15

Entering from Stage Right

The Bank and the Tory government of the early 1970s did not prove to be a love match. At the heart of Edward Heath’s initial economic strategy, after the election of June 1970, was the free-market belief that tax cuts and other stimulants of growth would be enough to discourage organised labour from making inflationary pay claims; but Leslie O’Brien, who had actively supported the prices and incomes policy of the last three years of the Labour government, was unconvinced, flatly declaring at the Mansion House in October that he did not ‘see how we can expect to maintain a fully employed, fully informed and increasingly well-off democracy, in which the development of wages and prices is left entirely to the operation of market forces’ – given that ‘the bodies on both sides of the bargaining tables, the unions and employers in both the public and private sectors, are too big and too powerful for such a process to yield us the result most likely to contribute to our general welfare and prosperity’. Presciently, he added that ‘if we try to rely on the marketplace and on the strict operation of fiscal and monetary policies, we shall find, I think, that we can achieve price stability only at the cost of unemployment that might be on a very large scale indeed’.

Discord was deepened that autumn by Heath’s outright refusal of the governor’s request for Bank rate to rise in order to counter inflation and a rapidly increasing money supply; and over the next few months the general assumption was that the new government would decline to renew O’Brien’s governorship (due to expire in June 1971) for a further term. Cecil King faithfully recorded the gossip about a possible successor. Initially, Gordon Richardson (despite being ‘vetoed by Cromer for health reasons’), Morgan Grenfell’s John Stevens (back on the Court, as a non-executive, since 1968) and – plausibly or not – Cromer himself as the three being bruited as candidates; then the emergence of Heath’s friend Lord Aldington, a politician-turned-banker (‘thinks he has the reversion to the job’); a strong late run from Richardson (‘actively canvassing for the job and may still get it’); and talk at the last of the youngish, energetic merchant banker David Montagu. In the event, there was no vacancy. O’Brien apparently expressed serious regret that he might not be reappointed, claiming it would be viewed as a public humiliation for the Bank; and in early 1971 a compromise was agreed, by which he would step down after a further two years, at the age of sixty-five.¹

1971 was also the year that saw the start of what became known as the ‘Barber boom’ – named after the chancellor Anthony Barber, but in practice probably owing much more to Heath. It was certainly a boom cooked up in Downing Street. ‘To his eye,’ noted Jasper Hollom as early as January of Sir Douglas Allen’s views at the Treasury as imparted to O’Brien, ‘everything pointed to a repetition of the 1962/64 situation – in which Treasury and Bank caution would be very uncongenial to Ministers and there would be a strong tendency for them to go for growth.’ Or as the governor himself explained soon afterwards to the clearing bankers: ‘The pressures towards reflation were increasingly to be seen. He made clear his own belief that such moves would not at present be timely, but recognised the influence which the unemployment figures were having on Ministers’ thinking.’ Barber’s tax-reforming budget in March (including the abolition of short-term capital gains tax) duly set off a bull market (property as well as stock market), even as unemployment stubbornly continued to rise. There followed in July a mini-budget full of explicitly reflationary measures, marking the real green light for the Barber boom. ‘He was discreet, of course, as usual,’ recorded King later that month after calling on O’Brien. ‘Straws in the wind of conversation were: (1) no reference of any kind to Barber; (2) Heath was described as “unapproachable”. In general terms it became clear that he thought the latest Budget had no economic justification but was forced on the Government by political necessity. Opinion polls had shown the Government in so unfavourable a light that something had to be done, and this was also necessary to get the Common Market [which Britain was moving towards entering] off to a good start.’²

The European question was intimately connected to the perceived stagnation and even decline of British industry – a perception already sharpened by the Rolls-Royce debacle. By September 1970 that hugely symbolic company was in serious financial difficulties, resulting in heated negotiations at the highest level over the next two months. ‘The initiative in Rolls-Royce now lay very much with Whitehall because of the unwillingness of the City to put up any money,’ O’Brien told Lord Poole of Lazards in late October, and increasingly the governor found himself the nut in the nutcracker: trying to get support from government, trying to get support from banks, getting thanks from no one. King recorded in early November the scathing verdict of George Bolton, no longer on the Court and as forthright as ever: ‘He said what remained to O’Brien of his prestige had vanished with his clumsy attempts to raise money for Rolls-Royce. He said there is nobody now at the Bank who is taken seriously in the City …’ Eventually, promises of help were secured – £42 million from government, £8 million from the Bank, £5 million each from Midland and Lloyds, plus a revolving £20 million credit from merchant banks – but they failed to prevent the company’s collapse in early February 1971, in turn leading to nationalisation. Almost at once, seeing the bigger picture, Heath started pushing for the Bank to reprise its constructive inter-war role in relation to industry. O’Brien responded in character:

I said [to the Bank person who had informed him of the prime minister’s steer] that this yearning to go back to the 1930s was unrealistic. Nevertheless we were considering what might be done to mobilise City views and investment strength, to secure improvement in industrial management, and possibly facilitate the raising of funds in suitable cases …

This, however, was very much a matter for the Governor, who would be personally identified with any move which might be made. I was not prepared to be pushed from any quarter into what I thought was an inappropriate initiative. My own feeling was that in the matter of Rolls-Royce I had come very near to impairing my influence in the City.

It all took time, and encountered significant resistance from some of the big insurance companies and pension funds, but by 1972 the Bank-sponsored Institutional Shareholders’ Committee was at last in existence. In practice, it punched well below its weight in terms of intervening collectively to improve the quality of industrial management. ‘Largely unsuccessful’, reckoned The Times the following year, while John Plender, in his 1982 study of the rise of the institutional investor, would frankly call it ‘an emasculated organisation’.³

Any pretence of business as usual was unavailing when it came to the international monetary order, as the early 1970s saw the collapse of the post-war Bretton Woods system of fixed exchange rates – the system that had tied the whole world to the US dollar. In May 1971 both the deutschmark and the Dutch guilder were floated; in August the US itself suspended the dollar’s convertibility into gold; and although shortly before Christmas the world’s finance ministers tried to put together a new system of broadly fixed exchange rates (the Smithsonian Agreement), it soon became clear during 1972 that a static approach was no longer appropriate for an increasingly uncertain world, not least with the inflationary consequences of the Vietnam War. Emblematically, the first financial futures market, enabling the hedging of currency fluctuation risks, began in Chicago in May 1972; and just over a month later its founder, Leo Melamed of the Chicago Mercantile Exchange, was in London trying to encourage participation in it. During his visit to the Bank, he suggested (probably to Hollom, in O’Brien’s absence on holiday in the south of France) that if the Bank really wanted to help the new market it would kindly float the pound. A strained smile greeted the wisecrack – and the next day, 23 June, the newspaper headlines announced (including to O’Brien) that this was what the British authorities had indeed decided temporarily to do, though for different motives. The trade balance had been deteriorating rapidly, and the probability of an imminent docks strike had led to such pressure on sterling that the government decided that floating was preferable to another ignominious forced devaluation. ‘IT IS RIGHT TO FLOAT THE POUND’ confidently declared The Times’s main editorial next day. Some in the Bank saw the move as the soft option, a political evasion of the financial discipline of a fixed exchange rate, but by this time the governor was not among them.⁴ In February 1973 the yen was floated, soon afterwards the dollar was further devalued, and on 19 March the major central banks formally abandoned their commitment to maintaining their exchange rates within a predetermined band in relation to the dollar. The era of flexible exchange rates – accompanied by the rise and rise of the almighty financial markets – had conclusively arrived.

