Lord Richardson of Duntisbourne: Governor of the Bank of England during the troubled times of the 1970s and early 1980s
Tuesday 09 February 2010
The scene was the magnificent office of the Governor of the Bank of England, on the ground floor of Charles Smirke's building within a building, in Threadneedle Street. In the Bank of England in 1976 power lay concentrated on the ground floor, as it is largely to this day. The offices of the Governors (internal communications were always addressed to the Governor, Gordon Richardson, and his deputy, Jasper Hollom as "Governors") were around the garden court, as were those of the four executive directors.
Gordon Richardson, the Governor since July 1973, sat behind his highly polished antique desk, clear but for one or two files, and suddenly interrupted deliberations about a speech he was to give to say, "You know: we are all outsiders in this room." The only other people present were Christopher Dow, who had arrived earlier in 1973 as economics director, and your correspondent. (I had been invited by the Governor from the Financial Times for a secondment.)
The Governor? An outsider? But that was how he and many of the permanent staff saw him. Gordon Richardson was not, like his predecessor Leslie O'Brien, a lifelong Bank of England man. He had been a successful chairman of Schroder Wagg, a leading merchant bank, and had been appointed by Edward Heath.
Like Heath he was very much a meritocrat, although he looked every inch the aristocrat. A big (but not burly) man physically and intellectually, he generated a natural authority. Denis Healey, with whom he had close dealings during an economically tempestuous period, observed of Richardson: "Fair haired and good-looking, with immense charm, he appeared typical of the gilded upper class which in those days slid effortlessly into most of the plum jobs in the City. In fact he had been at Nottingham High School..."
To paraphrase a popular line from a programme of the time, Richardson had not got where he was that day without fierce ambition and the cultivation of all the right people in most of the right places. After Law at Cambridge, a successful practice in company law and a stint at the Industrial and Commercial Finance Corporation, he became chairman of Schroders in 1962, where, in the words of City historian David Kynaston, the man of whom many people said "he looks like an Etonian!" in fact "had little time for the Etonian aspect of the City and enjoyed saying things like 'I look at Morgan Grenfell's clients today and say they will be ours tomorrow...'."
He turned Schroders round, displaying, as his long-time associate Geoffrey Bell recalls, a remarkable flair for business and choosing the people who could win more business. One of his recruits was Jim Wolfensohn, who went on to run the World Bank. Another was Bell himself, whom he took from the Treasury, warding off a rival offer from Warburg by allowing the economist Bell to write a column in The Times, something Warburgs would not countenance.
Bell, who jokes, "I was Richardson's butler", is the driving force behind the Group of 30, the influential think-tank where central and commercial bankers mix. After retiring from the Bank, Richardson was chairman of the Group of 30 and broadened its scope to the point where it played a key role in many financial issues, including the evolution of the recent Volcker banking reform proposals.
A success at Schroders, and having become a non-executive director of the Bank of England in 1967 – with directorships at Rolls-Royce and ICI – Richardson was a popular choice for Governor, despite the fact that after the controversial reign of Lord Cromer in the 1960s there had been questions about whether a merchant banker should ever again be chosen.
Yet he could not have known quite what he was in for. The economic crises of the mid-1970s tested the mettle of Prime Minister (Callaghan from spring 1976), Denis Healey (Chancellor 1974-79) and Richardson himself.
Christopher Dow, the economics director, had arrived from the Organisation for Economic Cooperation and Development a few months before Richardson, and formed the view that the Bank's economic expertise had to be strengthened. Dow has written: "The Governor, looking at the Bank as a whole, felt a more general insufficiency of ability, and strongly supported my own leanings. ... he once said, if there was one thing he could contribute to the Bank (implying, I think, that he felt inexperienced in economic policy), it was choosing people." Indeed, in those early days Richardson, as he asked Dow elementary questions about economic policy, mused, "I have come to this too late."
He had not. Richardson once observed that he appeared confident but was diffident underneath. However, those who knew him detected a commanding temperament. His dilatoriness in the preparation of public speeches was notorious – indeed his early reluctance to speak out in public provoked one city editor to complain that the Bank of England was "the tomb of the unknown Governor."
But, as Ian Plenderleith, later one of the most respected senior Bank officials, has emphasised, under Richardson it was during the process of speech-drafting that policy was thrashed out. Richardson was a perfectionist, with a successful barrister's determination to master all the evidence. For Richardson, procrastination could be the friend of time, not its thief. Governor Richardson was meticulous in personal and professional dealings. He wanted to get things right. He respected markets, and understood them. But he was not a slave to them – nor to politicians.
