Although, in common with many others, I feel a sadness for the passing of Margaret Thatcher, there is one major part of her legacy which recent history has shown to have been an over-sold concept – The Big Bang.
That was the day – 27th October 1986 – when London Stock Exchange rules changed. Jobbers and Brokers became one and the stock market free-for-all began.
It also signaled the coming of the modern Investment Bank.
That was also the day that the City of London became Americanised. The day that the MBAs and the suits showed up and eventually turned an old marketplace into a money-circus.
In 1986, I remember walking into an old Stockbroking firm called Scrimgeour Vickers as part of a Citicorp acquisition team. We had bought it and wanted to see exactly what it was that we had bought! I remember lots of frightened pale-looking people sitting in a sea of dark mahogany and typed paper, looking at us as if we had landed from another planet.
The contrast between us in our sharp suits with our management jive talk and these honest folk was striking.
One of them attempted to break the ice by saying: “This building was condemned in 1948!!” How he and his friends laughed! We didn’t. We were far too important for all that!
We fired most of them and installed new procedures, modern desks and computer screens. We were Gods and, without realising it at the time, a real metaphor for what was happening to the whole of financial services; an almost indiscriminate “Out with the old and in with the new!”
A white collar Revolution!
Margaret Thatcher had been unhappy about TWO main things. Firstly, London was in very real danger of losing its position as a major world finance hub and secondly, the City was ruled by an “Old Boys Network”. In place of the elitist public school stranglehold, Margaret Thatcher meant well when she had dreamed of it being replaced by the mythical “Meritocracy” – a place where people with talent and not necessarily “connected” could play their part.
She also wanted unrestrained competition and ultimately total deregulation, leading to more product innovation and the establishment of London as THE world’s financial centre.
Twenty seven years later, London is still the place to make deals and invest …..and still is the world’s biggest financial centre – but at what cost?
The Labour Government’s deregulation of the banks in 1997 unleashed a Frankenstein which was not recognised by the Financial Services Authority (FSA) until all the damage had been done. The FSA had been too busy looking through the filing cabinets of provincial insurance brokers whilst the banks had been trusted to carry on being as honest and straightforward as they had always been.
No-one appeared to appreciate that those Bankers were different bankers. In fact, most of them weren’t bankers at all.
They were a strange hybrid of Corporate Entrepreneur, pre-programmed to take risks with other people’s money as if it was their own…..and…..they are still doing it!
The global financial crisis certainly cannot all be blamed on Margaret Thatcher’s hopes and aspirations for Britain. But the creation of increasingly complex and convoluted financial products, deregulation and a total failure of successive governments and their regulators to spot bank wrongdoing, is very much part of her legacy.