Nothing, though, defined O’Brien’s last years as governor more than four fateful words: Competition and Credit Control (CCC). This new framework for the banking system had its immediate origins in a self-confessedly ‘curious and emotional’ note to O’Brien and Hollom sent by the executive director John Fforde on Christmas Eve 1970. ‘Our responsibility for ensuring, or failing to ensure, the proper evolution of the banking industry is more direct than that of H.M. Treasury,’ he declared. ‘It is our job to make the running in this field and actively to seek the required over-riding political decision that will govern the future shape of monetary controls. With six years of ceilings behind us, and a new Government in office, this is a responsibility that we cannot put to one side.’ As the Bank firmed up its proposals over the next few months, it took care not only deliberately to involve the Treasury at a relatively late stage, but to seek to avoid frightening the horses. ‘It does not look likely that anything like the theoretical possible expansion of credit under the new approach would occur if it were introduced,’ reassuringly predicted Kit McMahon in March 1971 as he passed the details on to the Treasury.

Overall, the Bank seems to have had four principal motives in mind: first, producing a healthier set of arrangements (‘the quantitative restriction of advances imposed on the banking system proper turned good bankers into non-bankers, forced on grounds of public policy to turn away business they would dearly have liked to do,’ recalled O’Brien of ‘the bad effects on the banking system of the repeated and prolonged periods of harsh credit restraint which had been necessary ever since 1957’); second, encouraging a more level playing field between the hamstrung Big Four and their more liberated competitors, including the increasingly active and barely supervised ‘fringe’ or secondary banks – with the Bank quite possibly hoping that that would enable Barclays et al to put the pesky secondaries out of business; third, the ambition that a single, indivisible market for credit would encourage those trusted Big Four to get into such critical, almost unregulated areas as the wholesale sterling market; and finally, most important of all, the underlying belief that the interest rate weapon was in every way preferable to ceiling controls as the way of maintaining tight control of the money supply, itself an increasingly high priority. But, observes the financial historian Duncan Needham of this last motive behind the new dispensation, the awkward political fact was that Heath was ‘implacably opposed to higher Bank rate’. And therefore, he adds in his persuasive analysis, ‘the Bank had to dress its proposal up in the language of competition’ – in order to ‘lull’ the Heath government, strong at this stage on such rhetoric, ‘into believing it was all about a more competitive banking sector’.⁵

Competition and Credit Control, a four-page consultative document, was published by the Bank on 15 May 1971. It proposed, as far as the clearing banks were concerned, the end of both quantitative ceilings on lending and the interest rate cartel; while all banks would maintain the same minimum liquidity ratio, at 12.5 per cent a ratio less than half of the prudential ratio that had previously been required from the clearers. In essence, the deal for the clearers was that in return for agreeing to the abandonment of their cosy, familiar cartel, they would be free to compete on level terms with the secondary banks and others. The document received a generally warm welcome. ‘A Keener Edge to Banking’ applauded The Times, arguing that ‘nothing has done more to stifle enterprise than the present system of controls and agreements’; ‘Yes, at last, revolution for the City’ was the Economist’s jubilant headline; and the Banker looked forward to ‘the habits of the last decade’ being ‘well and truly buried’. Over the next three months the clearing bankers signified their willingness to accept the thrust of the proposals, while managing to persuade the Bank that building societies and savings banks should not be protected from competition for deposits. At the end of the summer session, Heath addressed his party’s 1922 Committee and explained the new policy. ‘I looked around the room and wondered how many of the MPs present fully comprehended what he was talking about,’ recalled Edward du Cann, a City man as well as a prominent Tory politician. ‘I doubt whether more than half a dozen had the least idea.’⁶ On 16 September, only a matter of weeks after Barber had pushed hard on the reflationary button, the new arrangements came into force.

It was, to put it mildly, an unfortunate conjunction: following the introduction of CCC, there took place an explosion of more or less uncontrolled lending. ‘The freedom that was imposed in 1971 was a tremendous spur to the inter-bank market,’ the deputy chief cashier, George Blunden, would recall:

Many institutions conceived the idea that you could always get your deposits in large wholesale numbers. It became a case of liability management. And with that great growth in liquidity in the banking system, they turned to property. And property prices always went up – at least they had always, since the war. Ultimately, in the early 1970s, there were these two great myths around: that you could always get wholesale deposits and that you couldn’t go wrong with investing in property …

They were an extraordinary couple of years. ‘Almost for the first time in the whole history of banking,’ a senior clearing banker remembered, ‘you found your lending business and then scurried round for deposits.’ Between September 1971 and the end of 1973 total sterling bank advances to UK resident borrowers rose by no less than 148 per cent.⁷ Crucially, and feeding the frenzy, most of that lending was directed not to manufacturing but to property and finance; undeniably, the prime driver, even if much abetted by CCC, was the Heath government’s reckless – however well-intentioned – pursuit of economic growth at all costs. For the Bank, all this meant a loss of control over the money supply, and much else besides, for which it paid a high reputational price. Could it have done more to alter the course of events?

O’Brien would subsequently be criticised for not having fought the Bank’s corner harder, particularly in relation to interest rate policy; but in many ways he was powerless, especially in the context of a weak chancellor and an unusually obstinate, determined prime minister. In the first week of 1972, asking Sir Douglas Allen at the Treasury about the government’s ‘intentions on further reflation’, he was told that the minds of Barber and Heath ‘appeared to be running on divergent lines, with the Chancellor at present very much less concerned about unemployment’; later that January, he was informed by Allen that, in relation to Bank rate, ‘the idea of a reduction had receded for the present’ – an explicit indication of where the whip hand lay; by the spring, the word to King (via John Stevens) was that ‘the Governor can get no answers from the Chancellor and finds it hard to meet Ted’. Heath did in June reluctantly agree to a rise in Bank rate (from 5 to 6 per cent) in order, stated the official record, ‘to curb the rate of increase in the money supply and so damp down inflationary pressures’; but a few days later, responding to a member of the public complaining about inflation, O’Brien’s tone was almost one of helplessness, with the role of monetary policy conspicuous by its absence: ‘Inflation is certainly a very serious problem, but it is, unfortunately, a very difficult one to solve. I agree with you that we will need new initiatives and approaches. However, the Government is, as you know, engaged in discussions with the Confederation of British Industry and the Trades Union Congress, and we must hope that these prove fruitful.’

That same day, in the wake of the floating of the pound, O’Brien saw Heath, who raised ‘the question of bank credit and the disproportionate share of this which appeared to be going to property concerns’:

I explained to him the logic of an easy credit policy in harmony with H.M.G.’s plans for reflation of the economy. I said that inflation was the nigger in the wood-pile. On the one hand, it was holding back the restoration of confidence amongst industrialists, while on the other it was encouraging all and sundry to rush into property as a hedge against inflation. He clearly yearned for the return to qualitative controls. I said that I had seen indications that the banks were feeling that they had put about as much money into the hands of property concerns as they thought prudent. I would, however, take an opportunity of telling the bank chairmen that it would be helpful if they could damp down their property lending as much as possible.

To no avail, even after a formal, old-style request to the banks in August. ‘Money out of control’ was the title of the Banker’s very critical editorial in September marking the unhappy first anniversary of CCC; and the magazine damningly noted that ‘for some time now the City has come to assume that the Bank has meekly implemented the Treasury’s growth policy against its better judgement’, an assumption that was consistent with O’Brien apparently being relaxed, in his conversation with Heath, about ‘an easy credit policy’.⁸

The autumn of 1972 saw Bank rate being replaced, after 270 years, by a rather different mechanism. Linked to the market rate for Treasury bills, minimum lending rate (MLR) was a mechanism adopted, the chief cashier John Page explained not long afterwards, ‘basically because it was better than having Bank rate completely frozen by Ministers, not because we thought it was technically a superior arrangement’. Inevitably, against a backdrop of deepening industrial as well as economic troubles, a testiness developed in government/Bank relations, epitomised by an episode in November:

The Governor mentioned the Prime Minister’s irritation over the last Bulletin Commentary … Allen said that the sensitivity of Ministers, and particularly the Prime Minister, on matters of presentation could hardly be exaggerated. References in the Bulletin which did not wholly accord with the Government’s own presentation had a serious cost in making Ministers’ minds highly unreceptive to Bank advice on whatever subject … The Governor made it clear that he was not prepared to publish a Bulletin which was subjected to Treasury or Ministerial approval.

