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THE BANKERS OF SIENA AND THE BARINGS' SCANDAL
LONDON LETTER
BY: T.R.KI was on holiday in Florence and Siena like a time traveller temporarily inhabiting Italy's twin medieval towns once ruled by a dynasty of bankers. The Sienese bankers who gave the world of banking some of its best known terminology and useful financial instruments, dominated the world of European trade for four centuries from their august palaces, and financed the bloody crusades of the middle ages. It was in a sense a suitable and fitting place to be in when Barings Bank, the oldest and one of the most venerable of city financial institutions which has the Queen as one of its clients, went bust. Even the most prescient writer of financial thrillers could not have included such an event in a plot of financial skulduggery. Barings was founded in 1762 by two Baring brothers, when the Florentine banks still dominated Europe. It nearly went under once before in 1890 when its adventurous loans to Argentina were found to be irrecoverable. Barings employees whose average pay is around £100000 a year, had a package of £100 million in bonus awards just a week before its sudden and catastrophic demise.
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1.Palazzo
Vecchio(Old Palace) 2.Ponte Vecchio -one of the Bridges
3.The Duomo-Church of Santa Maria del Fiore. 4St.Peters Square _ Rome
Speculators in futures and currency in particular, have held countries hostage to the whims of this casino, with international banking greedy for overnight profits supporting this global activity. Now a great bank has been hoisted on its own petard and as a warning to others has sent shock waves throughout the financial world. One single dealer in these futures called derivatives, 28 year old Nick Leeson, the son of a plasterer from Watford, in these days of high-speed computer network has managed to lose a billion dollars and bust a venerable bank. The commodity that Leeson purchased with such abandon using serious money was the Nikkei 225, a representative basket of Japanese equities, like the American Dow Jones. When he started on his slippery way down, the average price of each of these futures contracts for the Nikkei 225 was US $196,000. Within a week it was worth no more than $183,000 with a paper loss exceeding $400 million. The final estimated losses when Leeson disappeared were expected to exceed a billion US dollars. The total purchases position that Leeson took was a staggering $27 billion.
An international newspaper described this as trading mania that afflicts large international banks and financial institutions whose primary duty should be to use their money to fund commercial and industrial activity. The newspaper goes on to say unequivocally that this kind of speculation termed arbitrage, is nothing but decadence and silliness. The Bank of England did not, as in 1890, bail out Barings. Meanwhile a survey of 200 Britain's leading financial institutions by accountants Touche Ross has revealed that 58% of these admitted that their own systems for monitoring risks on derivatives trading were inadequate. Germany alone among the European countries has been to able to assert that such a catastrophe could not happen to them. The Government watchdog of US commodities, the Futures Trading Commission was unable to give such comforting assurances.
Back in Siena and Florence, the latter a city of the Medicis, the Monte de Pascis, the Pittis and all those other bankers, I was immersed in history, architecture that defies description and an incredible treasure of art. I recalled the longing I had felt as a youngster in an Indian village for Renaissance Europe and its museums and its palaces and cathedrals. My resource then was an abridged Encyclopedia of unknown provenance, as its binding and cover pages were missing; and a travelogue by the Kanarese novelist, aesthete and polymath Shivaram Karanth, Apurva Pashchima- the Incredible West.
Florence is a war-wounded city. but the damage inflicted by the bombing of the second world war and the great flood of 1966 is no longer visible. Although it was early March, Florence and Siena and the medieval village of San Giminiano preserved in aspic, were full of tourists. It was impossible to get into the Uffizi museum, the most famous picture Gallery in Italy, as the queues stretched round the corridors of this monumental structure even at nine in the morning. I had to content myself with picture postcards and a calendar of Botticelli paintings and yearn unreasonably to be in the front of this queue snaking round the museum. There were, it seemed, thousands of young Japanese girls in fashionable European clothes displaying a very European body language making up most of these line-ups. As I had seen an exhibition of the 18th century Venetian paintings at the Royal Academy in London recently, my regrets at not being able to get into the Uffizi were somewhat assuaged. I settled for the Palazzo Pitti, an imposing structure dating back to the 15th century, and enlarged in the 16th under the patronage of the Medici family. A morning in the Palatine Gallery, with a brisk tour through rooms filled with the paintings, frescoes, tapestries and sculptures is frustrating. Each room, and there are hundreds of them, deserve a day of patient and pleasurable occupation. Florence is a city that should be lived in; not just visited for a few days.
It occurred to me during this short visit that compared with the massive and highly visible presence of the young Japanese and the older American tourists in Europe, the Indians are virtually invisible in the seasonal throng that descends on Europe's piazzas. I am told that enterprising tour operators from India with links in England organize specially tailored coach tours of Europe for the increasingly affluent middle class of India, with all matters of special needs like food taken care of. There are regional chefs travelling with each of these coaches, well versed in the fastidious culinary tastes and religious constraints of the Indian tourists. However ignorance of European cuisine, a lack of interest in European history and culture, a general inability and unwillingness to adapt can be serious impediments to Indian tourists in Europe.
Wednesday, the 8 of March was officially International Women's Day. British newspapers were awash with highly charged versions of the history of this shift of power from men to women, about the gender battle and a new optimistic ideal that women would achieve equality by working with men, in a new partnership. It would seem that the extreme agenda of the 70s feminists which gave rise to descriptive terms like "strident, man-hating, unfeminine and ugly" have been replaced by anonymous feminism that does not wear its credo on its lapel. There is an awareness of the global context of women's plight in a world with wholly different social and political conditions. The true aspirations of women in countries like Iran, Algeria, the Middle East with theocratic imperatives, and to a lesser degree in Pakistan and Bangladesh, are a world apart from the agenda of the anti-abortionists lobby of the Christian West. Here the imperatives are those of the Papal encyclicals. In India, as is often pointed out, the inequality is caused in essence more by a difference in caste than gender.
The Scotsman, a respected daily newspaper published in Scotland renamed itself the Scotswoman for just a day on the 8 of March. Its current acting editor is in fact a woman, Lesley Riddoch who planned this surprise edition for its readers. She sees women as having been far more interested in real issues and what lies behind news stories, than in speculative analysis of tedious speeches by male politicians.
It is not often that a book on economics published as a hardback and costing £17 becomes a runaway best-seller, with five reprints in as many weeks. Will Hutton, the highly respected Economics editor of the Guardian whom I have referred to several times in my previous despatches, (like J.K.Galbraith, Anthony Sampson and the antipodean journalist John Pilger) has argued for an economic agenda that has a wholly different historical perspective. It reveals Western capitalism as a king without clothes. The book, The State We Are In has been praised widely even by economists in the opposite camp as a radical economic and political blueprint for the next Labour Government in Britain. At the heart of his argument is Hutton's belief that Britain in run by a consensual gentlemanly capitalism of city institutions, landed estates and boardrooms, full of old boy net works that use their massive investment portfolios for short time returns at the expense of investing in manufacturing which is essentially long term and in welfare which underpins society's essential wellbeing and contentment. Larger macro-economic events in Mexico, Eastern Europe and the Soviet Republic and its former satellites make Hutton's thesis dated already, by being relevantto a very small number of European countries.
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