I wasnt interested. Please, Humphrey, I said. The papers are far more important.
With respect, Prime Minister, replied Humphrey impertinently, riled by my refusal to look at his silly agenda, they are not. The only way to understand newspapers is to remember that they pander to their readers prejudices.
Humphrey knows nothing about newspapers. Hes a Civil Servant. Im a politician. I know all about them. I have to. They can make or break me. I know exactly who reads them. The Times is read by the people who run the country. The Daily Mirror is read by the people who think they run the country. The Guardian is read by the people who think they ought to run the country. The Morning Star is read by the people who think the country ought to be run by another country. The Independent is read by people who dont know who runs the country but are sure theyre doing it wrong. The Daily Mail is read by the wives of the people who run the country. The Financial Times is read by the people who own the country. The Daily Express is read by the people who think the country ought to be run as it used to be run. The Daily Telegraph is read by the people who still think it is their country. And the Suns readers dont care who runs the country providing she has big tits.
[This critique of Londons newspapers was found in Number Ten Downing Street shortly after Hackers eventual departure. Xeroxed copies were found all over the building: the Cabinet Room, the Private Office and, of course, the Press Office Ed.]
[Shortly after the conversation about the City reported above, Sir Humphrey Appleby met Sir Desmond Glazebrook for lunch at Wheelers Restaurant in Foster Lane, a well-placed restaurant in the shadow of St Pauls Cathedral, known for the wide spaces between tables, most of which are placed in their own wood-panelled booths. Discreet conversation is therefore possible in this restaurant, which has become a favourite City watering hole.
Sir Desmond Glazebrook was an old acquaintance of Sir Humphreys. He was at this time still the Chairman of Barletts Bank, one of the High Street banks. Sir Humphreys diary records the menu Ed.]
Wednesday 3 October
Met Sir D. at Wheelers for lunch. Ordered the Dover sole and a couple of bottles of Pouilly Fuiss, Desmonds favourite. As a result he was even more talkative than usual.
I had arranged lunch so that we could discuss the Phillips Berenson business. To my surprise Desmond wanted to talk about it too. He said it didnt look too good, which is the closest Ive ever heard him come to admitting to rampaging fraud and theft among his City friends.
All that the press have said, so far, is that its a case of another investment bank thats made bad investments. But he implied that its the tip of the iceberg. Not only have they broken the insider trading regulations, which everyone knows by now though no one can say so yet, they have broken the basic rule of the City. [The basic rule of the City was that if you are incompetent you have to be honest, and if you are crooked you have to be clever. The reasoning is that, if you are honest, the chaps will rally round and help you if you make a pigs breakfast out of your business dealings. Conversely, if you are crooked, no one will ask questions so long as you are making substantial profits. The ideal City firm was both honest and clever, although these were in short supply Ed.]
I tried to find out if Phillips Berenson had been breaking the law. Glazemont was evasive. He said he wouldnt put it like that. This struck me as virtually conclusive.
I asked specific questions:
(1) Were the Directors of Phillips Berenson siphoning off shareholders money into their own companies?
(2) Were they operating tax fiddles?
(3) Were there capital transfers to Lichtenstein companies?
(4) Was there bribery?
Desmonds answers were even more evasive, yet crystal clear in their implications. In answer to (1) he acknowledged that this had occurred, although the money might have been intended to be repaid later; nevertheless, this repayment has not yet occurred.
In answer to (2) he agreed that Phillips Berenson had placed their own interpretation on Treasury regulations. It was felt that someone had to interpret them, especially as the Treasurys own interpretation didnt seem quite appropriate.
As to (3), capital transfers had occurred a bit. And (4) he did know of undisclosed advance commissions to foreign government officials [City code for bribery Ed.].
And what has brought it all to a head? Phillips Berenson are going to go bust. This is when it matters that they broke the rules -- now that the whole story is likely to come out.
Desmond feels passionately that it must be hushed up. This surprised me. He has a big vested interest. I had not realised until today that a huge High Street bank like this could be affected by the failure of a small investment bank. But it transpires that Barletts has been supporting Phillips Berenson in a big way. Glazebrook revealed that they are in for 400 million.
He was rather defensive. It appears that the problem lay with all that Arab money which they had at 11%. They would have looked rather silly if they didnt lend it to somebody at 14%. Trouble was, there werent all that many people whom you could trust to pay 14%.
Having lent the money at 14% to people who -- it turned out -- couldn't pay, Bartletts kept putting in more and more money to keep its creditors afloat. And yet they still sank.
Why didnt Bartletts (or Desmond) know that these people were crooks? Why didnt they make enquiries? With hindsight, its easy to understand: you simply dont make those sort of enquiries in the City. They had seemed like decent chaps, so the Decent Chap Rule applied: decent chaps dont check up on decent chaps to see if theyre behaving decently. Furthermore, theres no point: if theyre honest its a waste of time -- and if theyre not honest you dont find out until its too late anyway.
Then you have two options:
(a) either you blow the whistle on them and you lose all your money, or
(b) you keep quiet and become an accomplice in the crime.
Therefore -- and I can quite see why -- Desmond Glazebrook chose the third option: namely, to stay ignorant so that the Board of Bartletts Bank could emerge as honourable men who were shamefully deceived by a lot of rotters. Ultimately, the chaps in the City dont mind that. Nor do they really mind people being crooks. What they do mind is people finding out that people are crooks. Worse still, people finding out that people knew that people were crooks.
But the question remains: the whole mistake has cost Bartletts 400 million. Is ignorance worth paying 400 million for?
Glazebrook felt that it was. Ignorance is safety -- at least safety from the law. And, of course, its not the Bank directors own money.
So we moved on, over the trifle, to discuss solutions to this thorny problem. Glazebrook felt that there is only one answer: the Bank of England must rescue Phillips Berenson -- quietly, with absolutely no publicity. That way we keep it all in the family, and Bartletts Bank would get its money back.
There is one tiny drawback in this scenario: Bartletts gets its money not from its creditors but from the taxpayer. However, this is not an insuperable problem. Its feasibility will all depend on the new Chairman of the Bank of England -- who has not yet been appointed. Unfortunately, the likelihood is that the PM will appoint one Alexander Jameson.
Virtually everyone in the City is against Jameson. Its not simply that he behaves honestly. That, apparently, doesnt matter in itself. It is not seen as a fatal flaw, because smart people can be honest and still succeed. But Jameson goes one step further -- he commits the one unforgiveable crime in the City -- he moralises [i.e. he actually tried to stop dishonesty in others Ed.]. He conducts search-and-destroy operations. And, as Desmond Glazebrook rightly points out, the world doesnt work like that.