As for CCC itself, a beleaguered O’Brien had no alternative by February 1973, with the money supply still out of control and inflation rampant, but to tell the clearing bank chairmen that ‘we must face the fact that it is being widely criticised’.⁹ He had not, he must have reflected, had the easiest hand to play.

None of which, moreover, helped his or the Bank’s standing in the City, with things probably at their worst during the difficult summer of 1972. ‘Bank of England resisting pleas to revise gilts policy though jobbers withdraw’ was The Times’s headline in late July, recording discontent in the gilt-edged market about the aspect of CCC that involved the government broker (traditionally the senior partner of Mullens & Co) no longer supporting the market. The August issue of the Banker then drew attention to how, during the June weeks of flight from sterling and the floating of the pound, in turn creating intense pressure on the money markets, the Bank had ‘not handled the matter with particular efficiency’, not least being guilty of having ‘spoken with more than one voice at a critical moment’; while on 9 August, after O’Brien had asked the banking system to ‘make credit less readily available to property companies and for financial transactions not associated with the maintenance and expansion of industry’, the Daily Telegraph’s City editor (Kenneth Fleet) described the Bank as ‘tucking her skirt between her ageing knees and trying a handstand’, given the obvious contradiction between that request and the precepts of CCC, thereby putting the latter’s ‘credibility’ under ‘severe strain’.

A week later, O’Brien circulated to a handful of senior colleagues one of the most heartfelt governor’s memos in the Bank’s entire history:

I have become extremely disturbed by the growing volume of criticism of the Bank in the daily and Sunday newspapers, in other responsible journals, e.g. Richard Fry in the Banker this month, and from what we know of unhappiness in various quarters – the discount market and accepting houses, and the gilt-edged market to look no further.

I would not want anyone here to discount these developments as the inevitable process of the central bank being tarred with the brush of failure of Government policies, particularly in the field of inflation. Certainly the inflationary background is the principal enemy with which we have to contend, but against that background we are failing in various respects, not least as the market see it, to give that firm lead and guidance which they expect from us and, indeed, without which they feel as lost as a child whose parents falter in their authority.

Competition and credit control is partly the cause. It was welcomed by the press and embraced by the banking community who then, in some instances, proceeded to let it go to their heads. The market consequences have not been wholly satisfactory. Added to which the monetary authorities appear to have lost their grip of the situation and to have fostered, by allowing an undue expansion of the money supply, the inflation which frightens us all.

Altogether, he concluded, ‘I do not think it too alarmist to say that the Bank’s whole authority in the City is in some jeopardy … We pride ourselves on the lack of banking law and specific regulations, and on the superior merits of the Governor’s eyebrows. This is only justified if the latter are used with firmness to give clear and unmistakeable messages which are accepted as just and fair by all concerned.’

Those final three words begged a salient question. The Bank had long enjoyed a significant degree of authority over the clearing banks; but towards the secondary banks its stance was largely one of remoteness, with instead the main responsibility for their supervision resting with the Department of Trade and Industry, which during the Barber boom continued to hand out certificates to ‘fringe’ banks like confetti, even as their lending increased by three or four times as much as the clearers. Perhaps the sole exception to this detachment was Slater Walker, whose celebrated financial wizard, Jim Slater, fascinated O’Brien, even to the extent of wanting him (before being dissuaded) to join the Court. The consequences of the prevailing detachment would be played out in due course, but during the final phase of O’Brien’s governorship it was the Bank’s chequered relationship with the traditional City that preoccupied observers, among them the Telegraph’s Fleet in February 1973. After noting that ‘dissatisfaction’ in the City with CCC was ‘marked and probably growing’, and citing the discount market as a prime example, he went on:

The real trouble there is that the Bank, despite its apparent conversion to modern ‘scientific’ credit management, still loves its traditional ways too. It clings to the ancient rituals of ‘nod nod, wink wink’ but whereas in the good old days a nod was a nod and a wink a wink, now a nod may turn out to be a wink, a wink a nod, a nod ‘good morning’, and a wink no more than a ‘hello darling’. What is more, you can’t learn this sign language: it is liable to change every week.

In sum: ‘The dilemma for the Bank is between going completely modern, which it has not yet the will to do, and going back, which it can’t do. It should face up to it soon.’¹⁰

Later that month came the announcement that O’Brien would be stepping down at the end of June. Despite the earlier agreement, he had probably hoped to stay on a little longer, until the work had been completed of the IMF’s Committee of Twenty, set up the previous year to recalibrate the international financial framework and chaired by Jeremy Morse, who had left the Bank to take on the job. O’Brien had support from Barber, but the prime minister was adamant that the governor had to go, with King subsequently informed by both John Stevens and George Bolton that he had been ‘sacked’ by Heath. O’Brien himself favoured Morse as his successor – in effect the Bank’s ‘inside’ candidate, having been an executive director from 1965 to 1972 – but instead it was Gordon Richardson (a non-executive director since 1967) whom Heath chose, apparently consulting O’Brien and the Court only after he had reached his decision. Richardson’s broad-based experience (including on Neddy) made him, according to The Times following the announcement, ‘well attuned to the Government’; but in the Spectator ‘Skinflint’s City Diary’ was more sceptical, calling him ‘hardly the bright new dawn of an economic Renaissance’. For Richardson himself, who had long wanted the position, it was a case of waiting for a few more months. ‘Mr Hugh Seccombe of Seccombe, Marshall and Campion Limited, who are, as you know, the Bank’s bill brokers, telephoned me today to enquire whether you would like to have lunch with them before you become Governor’ was the message in early April from the governor’s office. ‘He told me that, after you become Governor, they cannot invite you.’¹¹

O’Brien’s final day in post included a haircut at Geoffrey’s, the barber’s at the Royal Exchange; and soon afterwards he was on the front cover of the Economist, with the accompanying, somewhat hyperbolic words ‘A Great Governor’. The largely laudatory assessment inside included a notable, historically informed passage:

Lord O’Brien [as he had recently become] has brought the Bank into its proper role as alternative brains trust and away from any role as emotional right-wing banshee. The role of banshee is still one after which central banks can hanker. Less than 50 years ago, in the aftermath of the First World War, central banks felt so indignant at the risk of being dominated by the swaying financial policies of their governments that an international conference which discussed the subject actually advocated their private ownership. Today, the ultimate political sovereignty of governments over central banks is not in doubt. Even the German Bundesbank, on paper the most unfettered of central banks, knows that it can go so far and no farther. But the idea of alternative brains trusts for policy is gaining in importance and influence …

Did the Bank in 1973 quite have the brainpower, allied to independence of mind, to fulfil that demanding role? The Economist thought so – ‘for the first time the Bank’s senior executive staff outdo the Treasury in economic sophistication and liveliness; its executive directors are a remarkable team of original, often slightly unorthodox, happily eclectic, and always stimulating turn of mind’ – but arguably such claims were exaggerated. ‘I was surprised at the absence of economic expertise which I found in the Bank,’ recalled Christopher Dow of his arrival as chief economist shortly before O’Brien’s departure; while in his congratulatory letter Bolton offered Richardson a robust analysis that may not have been wholly fair but was in essence probably true:

You have taken over the responsibilities of the Governor of the Bank at a time when few men would welcome the challenge and your position is all the more exposed because, in recent years, the Bank has lost a great deal of power and influence in the City – the reasons being many and varied. Leslie O’Brien did a most remarkable job in helping to restore some of the lost internal morale [following Cromer’s governorship] but he never had the experience or the imagination to build up around him a group of independent-minded men who could make an impact both on Whitehall and the outside world.

