Tower of Basel: The Shadowy History of the Secret Bank That Runs the World by Adam LeBor
Authors: Adam LeBor
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THE BANKERS KNOW BEST
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“I rather hope that next summer we may be able to inaugurate a private and eclectic Central Banks ‘Club’, small at first, large in the future.”
— Montagu Norman, governor of the Bank of England, to Benjamin Strong, governor of the Federal Reserve Bank of New York, in 1925 1
O ne day in the summer of 1929, Montagu Norman, the governor of the Bank of England, picked up the telephone and spoke to Walter Layton, the editor of The Economist . Norman excitedly asked Layton to come to his office as soon as possible to discuss a very important matter.
During Norman’s term as governor, from 1920 to 1944, he was one of the most influential men in the world, an apparently permanent bastion of the global financial system. His gnomic utterances were scoured for meaning. When he was re-appointed governor in 1932, the New York Times described him as overseeing Britain’s “invisible empire of wealth.” “Gold standards may come and go,” the article noted, “but Montagu Norman remains.” 2 Such was Norman’s power that a single speech could move markets. When, in October 1932, Norman gloomily proclaimed at a bankers’ dinner in London that the world’s economic disorder was beyond the control of any man, government, or country, stocks, bonds, and the dollar all slid sharply and quickly in New York.
Layton was not surprised by Norman’s agitated manner. The governor was a scion of an old and respected banking dynasty, but his mental state was an open secret among financial insiders. Norman was a mercurial figure, a manic-depressive, and a workaholic, notorious among financial insiders for his mood swings. Shy and hypersensitive, Norman was introverted to the point of neurosis. Before theFirst World War, Norman had consulted Carl Jung, the Swiss founder of analytical psychology, to discuss a course of treatment, with no success. Jung had implied that Norman was untreatable, which did not help matters.
The world’s most powerful banker abhorred publicity, being recognized or socializing, and was prone to fainting fits. He once threw an inkpot at the head of an underling who failed to meet his exacting standards. “He was a very unlikely banker. He was more like a seventeenth-century nobleman or painter,” recalled his stepson, Peregrine Worsthorne. “He was always very neurotic and had very bad nervous breakdowns. He was very shy and a loner. He had no care for conventions. He came down to dinner without socks and traveled to work on the underground, which was very unusual in those days.” 3
Nor did Norman look the part of a sober financier, with his cape, neatly trimmed Van Dyke beard, and sparkling, jeweled tiepin. But despite his own flamboyant dress sense, he disapproved of showy behavior, said Worsthorne. “He lived very austerely and discouraged all signs of ostentation. He hated cocktail parties.” Norman’s horror of publicity naturally had precisely the opposite effect. Although when he sailed across the Atlantic he used an assumed name because the press covered his every move, hordes of journalists and photographers still awaited when he disembarked in New York.
The balmy months in 1929 were the last hurrah of the Roaring Twenties. The American bull market was still growing. Share prices kept rising. The value of stock in Radio Corporation of America (RCA) rose by almost 50 percent in a single month. Even Wall Street’s shoeshine boys were passing on tips to their broker customers. In August a brokerage firm announced a new service for those heading to Europe on ocean liners: on-board trading during the weeklong crossing.
Layton, responding to Norman’s summons, quickly made his way to the bank’s headquarters at Threadneedle Street, the epicenter of the city, as London’s financial quarter is known. Surrounded by a high wall, covering most of a city block, the bank’s headquarters were meant to impress, even to
----
“I rather hope that next summer we may be able to inaugurate a private and eclectic Central Banks ‘Club’, small at first, large in the future.”
— Montagu Norman, governor of the Bank of England, to Benjamin Strong, governor of the Federal Reserve Bank of New York, in 1925 1
O ne day in the summer of 1929, Montagu Norman, the governor of the Bank of England, picked up the telephone and spoke to Walter Layton, the editor of The Economist . Norman excitedly asked Layton to come to his office as soon as possible to discuss a very important matter.
During Norman’s term as governor, from 1920 to 1944, he was one of the most influential men in the world, an apparently permanent bastion of the global financial system. His gnomic utterances were scoured for meaning. When he was re-appointed governor in 1932, the New York Times described him as overseeing Britain’s “invisible empire of wealth.” “Gold standards may come and go,” the article noted, “but Montagu Norman remains.” 2 Such was Norman’s power that a single speech could move markets. When, in October 1932, Norman gloomily proclaimed at a bankers’ dinner in London that the world’s economic disorder was beyond the control of any man, government, or country, stocks, bonds, and the dollar all slid sharply and quickly in New York.
Layton was not surprised by Norman’s agitated manner. The governor was a scion of an old and respected banking dynasty, but his mental state was an open secret among financial insiders. Norman was a mercurial figure, a manic-depressive, and a workaholic, notorious among financial insiders for his mood swings. Shy and hypersensitive, Norman was introverted to the point of neurosis. Before theFirst World War, Norman had consulted Carl Jung, the Swiss founder of analytical psychology, to discuss a course of treatment, with no success. Jung had implied that Norman was untreatable, which did not help matters.
The world’s most powerful banker abhorred publicity, being recognized or socializing, and was prone to fainting fits. He once threw an inkpot at the head of an underling who failed to meet his exacting standards. “He was a very unlikely banker. He was more like a seventeenth-century nobleman or painter,” recalled his stepson, Peregrine Worsthorne. “He was always very neurotic and had very bad nervous breakdowns. He was very shy and a loner. He had no care for conventions. He came down to dinner without socks and traveled to work on the underground, which was very unusual in those days.” 3
Nor did Norman look the part of a sober financier, with his cape, neatly trimmed Van Dyke beard, and sparkling, jeweled tiepin. But despite his own flamboyant dress sense, he disapproved of showy behavior, said Worsthorne. “He lived very austerely and discouraged all signs of ostentation. He hated cocktail parties.” Norman’s horror of publicity naturally had precisely the opposite effect. Although when he sailed across the Atlantic he used an assumed name because the press covered his every move, hordes of journalists and photographers still awaited when he disembarked in New York.
The balmy months in 1929 were the last hurrah of the Roaring Twenties. The American bull market was still growing. Share prices kept rising. The value of stock in Radio Corporation of America (RCA) rose by almost 50 percent in a single month. Even Wall Street’s shoeshine boys were passing on tips to their broker customers. In August a brokerage firm announced a new service for those heading to Europe on ocean liners: on-board trading during the weeklong crossing.
Layton, responding to Norman’s summons, quickly made his way to the bank’s headquarters at Threadneedle Street, the epicenter of the city, as London’s financial quarter is known. Surrounded by a high wall, covering most of a city block, the bank’s headquarters were meant to impress, even to
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