Associates recall his excellent relations with Healey during a difficult period that included the inflation of the mid-1970s. All oil importers suffered the inflationary consequences of the quintupling of the price of oil in 1973-74, but as the man responsible for the operation of monetary policy, Richardson also inherited the wage-price spiral caused by Heath's decision to link earnings to the cost of living (under the so-called "threshold agreements"). Richardson backed incomes policies and, though he was often the messenger of bad tidings to Healey and Callaghan, it was done with good grace and mutual understanding – although Callaghan did complain he had seen it all before as Chancellor: "I agreed with much of what [Richardson] said, but regarded myself as having been vaccinated against the disease I had christened 'Governor's gloom', for had I taken it all at face value the only thing to do would have been to throw myself out of an upper-floor window on to the Downing Street pavement."
Richardson was one of the few people of whom it could be said that Healey was in awe. The two shared passionate interests in music and literature. On one occasion they were at a dinner with Mrs Thatcher and began competing with each other with quotations from Yeats and Blake. One of those present said it was clear that Thatcher was at a complete loss.
Richardson and Thatcher did not get on. Later Richardson would quote the words of an official in the early 1980s "She's canine and he's feline."
In some ways Richardson was the Roy Jenkins (a personal friend) of central banking. There would be soirées hosted with his wife Peggy – on whose advice and support he depended – and the cultivation of contacts at home and abroad. He was proud of his dry martinis – "this is the way they mix them in New York" – which were liberally served, before the best wines.
A colleague he brought from Schroders was the former Foreign Office official Anthony Loehnis. Loehnis, who became overseas director in succession to Kit McMahon after the latter's elevation to deputy governor, was very much an Etonian; observers joked that one of Loehnis' extra duties was to be director of etiquette.
The 1973-83 period for the Bank had three notable themes: how to get to grips with inflation; dealing with two major banking crises; and the internal reorganisation and modernisation of the Bank. The latter was not of particular interest to outsiders, but the first two were hugely important.
While agonising over economic policy and flirting with monetarism, Richardson in the end proved wise and pragmatic. This was not to Mrs Thatcher's liking – nor was the fact that this handsome man, who looked like a Roman senator, did not flirt with her. Rather, he was coldly correct.
While a doctrinal attachment to monetarism was seriously damaging British industry, Richardson once told me, "In those days one only had to look out of the window to see that monetary policy was too tight." But also in those days, of course, interest-rate decisions were in the hands of the Prime Minister and Chancellor.
Under Richardson the Bank launched a covert operation to assist good firms threatened by monetary extremes, a policy carried out under Sir David Walker, subsequently to become a big figure in the City, whom Richardson had recruited from the Treasury. Richardson also spotted the talent of Eddie George and rescued Sir George Blunden from responsibility for computers to the central role he played for many years.
Richardson inherited the secondary banking crisis of 1973-74 and was considered to have played a crucial role in the launch of what became known as "the lifeboat", which prevented a fringe banking crisis from bringing down the system. Towards the end of his governorship he also played a central role, with Paul Volcker of the Federal Reserve and Jacques de Larosière of the International Monetary Fund, in preventing the 1982 Mexican debt crisis from escalating into the kind of global crisis of recent years. People often wonder how he would have handled this recent crisis.
However, there were those who thought his own approach to banking reform was not sufficiently "hands on" to prevent subsequent banking failures. In particular, Stephen Fay in Portrait of an Old Lady blames Richardson for the regime that led to the collapse of Johnson Matthey Bankers in 1984. When interviewed by David Kynaston about this years later, Richardson was still sore about Fay's criticisms.
But the popular verdict on Richardson's period as Governor is hugely positive. The one human defect on which almost all who knew him commented was his vanity. He was a great man, from central casting, who had a lot to be vain about. He was sad not to be reappointed for a third term, but went on, both in the Group of 30 and as chairman of Morgan Stanley International, to enjoy a fruitful third career well into his eighties.
Gordon William Humphries Richardson, lawyer, banker: born Nottingham 25 November 1915; Governor, Bank of England, 1973–83; MBE (military), 1944; Privy Council, 1976; cr Life Peer, of Duntisbourne, 1983; Knight of the Garter, 1983; married 1941 Margaret Allison (died 2005; one son, one daughter); died 22 January 2010.
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