‘The tendency,’ added Bolton with salutary intent, ‘has been to promote from within and import the ready-made academic mind.’¹²

‘It is thought in the City that Gordon is not a good administrator, and not really a banker, but a very intelligent lawyer and a brilliant draughtsman,’ noted King after Richardson’s appointment was announced. ‘Not really a banker’ was at most only half fair. Born in Nottingham in 1915, the son of a well-off local provision merchant, he had read law at Cambridge before becoming a successful London barrister specialising in company law. In 1955 he decided to try his luck in the City, going two years later to Schroders and becoming the top man there in 1962. Over the rest of the decade he proceeded to turn it into (in the words of a client and close observer of City matters, Charles Gordon) ‘one of the smoothest, best-operated merchant banks in the City’, with the general tenor being ‘overall expansion, little publicity, less fanfare, superb results’. Befitting an essentially self-made man, he 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.’ Striving consciously for excellence (with a particular focus on attracting qualified recruits), and developing a wide range of contacts with leading people in politics and industry, he was increasingly seen as the City’s coming man, just the right sort of meritocrat. ‘Richardson is a highly professional banker, ruthless but fair, opposed to nepotism, and his directorships range from the Royal Ballet to Lloyds Bank,’ noted Anthony Sampson admiringly in 1965. Undeniably he was a class act, helped by a handsome, commanding face and bearing, which made him seem significantly taller than he actually was.

The main downside, all his colleagues agreed, was a lawyer’s unwillingness to reach a decision that was not on the basis of full information and equally full deliberation. One colleague at the Bank would even compare him to Thomas Hardy’s Bathsheba – ‘she had to consult her clergyman on financial affairs, her lawyer on medical matters, her doctor on business, and so on, and Gordon normally consulted a tremendous range of the top of the Bank on any issue’. The ultimate upside, comparable in its way to Norman, was the sheer authority-cum-charm of his presence, suggestively evoked by Christopher Dow, writing privately about halfway through Richardson’s governorship:

When one first sees him in the morning, almost without fail, however preoccupied or hurried, he smiles and says, ‘Good morning, Christopher’. This may seem a small thing; but most of us nod and go on with our trains of thought; I am sure such consistent courtesy does not come without conscious effort and training. I remember the Governor once saying to me, ‘I am constantly finding irritation aroused in me by X and Y, and then interrupting myself and saying, “If I ever allowed myself to feel irritation, this would irritate me profoundly.”’ When he has an address to make, however small, as after a lunch or dinner where an important visitor is present, his words are always carefully chosen, and caressingly enunciated. In working hours he does not drop his courtly manner. When he introduces a subject for discussion at a meeting, or sums up what he wishes to be the conclusion of a discussion that has just taken place, his words are always balanced and elegant – not inarticulate and halting as with most of us; and this elegance, which carries a sensation of his having command over events, increases his authority, like a man who has a good seat on a horse.

Even so, added Dow, ‘just as he is always courteous to us, so he, like the Grand Monarch, likes us to be attentive to him, and does not care for disloyalty’. Indeed, analogous again to Norman, the inner steel was never quite absent. ‘You know, the Bank has not always been right,’ the chairman of Barclays remarked to him on one occasion (as observed by the Tory politician Jock Bruce-Gardyne). ‘Oh, when hasn’t it?’ he asked, with a flash of his blue eyes. ‘Well, when you didn’t say that our paper was eligible.’ To which Richardson responded unanswerably: ‘That remains to be seen.’¹³

What could not be gainsaid was that July 1973 was an intensely difficult point to become governor. Twice in his first three months he offered ‘directional guidance’ to the clearing banks – pointing out that ‘personal lending, if not controlled, could come to be the Achilles heel of Competition and Credit Control’ – but the underlying economic policy reality was that Heath, Peter Walker and a few other ministers still hoped against hope that, as Heath’s biographer would put it, ‘the Government was on the brink of achieving its breakthrough, despite the commodity price explosion, the alarming trade balance and the sinking pound’. From October, however, all bets were off, following first Egypt’s invasion of Israel and then an alarming rise in the price of oil. At last, on 15 November, Barber informed Richardson that the time had come to rein back the money supply, though with the crucial rider that the prime minister was insistent that this be done without raising interest rates. Orders were orders, but next day, at a meeting at the Treasury, the governor not only argued that ‘monetary policy had pretty much shot its bolt’, but complained of ‘a serious lack of understanding by Ministers of the problems in this field’ and emphasised the difficulty involved in achieving ‘any sizeable decrease in the potential liquidity of the system’. Later that month, having been briefed by Walker to stress ‘the dangers that a further increase in oil prices would present for the world economy’, Richardson paid a visit to Saudi Arabia; but to little avail, with OPEC’s announcement just before Christmas that the price of crude oil would rise from $5.10 a barrel to $11.65, four times what it had been at the start of the Arab–Israeli War.

By then, the Bank had reluctantly come up with a solution to meet the politicians’ wishes, a solution (largely devised by Charles Goodhart) that Barber announced in his emergency mini-budget on 17 December, itself coming shortly after Heath had announced on television the start of the three-day week in order to conserve electricity supplies. That solution was the so-called ‘Corset’, as coined by the Bank’s Gilbert Wood, recalled Goodhart, ‘to indicate an external constraint to disguise and conceal internal flab’; officially known as the supplementary special deposits scheme, and marking an end after barely two years of the full-tilt CCC period, it required banks to make non-interest-bearing deposits with the Bank if their interest-bearing deposits increased at more than a specified rate. ‘Too primitive an idea’ would be the scornful verdict of Barber’s successor, Denis Healey, but Goodhart probably had a case when he contended – likewise many years later – that it was ‘the best possible answer to a tricky, and unavoidable, problem’.¹⁴

During the closing weeks of 1973, the Corset was the central preoccupation of neither Richardson nor his deputy Jasper Hollom. Instead, it was the increasingly fraught state of the secondary banks – a sector flourishing since the late 1960s but now suddenly vulnerable because of imprudent loans and heavy reliance for funds on the fast-growing, wholesale inter-bank market. The canary in the mine was London and County Securities: run by the self-promoting Gerald Caplan, and including the Liberal leader Jeremy Thorpe on its board, it was in such serious trouble by early December that, via the good offices of the Bank, it had to be rescued, mainly by its bankers NatWest but in part by a more reputable secondary bank, First National Finance. Soon afterwards, another secondary bank was also known to be in dire straits: namely Cedar Holdings, which specialised in second mortgages and whose quality of business had sharply declined after going public in 1971. For all secondary banks, moreover, Barber’s emergency measures of 17 December had – through their combination of immediate credit controls and a pledge to introduce a development gains tax aimed at curbing property speculators, to whom the secondaries had lent so much – potentially lethal implications that were almost immediately recognised. That week before Christmas saw the secondary banking crisis fully under way, a crisis played out, in time-honoured fashion, largely behind closed doors.¹⁵

On Wednesday, 19 December the Fringe Banks Standing Committee – set up by the Discount Office’s James Keogh on the 14th and comprising representatives of the Bank, the four leading clearing banks and Williams & Glyn’s – met for the fourth time, chaired in Keogh’s absence by his deputy Rodney Galpin. After a discussion about the plight of various of the secondaries (now including First National as well as Cedar), the key moment came when NatWest’s Sidney Wild, almost certainly under instructions from his bold and energetic chief general manager Alex Dibbs, ‘suggested that a support fund should be set up as a means of providing the potentially large amounts of assistance which could be needed for joint rescue operations’ and ‘thought it might be no exaggeration to speak of a total of well over £1,000m’. Such was the genesis of what would become known as the ‘Lifeboat’, some eighty-three years after a similar vessel had rescued Barings. That afternoon, at a secret meeting with the chairmen of the clearers, Richardson mentioned the possibility of a general support operation. Meanwhile, through that Wednesday and long into a memorable night, a series of meetings at the Bank sought specifically to prevent Cedar’s immediate collapse. ‘Both acted magnificently,’ recalled Hugh Jenkins (investment manager of the National Coal Board pension fund, one of Cedar’s four main institutional backers) about Richardson and Hollom. ‘They knew the nature of the problem and their sang froid was remarkable. They were cool but very firm.’ Hollom in particular successfully warned of the domino effect if Cedar went, with the Bank’s overall performance marred only by the tactless serving of ham sandwiches to Cedar’s mainly Jewish directors, as they waited downstairs for several hours to be brought into the discussions. The public announcement of a support package for Cedar was made on Thursday morning – but, far from reassuring the City, it had the effect, as it sank in that a substantial concern like Cedar had been brought low, of fuelling the rumour-mill and causing the share price of many secondaries to plummet.

