Martin Vander Weyer

The ticking parcel I failed to spot and the oil-price prediction I got spot on Last week’s global stock market panic, the overture to this week’s astonishing round of state interventions, was in part provoked by fear of humongous losses in something called ‘credit default swaps’. These arcane inventions by Wall Street rocket-scientists are a form of derivative contract — or ‘weapon of financial mass destruction’, as Warren Buffett put it — akin to debt insurance. A ticking parcel of at least $400 billion worth of them relates to bonds issued by Lehman Brothers before it went bust. Since Lehman paper is now priced at only 8 cents on the dollar, enormous claims are about to emerge against the parties to the swaps.

At the historic moment when the House of Representatives passed Hank Paulson’s bail-out bill last Friday night — thus, we must hope, despite early indications to the contrary, significantly improving the world’s chances of avoiding economic cataclysm — I was conducting some research into the Scandinavian solution. I don’t mean the policies followed by the Swedish government to steer its banking sector through a near-terminal crisis in the early 1990s, of which more in a moment. I mean I was sitting in the back row of a packed cinema watching Mamma Mia!, the Abba-singalong movie, and observing the impact of a mass inoculation of feel-good on a crowd that had been battered with bad news all week.

On Monday afternoon I rang a Wall Street friend who used to work at Lehman Brothers. ‘What’s the mood?’ I asked him. ‘Do you think this is the turning point?’ ‘Hold on a moment,’ he replied. ‘Let me just climb back in off the window ledge.’ There was a pause, then a nervous chuckle. For the half-second of that pause, I actually wondered whether he was serious. And that was just Monday: since then, things have got really frightening. The former Federal Reserve chairman Alan Greenspan says the current financial crisis is ‘a once-in-a-half-century, probably once-in-a-century type of event’, but he’s wrong.

Does Medvedev really believe in the rule of law? The fate of TNK-BP is the test Is President Dmitri Medvedev of Russia — who looks and sounds like a liberal-leaning modern technocrat — really his own man, or is he merely the stooge of his predecessor, the sinister, warmongering Vladimir Putin? The mad situation engulfing BP’s Russian joint venture, TNK-BP, is surely the test of this question. Its BP-appointed chief executive, Robert Dudley, has met such hostility from the gang of oligarchs who are BP’s partners in the company that he is now trying to run it by email from a secret address somewhere in eastern Europe.

Martin Vander Weyer's thoughts on the world of business Shell and Barclays were the two highest-profile British companies in South Africa during the apartheid era. Both pursued non- racial business practices as far as they could, but both endured years of disrupted shareholder meetings and flak from the student Left. Shell stuck it out — and shortly after his release from prison in 1990, Nelson Mandela declared, ‘We’re glad you stayed.’ Barclays bowed to the protesters and abandoned its network of 900 branches in 1986; when the bank returned in 1995 to open one office in Johannesburg, Mandela told the men from Lombard Street, ‘You should never have sold.

How times change: the ECB has become the very model of a modern central bank I don’t suppose many of my readers took part in the European Central Bank’s tenth birthday celebrations last week — but if I’m wrong about Jean-Claude Trichet’s taste in columnists, then bon anniversaire, monsieur le président, though I can’t quite bring myself to add beaucoup des retours heureux.

These days, Vesco the fugitive fraudster would have had a top job on Wall Street So farewell, Robert Vesco, the fraudster, drug trafficker and fugitive from US justice whose death last year has been ‘confirmed by Cuban burial records’, according to the Daily Telegraph. Vesco absconded with $200 million of other people’s money — $60 million of it in banknotes in his excess baggage on a commercial flight — after looting Investor Overseas Services, the mutual-funds empire created but recklessly mismanaged by Bernie Cornfeld. Welcomed as a white knight when he gained control of IOS in 1970, Vesco proceeded to steal most of its remaining assets by selling them to fictitious companies as fast as he could print imaginative new letterheads.

