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  1. Wealth
October 4, 2010

Letter from Brum

By Spear's

Click here to read my latest update from the Tory party conference in Birmingham

Tuesday 5/10, 14.50
Have emerged from the City of Birmingham Symphony Orchestra/Association of British Orchestras’ panel event with Ed Vaizey, culture minister; Emma Turner, a philanthropy adviser with Barclays Wealth; Stephen Maddock, CEO of CBSO; and Colin Tweedy, CEO of Arts & Business.

The feeling from the panel was that we have to be more business-like about our philanthropy; indeed, Ed Vaizey said: ‘When I hear of someone giving a large amount, I always say, Have we, the Government, said thank you?’ He thinks that donors virtually carry out a cost-benefit analysis of philanthropy: ‘It’s not inappropriate for a donor to say, If I give you money, what do I get out of it?’

Emma Turner complained that the tax breaks which do exists are not publicised enough by the Government, putting off potential donors, and Vaizey admitted that he was talking to the Treasury about further incentives, but – given the circumstances – this was something for the future. Turner also said that 75 per cent of HNWs surveyed had said they would maintain their giving, and that 26% would increase it. Do we believe this figure?


The Spear’s event with Crispin Odey at the Hyatt, today at 12.30, has been cancelled after Crispin had to pull out.

Monday 4/10, 23:45
The issue of public anger was one I touched upon earlier, and I found myself falling victim to it at the FT/City of London debate on the future of the financial services industries earlier this evening.

In their introductory remarks, Mark Hoban MP, financial secretary to the Treasury had talked about how the industries needed to ‘reconnect with the broader economy’; Stuart Fraser, the policy chairman of the City of London, had remarked upon the ‘suspicion’ with which most people viewed the City despite its tax-generating capacity; and Xavier Rolet, CEO of the London Stock Exchange, had described the blow-up as a crisis of leverage and all that had allowed that.

Lionel Barber then posed a couple of starter questions, and Fraser was responding to one on bonuses and pay, when he began his answer curiously: ‘When god gave out brains, he didn’t give them all out equally, and so we have to live in an unequal society.’ (Barber pointed out that few people were ten times as clever as someone else and thus deserved ten times their salary.)

Then Fraser chucked into the audience his red rag, though it came as a grudging concession: ‘The banks,’ he said, at the end of a sentence, ‘were associated with the collapse.’ Murmurs and laughs from the audience; a furious question from me about Fraser playing to his constituency. I was appalled at Fraser trying to pass off a major component of the crisis as if it were some relevant but not crucial factor. Surely saying banks were ‘associated’ with the crisis is a bit like claiming mosquitoes are ‘associated’ with malaria? (Not my actual question, just my current favourite simile.)

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Fraser’s response was reasonable: there were many fathers to the crisis, and many parts of the financial services industries – insurance firms, pensions funds, law firms – had not failed; later he said that a lack of regulation was key too. Of course, he’s right that other parts continued, but actually auditors and accountants have been criticised in the Lehman case (Repo 105 anyone?), and almost every arm participated at some stage in demanding or digesting the toxic debt.

It’s also fine to criticise lack of regulation, but it’s like saying that you killed someone because there wasn’t a law against it – banks should not portray themselves as helpless businesses without sense who only know what’s wrong or right or healthy or dangerous because a regulator tells them. What this is really is taking liberties, and it happens that the economy was the victim.

Anyway, I went to Lansons financial services industry party afterwards at Nuvo (uch, hideous spelling), where I asked Mark Hoban about whether traders’ rewards should be more directly connected with their results, following up someone else’s question from the debate. He said they should, and he then agreed that maluses were a good idea, such as UBS have adopted. From a Treasury minister, this is an intriguing hint about a possible policy direction.

Much interesting talk to bankers and wealth managers and low-tax jurisdiction representatives. ‘Fire half the FSA, hire twenty guys on £200,000 and promise them a third of any fines they’re responsible for levying,’ one wealth manager told me. We’ve heard this sort of thing before, but it seems no less attractive now: never mind strict rules, you need the regulator to have sufficient brains to understand what’s going on in the ever-so-clever financial innovators.

Have been to see the Staffordshire Hoard at the Birmingham Museum and Art Gallery. If it didn’t have the Hoard, the middle-ranking Impressionists and so-so Cubists which fill so many of the walls here would be the pretty tepid highlights.

The Hoard itself isn’t immediately stunning – no Sutton Hoo helmets here. Only a fraction of the 5,000 pieces – still mostly uncleaned and unrestored – were on display, and even some of these were still caked with mud, which does at least recreate a tiny frisson of the original discovery.

Most of the pieces were pommel-caps and hilt-covers (often inlaid with garnet), which suggests an unusual provenance for the hoard: if you wanted to find broken parts of swords in such great numbers, you’d scavenge a battlefield soon after – or even during – combat. We’re almost dealing with some medieval Mother Courage.

Well, it’s sunny. Which would be a good thing, were I not wearing wool trousers in anticipation of the dankess one associates with the Midlands.

At lunchtime (ironically named), I went to the Policy Exchange debate on regulatory reform: has it gone too far? not far enough? so far that we can’t even see it any more, not even on the horizon, a small black speck? Speakers included Xavier Rolet, CEO of the London Stock Exchange; Vicky Ford, MEP; Andrew Tyrie MP, chairman of the Treasury Select Committee; Gerard Lyons, chief economist at Standard Chartered; and Andrew Lilico of Policy Exchange.

What became clearest from this fringe event is that we have found ourselves in the middle of regulatory reform without a clear plan for how to complete it, driven not by principles-based changes but reflexive public anger and cowardice from the financial services industry. During national, European and global discussions of regulation, banks, pension funds, PE firms, hedge funds et al had been obstructive, or at best obfuscatory. But how could they not be? What they really want is Swiss cheese reform, with sufficient holes in.

One of the key areas of agreement was that the financial services industry had not helped itself by presenting a fractured front. Vicky Ford said that if they had participated in shaping it, they might not have ended up with ‘blatant French protectionism’ undermining the City, which – she added with pride – the British had helped to repel last week. Still, Xavier Rolet was nodding when Ford said the banks ought to have adopted ‘more of a mea culpa attitude’.

But when we do get legislation, it has to be implemented globally, said Gerard Lyons: a British bonus tax only hurts the British. Although with a global bank, he welcomed ‘strict intrusive supervision’ because a good macro-prudential regulator was the only way to prevent blow-ups.

Andrew Lilico was – to some ears – the harshest, or at least the most truly capitalist. If a bank is going to fail, let it fail; bondholders should suffer, and so should depositors, at least to a certain extent. He recommended bringing back savings banks, where deposits were guarantee by government bonds and no gambling was permitted. (Sounds a lot like a narrow bank to me…)

I asked the panel about the role of public anger in regulatory reform. Andrew Tyrie said that were it not for public anger, politicians’ attention would no doubt have been less focused on reform, but that now the anger was exhausting itself, they could get on with other business – a mixed blessing, with the job incomplete. Lyons was wary about misdirected anger and said that because bankers and technocrats had failed to set the agenda (in consonance with Ford above), politicans had led the way, driven by a fire-breathing public.

Taking a break from the conference centre’s benign mid-afternoon tedium to go see the Staffordshire hoard at the Birmingham Museum and Art Gallery in Victoria Square.

I’m in Birmingham and have fought through the crowds to get to the lobby of the Hyatt, where even greater crowds of sky-blue-lanyard-wearing delegates, thrusting Spads and boshie press officers are thronging before George Osborne’s speech. Check out my tweets to hear what George has to say.

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