Help, however, was at hand. Following meetings at the Bank on 21 and 27 December at which the governor deployed all his formidable powers of persuasion to achieve from the chairmen of the clearers broad acceptance for the principle of a joint support operation, the Lifeboat was launched, with the Bank agreeing to a 10 per cent participation (having initially suggested 7.5 per cent) and the remainder being shared by the clearers. Chaired by Hollom, the first meeting of the Control Committee (as it soon came to be known) took place on the 28th and considered what was to be done in relation to twenty of the secondaries. The Lifeboat may not have been the Bank’s idea – indeed, a Hollom memo dated 20 December on ‘Rescue Operation’ contemplated alternative approaches – but it had rapidly adopted it and given it its imprimatur. ‘We had to support some institutions which did not themselves deserve support on their merits and, indeed, institutions which fell outside the Bank’s established range of supervisory responsibilities,’ publicly explained Richardson five years later:

But I felt, as I saw the tide coming in, that it was necessary to take the Bank beyond the banking system proper, for which it was responsible, into those deposit-taking institutions, because collapse there was capable of letting the wave come on to the institutions themselves; and the fact that very rapidly we had to extend our support to a wider circle, which included some reputable banking institutions, showed that our instinct that we were on very treacherous ground was sound … I have absolutely no hesitation in saying that, faced with the same circumstances again – regrettable though they were – I would take the same strategic position and would act in the same way …

It was a cogent and in many ways convincing rationale, but inevitably there were dissenters. ‘Bolton thought the secondary banks should have been allowed to go to the wall,’ recorded King some months after the Lifeboat’s launch; in October 1974 the Banker noted that ‘some bankers believe that the operation was misconceived from the start and that more of the bad apples should have been allowed to fall to the ground’; while a year later, a Labour MP, Frank Hooley, wrote to the governor declaring that the whole support operation appeared ‘to indicate to the financial “smart Alecs” in this country that they need not worry too much in future about incompetent or shady deals since, at the end of the day, the Bank of England itself will step in and save any outright scandal’.¹⁶

By August 1974 the Control Committee, very actively chaired by Hollom, had met over fifty times; by June 1975, a hundred times (occasioning a drink). Predictably enough, the Lifeboat in action was a complicated story, full of resentments and cross-currents as well as nobler motives. After only a few weeks, for instance, Hollom noted Eric Faulkner of Lloyds telling him, in relation to First National, that there existed on the part of Faulkner’s colleagues ‘a good deal of uncertainty about our own [that is, the Bank’s] motives and surprise at our championing of Matthews [Pat Matthews, top man at First National], who was after all an appreciable competitor of theirs and was not everybody’s favourite character – nor on his record did he deserve to be’. Indeed, Faulkner even suspected that the Bank was trying with First National ‘to build up a sixth London clearing bank’. The deputy governor’s response was characteristic: ‘I said that, though I was not an unbridled admirer of Matthews, I thought he was not as black as he was sometimes painted. Much more important was the fact that, since we felt we could not let First National go or be strangled by its rescuers, the clearing banks had effectively forced our hands by their reluctance to back a less aggressive rescue operation.’ And: ‘I emphasised that though we felt bound to head the support operation ourselves and meant to make it go, we would be concerned to withdraw again as soon as our prime objective had been secured.’

Transcending such concerns was the broadly agreed need, strongly pushed by Hollom, to keep the Lifeboat afloat – especially in the context of the deep crisis during 1974 in the property sector. ‘What it amounted to was really buying time so that the property market could recover’ was how John Quinton of Barclays recalled the situation, and he remembered Hollom saying at one point to the clearing bankers: ‘“Unless we save this bank, then the ripples will hit some of you people round this table”. The temperature dropped about 10 degrees and we all said “Yes”.’ The grumbling persisted of course, though abating somewhat when Hollom in August agreed to an overall limit of commitment being set at £1,200 million – not so far from Wild’s original figure, and a limit that by November the joint support operation was close to reaching. Eventually, the secondary banking crisis receded, with some of the fringe concerns allowed to collapse: the Lifeboat peaked at £1,285 million in March 1975 (the Bank having to meet the excess above the agreed limit), before slowly but surely that figure came down. The financial loss sustained by the Bank is impossible to compute retrospectively but was certainly containable; and the incoming tide had been stemmed, though at one point (late 1974) it lapped alarmingly close to NatWest.¹⁷

Picking up the tab for the febrile early 1970s also involved concerns outside the Lifeboat’s remit. Two in particular warrant mention, the first being the asset-stripping and share-juggling Zeitgeist-reflector that was Slater Walker – up like a rocket, down like a rocket. ‘Slater claimed to be massively liquid,’ Keogh informed the governor on 21 December 1973 after a meeting at Slater’s request, ‘but he was obviously worried and spoke very forthrightly about the need to rescue the “fringe” lest there should be repercussions on his own bank.’ Over the next year and more, Slater publicly stressed the virtues of ‘retrenchment’, but was denied in December 1974 when he requested that Slater Walker be added to the Bank’s list of eligible names. ‘In our view,’ pronounced Hollom, ‘eligibility is a recognition which has to be built up over a considerable period of time and which may only be considered when a house’s acceptance business is judged to be of sufficiently high quality in the eyes of the discount market.’ 1975 proved the decisive year. In March, Slater called on Richardson to tell him that he had had an approach from Tiny Rowland’s Lonrho about purchasing Slater Walker (‘he assumed that we would not accept this and this was confirmed,’ ran the Bank’s note of the meeting); two months later he was still sufficiently persona grata for the deputy chief cashier, Rodney Galpin, to accept his invitation to Slater Walker’s cocktail party at the Dorchester; and in October, having first secured the Bank’s say-so, Slater abruptly announced his retirement from the City, with James Goldsmith to take over the running of the company. Propped up by the Bank, Slater Walker then staggered on for two more years, before in 1977 a major reconstruction saw the Bank (at considerable, much criticised expense) taking over the banking arm and proceeding to run it down, while other parts of the business were reconstituted under a different name. It already seemed a long time since ‘the Master’ (as Slater’s small shareholders liked to call him) might have joined the Court.

