The dealers raised money for big business, sold shares at home and abroad, and traded pesos, French long bonds and anything else in which ingenious financiers had created a market. But earlier this year, NatWest realised that it had bitten off more than it could chew. To make their huge profits, global banks have to absorb some hefty losses, and guard against fraud on an extraordinary scale. What happened to NatWest Markets was not nearly as bad as Nick Leeson's pounds 869m loss that wiped out Barings. But it had suffered a pounds 70m loss by a trader who had been allowed to go out of control.
The directors and shareholders of NatWest grew anxious and irritable. At the end of November they decided enough was enough. NatWest Markets was sold to Bankers Trust of New York, leaving Lord Hurd, as he had now become, unsure of his position.
I happened to see him a few days later in his office in Broadgate, and I asked him why British financial institutions - the banks and the securities houses that have been rooted in the City for almost two centuries - are so enthusiastic about selling their assets to foreigners. Merrill Lynch had bought Mercury Asset Management. Barclays had sold off the equities and corporate finance business in BZW to a German bank, Deutsche Morgan Grenfell; just before Christmas, Hambro's sold its banking business to a French bank.
Hurd, staring ahead at a panoramic view of the City, said: "It's Wimbledonisation." He meant creating beautiful conditions in which foreign players can come over here and win. The fair play of the crowd and the skill of the groundsmen is a metaphor for the City. It's a fine place to work, but, just as foreign players win Wimbledon, foreign banks and securities houses own a controlling interest in the City of London.
The City's banks, shipping and insurance businesses earn more money abroad than any other industry in Britain. The fact that so little of it is still British is a phenomenon of the Nineties. It is a decade that has seen much of Britain - starting with the electricity industry and parts of the rail and water business - up for sale and snapped up by foreign buyers.
But it had happened before. Rolls Royce, put on the block a couple of months ago, is the last British-owned car manufacturer. The rest were sold years ago. This sale of British assets has happened so regularly that it passes almost unnoticed, but it is, on the face of it, shocking. The Germans, French and Americans would not like it; the Japanese would not contemplate it, so why does it happen here? And does it matter?
A conversation at a Christmas party reminded me why the British motor industry went up for sale. A chief executive still working in the industry was reminiscing about the state of it when he joined it early in the Seventies. There was plenty of energy and ingenuity on the shop floor, but most of it then went into fighting skirmishes in the class war rather than into making cars.
Workers in British car factories were not intrinsically inferior to those in Germany or the US. In fact, British workers were admired abroad for their ability to cobble together inventive solutions to unforeseen problems on the production line - the "botched job". In the Midlands and Liverpool, outwitting the bosses was a priority, and the workers usually won. Most managements seemed to lose the will to manage. Badly produced cars left the factories, and were rejected by the majority of British car buyers, who preferred the more reliable models made in Japan, and the more elegant cars from Germany.
When Japanese, French and German motor manufacturers bought companies like Rover, they invested money that British owners could not raise, and they produced good cars. The trade unions and the Labour left said this was because the workers were cowed into submission by the fear of redundancy and unemployment. But that wasn't the main reason. New owners managed to turn the single botched job into a coherent production process - partly by treating workers as though they had a useful contribution to make.
In one area of motor manufacturing, the managers clung on, and survived. This was the unglamorous but very profitable spare-parts business, and the chief executive I was talking to at the Christmas party runs one of these companies. I listened carefully, partly because I thought I detected an unfamiliar accent. I asked if he had been born in Britain. "No," he replied. "South Africa." Foreign-born managers were also involved in the struggle for survival.
Clearly, the British-owned motor industry failed because of the alienation of the owners and the workers. But the motor manufacturing business in Britain is now doing well, and slowly catching up the continental producers. The Wimbledonisation of the motor industry has been its salvation.
But foreigners also buy companies here because of things that Britain is good at - like selling. Supermarket chains are as adroit at cutting costs as Japanese motor manufacturers. Competition in the retail trade benefits from the application of the principle that everyone should be allowed to do their own thing. Like opening and closing when they please, which is still not permitted in Germany or Japan, where rules seem to be made to suit the retailer rather than the consumer.
In fact, history and philosophy both help explain why bits of the nation are regularly put up for sale. It all goes back to 1846, when the choice was between the landed interests, protected by Corn Laws, and foreign producers who could meet the demand from urban consumers more cheaply. The Corn Laws were repealed. Britain chose free trade, and, with only an occasional wobble, has stuck by this preference ever since.
Free trade Britain looked outward, buying and selling goods abroad in vast quantities. It may have lost an empire, but it has retained a familiarity with abroad. Rubber boots come from China instead of Birmingham, and washing machines from Italy rather than south Wales, and hardly anyone turns a hair.
The City of London now is not unlike the way the car trade used to be. The sell-off began 11 years ago when the City accepted that it would be squeezed out of world markets unless it dropped the old restrictive practices and opened the London markets to competition. Before that a rigid class structure had bolstered authority and preserved jobs for the boys, but the old City firms were too small to compete globally. When a bank from Wall Street, Tokyo or Zurich made an offer, refusal was not an option.
Banks like Warburg, which tried to compete globally, found they were not big enough. Others, like Barings, did not understand that they were too small and too slack to slug it out with the big banks; and when they fell victim to Nick Leeson's fraudulent conceit, they had no defence against it. They were bailed out by a Dutch bank.
The throng of foreign buyers in the City - together with the extravagant salaries and exorbitant bonuses - make it appear less British all the time. The high street banks are still a presence, though less of one once it became clear last month that they cannot afford to compete in the major league. The City is becoming like an off-shore island, connected to the rest of Britain mainly by means of an ineffectual transport system.
A few influential British institutions stand out against the trend, principally in insurance. And there are two British merchant banks left. These are N M Rothschild and Son, and Schroders, founded respectively by Nathan Meyer Rothschild of Frankfurt and Joachim Heinrich Schroder of Hamburg. Perhaps sometime early in the 21st century Merrill Lynch and Credit Suisse will seem no less English.
In the meantime, Britain is progressively Wimbledonised. It sounds humbling at first. How is it that a nation that ran the biggest empire since Rome only two generations ago can no longer run crucial industries at home? Sometime between 1965 and 1985 the will to manage industry decisively was lost. But there is still good reason to feel some pride in the fact that the things the British do well are so much admired abroad that they are worth paying money for. It's like feeling proud of Wimbledon.Reuse content