Twenty years ago, when I ran the Hong Kong branch of a London investment bank, one of our most important London-based investor clients for Asian stocks was only ever referred to, in whispers, as ‘Orange’. It operated — so I was told — behind unmarked doors somewhere near St Paul’s Tube station; it dealt with us only on condition of absolute secrecy; and it had nothing to do with Orange mobile phones, which had yet to be invented. I think enough water has flowed under City bridges since those days to permit me to reveal Orange’s identity without embarrassing anyone — the investment bank and its Hong Kong branch having expired long ago.

I think I’ve spotted the ‘trash and cash’ merchants, dining at Mayfair’s best tables A posse of hedge fund managers came round to The Spectator the other day, not to indulge in ‘trash and cash’ — or the even less attractive ‘pump and dump’ — but to participate in a breakfast discussion about how they are perceived by the media and the political world, and what they ought to do about it. I was asked to kick-start the debate, so I gave it to them straight in the croissants.

‘Sexual intercourse began in 1963,’ wrote Philip Larkin; consumer debt, with similar connotations of gratification and regret, began in Britain three years later with the launch of Barclaycard, based on the model of the world’s first mass-market credit card, BankAmericard in California, which dated back to 1958. A retired bank manager once told me he swiftly realised the three most useful things about the revolutionary new product: ‘It scraped ice off your windscreen. It picked Yale locks. And it got my customers into debt.’ To that list we can now add a fourth: it fills holes in bank balance-sheets.

In the end, they may have to auction what’s left of Northern Rock on eBay When the nationalisation of Northern Rock was announced at the beginning of the week, commentators queued up behind the shadow chancellor to declare a return to the dark days of the 1970s and to dance on the ashes of Alistair Darling’s career. It took a little longer for us all to work out what a horrendous task faces the new management duo of Ron Sandler and his chief financial officer, who rejoices in the name of Ann Godbehere.

Martin Vander Weyer on the next thing to cause heartburn in the financial markets.  The current market crisis sometimes feels like a Scrabble championship between financial pundits, in which most of us hesitate to challenge dubious words and strange jumbles of letters for fear of showing ignorance. First came ‘subprime’, which we learned to define as a category of mortgage borrowers so uncreditworthy they cannot even afford the hyphen the Spectator’s learned sub-editors would prefer to insert between the ‘sub’ and the ‘prime’. Then came a rash of acronyms encapsulating both the science of subprime lending and the alchemy of securitisation by which its poison has been spread around the world.

Since I’m not a Northern rock shareholder, I wasn’t at yesterday’s EGM in Newcastle’s Metro Radio Arena – so I’m grateful to Graeme Wearden on the Guardian’s NewsBlog for a blow-by-blow account of the proceedings. A lot of ‘north-east (hurt?) pride’ was on display, he writes, as well as some natty shirting worn by the two hedge fund managers who have made themselves central to the story, Philip Richards of RAB Capital and Jon Wood of SRM. In the chair, trying to get the audience on his side with a joke about having the second toughest job in Newcastle (the worst, of course, being manager of the troubled football club), was Bryan Sanderson, the ex BP executive who was parachuted in after Dr Matt Ridley did the decent thing and resigned.

‘Should we blame it all on City spivs?’ I asked a managing director of a famous investment bank at a pre-Christmas party. He had just told me – with the smile of a man who can look forward to yet another seven-figure bonus in a few weeks’ time – that his firm was still doing very nicely thank you. It was doing so, he continued in the same breath despite the fact that the economy was going to hell – and his forecast for the state of the nation’s, rather than his own, wealth in 2008 was as startlingly downbeat and bluntly phrased as any I have yet heard in this winter of doomsaying.

Tuesday’s announcement that the Treasury will guarantee lending from other banks to Northern Rock is last ditch bid to avoid having to nationalise the bank. But in truth, most of the best options were closed off by inaction back in September. National Rock? With the announcement this morning of a further extension of the scope of the Treasury’s guarantee of Northern Rock liabilities, nationalization of the crippled mortgage lender looks an even stronger bet than it did yesterday. The guarantee, you may remember, initially covered only the £24 billion or so of retail deposits made before everything went pear-shaped and panic-stricken in September. Then the guarantee was extended to cover new deposits after that date and some wholesale deposits.