The second concern, also with its element of controversy, was the Crown Agents: ill managed, ill advised, and by 1974 having staggering amounts lent out to suddenly floundering property companies, above all the Stern Group run by the Hungarian-born Willie Stern. The ensuing collapse – necessitating a government rescue – inevitably triggered the blame game. ‘We appreciate that the Bank is independent of government,’ noted the 1977 report of a committee of inquiry chaired by Judge Edgar Fay, ‘but it is government’s major contact with the City, and we think it would not have been unreasonable for the Bank to have played a greater part in this affair than it did.’ Hollom, however, was unrepentant. After calling the report ‘a horror story of the way the Crown Agents swam out of their depth into every kind of speculative venture’, his typewritten memo ended flatly: ‘To us, throughout, the Crown Agents were part of the Government machine which it was for the Ministry and the Treasury to manage and monitor.’ To which, with feelings clearly running strong, the deputy governor added a handwritten sentence: ‘The Bank are not to be regarded (as the Committee at times seems to do) as just another part of the Government machine.’¹⁸

The events of 1973–4 could not but have significant supervisory implications. In June 1974 the governor explained to the Treasury’s permanent secretary, Douglas Wass, that his aim was ‘to move quietly and steadily since rush and drama would be bad for confidence’; and the following month, the historic Discount Office was closed down – with Keogh, in many ways unfairly given his poorly supported attempts to monitor the fringe banks, made the scapegoat – and replaced by a new Banking Supervision Division, under the ruggedly pragmatic George Blunden and much more heavily staffed. Within weeks, reflecting ultimately a shift away on the Bank’s part from the time-honoured virtues of trust, informality and personal judgement, it was insisting on regular prudential returns from all banks. ‘A tremendous relief to them, they were delighted – all except one bank … The oldest bank, Hoares Bank,’ recalled Blunden. ‘The chairman of Hoares phoned me up, when he had the letter saying we were going to be supervising them, and said, “This is quite absurd, we don’t want to fill in forms, and you don’t want to waste time looking at forms, and we don’t want to come down to the Bank of England to be interviewed. Why don’t you agree to come and have lunch with us once a quarter?”’ Under the new dispensation, no dice – and indeed there was by now also a changing international dimension to supervision, following the collapse in June 1974 of a leading German private bank Herstatt, prompting Richardson to seize the initiative and, at the following month’s Basle meeting of the BIS, persuade his fellow central bankers to adopt the principle of ‘parental responsibility’, whereby each central bank assumed responsibility for the supervision of foreign branches established by its domestic banks. The final, Treasury-led piece in the new supervisory jigsaw, though it took a considerable time to complete, was the eventual Banking Act of 1979, formally embodying a two-tier system of regulation under the Bank that in effect distinguished between ‘proper banks’ and licensed deposit takers. Almost certainly, Richardson’s preference would have been for the established banks to be excluded from the legislation; but as the chancellor of the day, Healey, realistically said to him, ‘Look, I cannot do it, I would like to but you cannot have it.’¹⁹

1979 seemed a distant date indeed during 1974, a year of intense crisis management – and accompanying political-cum-economic drama – in Britain plc. Rampant inflation, a savage bear market, Labour winning two general elections were just some of the features of twelve months that culminated in the announcement on New Year’s Eve, the day after Aston Martin had gone into liquidation, that Burmah Oil was going to have to be rescued by the Bank on behalf of the government. Motivated in part by considerations of sterling plus the City’s standing as an international financial centre, it was an involvement that exposed the Bank to significant if misplaced criticism, on the grounds that its purchase of almost £78 million of BP shares hitherto held by Burmah Oil had been unfair to existing Burmah shareholders, with the shadow energy minister Patrick Jenkin even declaring in the Commons that ‘lasting damage’ had been done ‘to the credibility and independence of the Bank of England as a lender of last resort’. During the mid-1970s, however, most of the political flak concerned Labour, whose hostility to the City was matched only – and perhaps even exceeded – by the City’s hostility to it. The Bank sought to calm passions. In July 1974 the Stock Exchange’s chairman showed Hollom his proposed riposte to Labour’s consultative green paper on the reform of company law: ‘It was, of course, for them to decide on the tone of the document but I expressed my feeling that a cooler reply might have been more effective.’

What about the relationship between Richardson and the often combative chancellor, Denis Healey? In June 1974, barely three months after the first election, a moment of frisson occurred when Healey, ahead of a visit to the Bank, ‘requested meetings with the Dealers, the Chief Cashiers who are in direct touch with the gilt and day-to-day markets’ and ‘the principals of the Discount Office, with respect to both their responsibilities for the discount market and banks in general’, as well as wanting to meet ‘those in the Bank who have direct links with industry’. Reassured, however, by a Treasury mole that the meetings ‘may amount to little more than exhibitions of the Chancellor’s bonhomie’, the governor made no objection, merely letting it be known internally that he ‘would not object if the systems were given an extra polish to dazzle the Chancellor’. In general, moreover, it proved to be an eminently workable relationship: although Healey was unfavourably struck at the outset by the Bank’s determination to uphold what he called ‘the cabbalistic secrecy’ of the Norman era, and although Richardson was disconcerted by Healey’s insistence on cultivating his own contacts with key players elsewhere in the City, there developed a strong mutual respect, perhaps helped in the early stages by each recognising that the other was learning on the job. In any case, with so many enemies to his left, not to mention the extraordinarily difficult macro-economic situation facing him, Healey was hardly looking for unnecessary opponents. ‘Although he could be pretty brutal and rough, throw his punches around, he was a very cautious man when it came to taking on the Governor on a serious matter,’ recalled the Treasury’s Douglas Wass. ‘Time and again he would prefer the Governor’s views on a monetary matter or a capital market matter, a gilt issue, to the Treasury’s not because he felt the Governor was endowed with greater wisdom, [but] I think because he thought this wasn’t worth a fight.’²⁰

The documentation is somewhat patchy, but one’s sense is of Richardson becoming an increasingly confident and assertive figure in the course of his second year as governor. The turning-point may well have been in mid-December 1974, when in the immediate context of a beleaguered pound (causing the Bank to spend some £1 billion intervening in the foreign exchange market) he frankly told Healey that the time had come for a new economic strategy – which in practice meant a reduced PSBR (public sector borrowing requirement) and the implementation of a statutory incomes policy. Healey had been getting the same message from his advisers at the Treasury and now largely took it on board (involving on his part a conscious repudiation of his Keynesian assumptions), though it took another six months or so for his colleagues more or less to sign up. ‘Everyone now admits that you are the best government that we could hope to have at the moment,’ the governor remarked in March 1975 (with inflation still roaring ahead) to the paymaster general, Edmund Dell, who was in effect Healey’s deputy. ‘Why are you doing so many silly things? The NEB [National Enterprise Board, designed to invest public money in industry] will do no good at all …’ Over the next month or so a series of hugely inflationary pay deals revealed the much vaunted Social Contract (the government’s agreement with the trade unions over voluntary pay restraint) to be in tatters; but by early June the EEC referendum was safely won and the prime minister, Harold Wilson, was at last willing to take on his party’s left wing.

Conveniently for him, for Healey and indeed possibly for the Bank, a major sterling crisis then blew up over the next few weeks. On the 12th the word to the governor from Bolton was that ‘the centre of activity in the latest attack on sterling’ was ‘the Dresdner Bank in Frankfurt’, with a spokesman for that bank having declared its belief that ‘Britain was crumbling’; the following week, Richardson told the Treasury that ‘what was puzzling to outside observers was why it took the Government so long to act’; soon afterwards, a beer-and-sandwiches session in Downing Street earned the railwaymen a 30 per cent pay settlement; and on the last day of June came the denouement, as sterling nose-dived with at this stage perhaps little impediment from the Bank. ‘Richardson in with Wass,’ crisply noted Healey. ‘“Sterling collapsing.” Tell him to see PM.’ Richardson duly went to No 10 – where, shortly before, Wilson had predicted to an adviser, Bernard Donoughue, that they were reaching the ‘point in the play when the Governor of the Bank of England enters from stage right’. Donoughue now recorded the words of the ‘haughty and patrician’ visitor: ‘This Government’s whole credibility has gone … We must end this nonsense of getting the cooperation and consent of others, the trade unions, the Labour Party. We must act now.’ No doubt there were shades of Cromer in Wilson’s mind; but 1975 was not 1964, and the government did act in accord with Richardson’s wishes, producing on 11 July an anti-inflation White Paper that included an incomes policy.

