agenda. The bank whose 2007 collapse heralded 2008’s financial armageddon was always going to be sold to the highest bidder at the earliest moment a deal could be made to stand up and not look too embarrassing for George Osborne.

The Bank of England was expected this week to slash its growth forecast for the current year and next to around 1 per cent, down from previous forecasts of 1.5 and 2.1 per cent — but that’s still optimistic according to a European Commission report which projects no better than 0.7. Official ­figures were also expected to show the number of unemployed 16- to 24-year-olds passing a million for the first time. In the eurozone, where Marios are suddenly in the ascendant, the new ECB president Mario Draghi admitted that ‘mild recession’ is in prospect while pundits gave Italy’s new prime minister Mario Monti a month at most before his country’s bond yields move back into meltdown territory.

What are bond markets saying about Italy? With my usual proviso that markets are best understood as shoals of piranhas, communicating moods of panic, indifference, bloodlust and satiety rather than coherent ideas, the relatively clear message earlier this week was that Italian government bond yields were perilously close to the threshold of panic. That threshold is widely deemed to be 7 per cent, more than 4 per cent above benchmark yields for German, French and Dutch debt. Let me try to put this in perspective. The incremental interest cost to the Italian treasury is about €2 billion per percentage point per year, which doesn’t sound too terrifying.

‘The boom in top people’s pay is gathering momentum,’ I wrote before some of you were born — those of you who are still at school, that is. I went on to quote a leading industrialist of the day: ‘Shareholders won’t be able to stop it. Moderation will have to come through pressure of public opinion.’ Statistics from the same source two decades apart suggest public opinion has done a pretty feeble job. In a piece headed ‘Snouts in the Trough’ (1 May 1993), I quoted an Income Data Services (IDS) survey of FTSE 100 companies whose chief executives had received average annual pay increases in the depths of the 1991-92 recession of 15 per cent, to £463,220.

Deep in autumnal France, it’s eerily quiet except for a flock of magpies in the trees — an omen of ‘death and hard times ahead’, or so I read on a website for druids which is as informative as any of the more mainstream sources about the chances of successful resolution of the euro crisis. ‘Le plan sera decidé mercredi’ declares the most mainstream, Le Figaro, in the de haut en bas tone of a paid-up member of the Euro-establishment. But my neighbours here are more agitated by the second story, ‘Rugby: la defaite avec panache’, and at least mildly interested in the third: ‘Carla et Giulia sortent de la maternité’.

As mass expressions of anti-capitalist rage go, ‘Occupy London Stock Exchange’ has been a bit of a damp squib. What was meant to be an assault on the epicentre of evil dealing, co-ordinated with similar eruptions in New York and elsewhere, swiftly turned into an extended coffee morning on the steps of St Paul’s Cathedral. Perhaps the genteel protesters did not realise that their target was ill-chosen anyway because the Stock Exchange building in heavily defended Paternoster Square (owned by the Mitsubishi Estate company of Japan — there’s globalisation for you) houses only the market’s bureaucrats, while the evil dealing itself takes place in cyberspace above.

Hang on to your popcorn – this could be the final reel of the euro disaster movie The good news is we’re in a new phase of the euro crisis. The bad news is we don’t know how it’s going to end. In every good disaster movie, there’s a moment when bickering bureaucrats who have failed to tackle the threat — epidemic, earthquake, invasion — are sidelined to make way for the maverick (and unkillable) hero or heroine. A classic example comes in Independence Day (1993) with the sacking of spineless secretary of defense Nimzicki and the triumph of the computer nerd played by Jeff Goldblum, who figures out how to zap giant alien spacecraft.