What did the future hold? ‘The horrible experiences of the past two or three years ought to have given us a unique opportunity not only to see more clearly the monetary problems lying ahead in the recovery phase, but also to obtain and retain governmental and public support for the monetary and fiscal policies that will have to be pursued if the problems are to be overcome,’ reflected Fforde in a note to the governors shortly before the White Paper. ‘None the less,’ he added, ‘although the opportunity may be unique, it may not in practice be at all easy to grasp it and keep hold of it.’²¹

Amid the political and economic turmoil, a running sub-plot through the mid- to late 1970s was the City’s troubled relationship with British industry.²² Richardson, who personally knew a wide range of industrialists and maintained his contacts, responded constructively and, like Norman between the wars, did all he could to keep government out of the picture. That constructive response had three main aspects. The first, involving pressure on the often reluctant and sometimes hard-pressed clearing banks, was seeking to expand the role of Finance for Industry (FFI), itself the creation of a recent merger between the Industrial and Commercial Finance Corporation (ICFC) and the Finance Corporation for Industry (FCI); the second, involving in 1975 the recruitment to the Bank of the near-legendary accountant Sir Henry Benson as industrial adviser, was the creation of an Industrial Finance Unit, essentially in its initial stages seeking to improve corporate governance through the influence of the major institutional investors; and the third, also involving Benson, was the launch in 1976 of Equity Capital for Industry (ECI), a Bank baby that struggled to get even the unenthusiastic support of the City. Taken in the round, the evidence is that these three initiatives did between them achieve some useful things, but fell well short of being game-changing. The Bank’s contribution to industrial finance was squarely in the remit of the Wilson Committee, chaired by the former prime minister and eventually reporting in 1980 on the functioning of financial institutions. Reasonably supportive, its main criticism of the Bank was to question whether it was yet ‘adequately’ equipped with ‘staff experience and qualifications to match its increased responsibilities’.²³

For Bank, City and industry alike the scourge of high inflation – never quite Weimar-like, but unprecedented in British living memory – was pervasive and dominant. By September 1975, with inflation running at an annual rate approaching some 25 per cent, a full-scale debate was under way at the Bank about whether the best way to control and check inflation was through targeting monetary aggregates. ‘There is some general feeling that we lack a philosophy about monetary policy,’ observed Christopher Dow, adding that ‘if we could agree on what we did believe in, we could then start to try to put it over in public’. John Fforde, Kit McMahon and Dow himself now all had their say, none of them starting remotely from the position of being convinced monetarists, unlike their colleague Charles Goodhart.

The major, somewhat anguished contribution came from Fforde. He observed that ‘there are undoubtedly people of some distinction in the field of economic policy who would respond to an acceleration of monetary growth in present circumstances by advocating precisely the kind of action which every enlightened demand manager [that is, Keynesian economists] would totally reject’; he noted that the high inflation of recent years had ‘enabled the monetarists to seize and occupy different strategic ground to the demand managers and to accuse/attack the latter for failing to recognise and to tackle the true nature of the inflationary problem’; he called the existing debate between Keynesians and monetarists a ‘dialogue of the deaf’; he accepted that the ultimate ‘economic objective’ was that of ‘preventing inflation from destroying our entire politico-economic structure’; he accepted too that it was impossible to assess the viability in counter-inflationary terms of continuing ‘the prices and incomes/demand-management strategy’; and he acknowledged in conclusion that he was finding himself increasingly ‘sympathetic’ towards ‘the monetarist position’, in the sense anyway of it being ‘a position which the Bank could at least partly adopt, as a means of trying to get what we (and most other people) would want in the prices and incomes and PSBR areas’. Dow in his response then made a pragmatic, not dissimilar ‘non-monetarist case for a monetarist line’; as for McMahon, after noting that ‘there will be risks that monetary policy will prove a brittle instrument’, he asserted that nevertheless he was ‘for taking a deep breath and going for relatively tight control of money supply from now on and for as long as we can maintain it’. That was very far from the end of the internal debate – which continued through the winter of 1975–6 and beyond – but clearly the sands were shifting; and although Richardson declined for the moment to commit himself fully to any set position, it was significant that in March 1976 he specifically requested Healey to include in his forthcoming budget ‘a firm statement on monetary policy’.²⁴

That request was on the 30th – at the end of an extraordinary month in sterling’s chequered history. The backdrop was a running Treasury/Bank dispute going back to at least the previous December: in essence, the former wanted to engineer a significant depreciation of the pound in order to make British exports more competitive, while the latter was instinctively resistant. Dow, writing privately a few months later, recalled the tension:

After a period when the exchange rate seemed to have got stuck on a plateau, the view strengthened, most vocally in the Treasury, that the exchange rate was too high and could with advantage be lower. We [the Bank] should cream off more dollars from the market when the rate was strong, or support it less zealously when it was weak; or we should be less anxious to preserve a favourable interest rate differential against rates abroad. What the external side of the Bank most hated was the Treasury breathing down their necks with the constant cry: ‘Go on, get the rate down’. If we tried to get the rate down we were likely to be seen doing it. For the dealers, to accept a fall brought about by events was one thing, but deliberately to worsen one’s own rate went right against the grain. To the Governor and others in the Bank, it also seemed close to a breach of faith …

Matters came to a head in early March. On Tuesday the 2nd, following Healey’s lunch at the Bank the day before, Richardson reluctantly consented to the Treasury preparing a depreciation strategy involving a mixture of intervention and interest rate policy to get the exchange rate down; but in the event, before that policy could come into effect, the markets themselves took over, as the pound fell sharply on the afternoon of Thursday the 4th, at one point to a record low of $2.0125, amid what The Times reported as ‘a sudden wave of selling … thought to have largely emanated from London’, with currency dealers describing the sudden movement as ‘inexplicable’. The Bank would subsequently be blamed (including by Healey) for having sold sterling in a falling market and thus unnecessarily precipitating a sterling crisis; its own defence, which few listened to, was that it had started selling on the 4th as it became known that large buying orders from commercial banks were pushing the currency up, which it knew would displease the Treasury. Next day the pound finished trading below $2 for the first time ever, while over the following fortnight the slide continued. ‘Byatt said the Bank of England had done everything it could to steady, to interrupt and to create a sense of hesitation in the decline of sterling’s rate today,’ noted the Fed record on the 15th of a phone update from the Bank’s foreign exchange adviser, Derrick Byatt (subsequent historian of the Bank’s note issue). ‘But no matter what the Bank of England did, it was not believed in the market … Today has been a record in every respect. The drop in the rate is the largest ever, to $1.92 …’ And: ‘Generally speaking, the market is extremely disturbed by the lack of indication that the Bank of England intends to take a firm stand.’ The Treasury, though, had got what it wanted – a substantial depreciation – and could, in Wass’s retrospective words, ‘hardly believe its luck’; as for Healey, who had always had his misgivings about a deliberate fall in sterling, he took the broad view, privately admitting to ‘mixed feelings, like the chap who saw his mother-in-law go over Beachy Head in his new car’. There were few such mixed feelings at the Bank, which felt that its reputation in the foreign exchange market, and accompanying ability to maintain an orderly market, had been seriously compromised.²⁵

From early April the occupant at No. 10 was James Callaghan, who would recall his first meeting with Richardson:

It was uncannily like stepping back 12 years and listening to a record of one of my talks with Lord Cromer when he was Governor. The decline in the sterling rate was a direct response to unparalleled uncertainty and loss of confidence. The US was taking a gloomy view of sterling’s future and industrialists were saying that all that appeared to be happening was that a bankrupt nation was selling off its stock. The Government’s borrowing requirement was too high and in due course would crowd out investment by the private sector …

For the moment Callaghan would try to shrug this off as ‘Governor’s Gloom’, but in truth the foreign exchange markets had been thoroughly rattled by sterling’s debacle in early March. Over much of the next two months – with not only Bank and Treasury mutually failing to communicate effectively, but there developing within the Bank an atmosphere that Dow described as ‘one of collective hysteria’ – sterling took a battering, so that by Thursday, 3 June, it was down to a new low of barely $1.70. The immediate upshot, as initiated by the BIS and arranged by telephone over the following weekend (largely by the Bank), was a $5.3 billion stand-by credit to enable the Bank to support the pound, with a handful of central banks chipping in as well as the BIS and the US Treasury. Tellingly, Richardson’s preference would have been to go in the first place to the IMF for assistance, as the surest way of imposing greater discipline on government policy. Healey duly announced the package on the afternoon of Monday, 7 June, a day with a piquant aspect: the first visit to the Bank of the newish (from February 1975) leader of the Tory opposition, Margaret Thatcher. She came to lunch and it was, recalled Dow, a ‘disastrous’ encounter: ‘We were of course polite but did not take to her, because she spoke her mind in very broad and sweeping terms and gave little opening for anyone to tell her things which we could have told her and which would in fact have been useful for her to know. She sensed we did not like her: “I saw them smiling,” the Governor reported her as saying afterwards …’ Nor did it help her mood when she discovered later in the day that she had not been told by the Bank about the imminent stand-by announcement.

The announcement itself just about did its job in terms of stabilising sterling, which gradually rose during the summer to the higher $1.70s. Intrinsic, however, to the massive loan was the assumption on the part of the lenders – and the international financial community at large – that the government would use the breathing space to reduce substantially its projected PSBR for 1976–7 from the £12 billion figure that Healey had given in his recent budget. Richardson for one now pressed that point implacably, visiting the Treasury at least twice later in June in order to demand that £3 billion of public expenditure cuts be made immediately. It was during such a visit that the Court had one of its relatively rare substantive (albeit inconclusive) discussions about a matter of high policy – appropriately enough, given that Richardson’s demand was so dramatically at variance with the whole post-1945 social democratic ‘welfare’ settlement. Dow, by instinct an unashamed Keynesian, recorded the episode:

The Governor missed that meeting: he was with the Chancellor arguing that spending should be cut. Maurice Laing [an industrialist], as senior Director present, asked that the wishes of the Court for his success in these endeavours should be conveyed to him. Sidney Greene [Lord Greene, a trade unionist] looked unhappy and asked a muddled question. Since some dissent had been voiced, I felt I could not stand aside. Though normally it would not have seemed proper for an executive director to criticise the Governor in open session, I raised my hand and said that, as the Deputy Governor (who was in the chair) knew, I had difficulty in fully associating myself with what Maurice Laing had just proposed. The Deputy then invited me – which I had not expected – to explain my view. Eric Roll then spoke up, starting by saying that he agreed with me, though perhaps ending more equivocally; to be followed by Adrian Cadbury [another industrialist], who seemed to be half agreeing, or was it agreeing with everybody? Jasper Hollom then thanked everyone.

Eventually, after protracted haggling between ministers, Healey on 22 July announced cuts of just under £1 billion: appreciably less than the governor had wanted, but still a historic surrender on Labour’s part to the power of the financial markets. The chancellor in his speech also touched on the question of controlling the money supply. ‘In our judgement,’ a Bank paper sent to him three days earlier had asserted (in another clear defeat for Keynesianism in Threadneedle Street), ‘a publicly-announced target would do much to allay the generalised fear of excessive monetary expansion, by giving the public a clearer idea of the commitments of policy and greater confidence that action as necessary be taken to achieve the intentions of policy.’ In the event, Healey said that, for the financial year as a whole, ‘money supply growth should amount to about 12 per cent’. Was that a target or merely a forecast? Or somewhere in between? Theological debate raged – but, whatever precisely it was, undeniably it was another step in the monetarist direction.²⁶

The next few weeks provided some brief relief for the Bank if not for the nation’s gardeners or groundsmen. ‘Byatt said Britain’s lack of water now means that sterling can’t float very well in the exchanges,’ noted his counterpart at the Fed in late August shortly before the drought broke. But for most of the rest of 1976 there were few jokes to be had.

During early September, sterling held steady at around $1.77 only because of heavy Bank support, in turn leading to an increasingly unsustainable drain on the reserves; and by the 10th, against a backdrop of Labour’s proposals to nationalise the banks and news of an impending seamen’s strike (shades of 1966) combining to push sterling southwards by some 3 cents, not only did the government instruct the Bank temporarily to stop spending money on propping up the pound (with Callaghan still hoping to repay the stand-by loan), but Healey raised MLR to an unprecedented 13 per cent in order to try to get gilt sales moving again after the so-called ‘gilts strike’ of the summer. Sterling continued to slide, so that by Friday the 24th it was barely $1.70. ‘The market seems to be falling into the trap of reacting with excessive pessimism to developments in Britain,’ lamented the Bank’s Roger Barnes to the Fed that day about what he saw as the irrationality of foreign exchange dealers. The following week was memorable. On Monday the 27th, as Labour’s conference at Blackpool began by passing a resolution against any further public expenditure cuts, sterling fell to $1.68; and then next day came the drama tersely captured in Healey’s diary entry: ‘Packed in morning. £ still falling heavily. Gordon in just before I left Downing St. £ fell the whole morning. Out to airport. Decided to stay. Back to London. Series of meetings, 3% loss.’ Healey and Richardson had both been intending to fly that day from Heathrow, with the IMF meeting in Manila their ultimate destination, in the chancellor’s case via the Commonwealth finance ministers’ meeting in Hong Kong and in the governor’s case via a visit to Tokyo. In the event, neither man left Heathrow, with Richardson persuading Healey at the airport – before they returned together to the Treasury – that it would be too risky for the chancellor to be out of contact with the markets for as long as seventeen hours. The markets themselves saw sterling at a little below $1.64, having fallen 8 cents in four days of trading and apparently heading irresistibly towards £1.50.²⁷ The following day, the 29th, Healey reluctantly announced a $3.9 billion application to the IMF – at the time, the largest-ever application to that body, and a request bound to involve more explicit and more stringent ‘conditionality’ than that attached to June’s stand-by credit.

October proved a nervous, confusing month, pending the arrival in London of the IMF negotiating team. On the 7th, taking Richardson’s advice that it was the only way to (in Healey’s retrospective words) ‘sell enough gilts to get money under control’, the chancellor raised MLR to a politically disastrous 15 per cent. This was the somewhat controversial tactic of the Bank’s now coming to be known by sceptical observers as the ‘Grand Old Duke of York’: or in Forrest Capie’s words, seeking ‘to boost flagging sales of gilts by increasing MLR and then hoping that the ensuing rise in yields would attract buyers’, before ‘a falling trend in short-term rates was then engineered by the Bank to maintain the interest of gilt investors’. No observer, however, could have been more sceptical than the Labour backbencher Jeff Rooker, who soon after the MLR rise introduced a Prohibition of Speculation Bill (targeted at both currency and commodity speculation) that accused the Bank of being guilty of ‘treasonable mismanagement of the money markets’. By contrast, Labour’s chancellor and the Bank’s governor gave every appearance of complete harmony at the Mansion House on 21 October, with the former explicitly stating his commitment to a monetary target (for £M3, otherwise known as ‘broad money’, including not just physical money – notes and coins – but also deposits at banks) and the latter warmly supporting him for doing so. This was a carefully orchestrated display, for the benefit of the markets, of what Samuel Brittan in the Financial Times scornfully dismissed as ‘unbelieving monetarism’, declaring that ‘they have belatedly and inefficiently been pursuing a money supply policy at the behest of overseas opinion in which they do not have their hearts and are therefore carrying out badly’. In any case, it was a display soon eclipsed by the so-called ‘Sabbath thunderclap’: this was a Sunday Times story on the 24th claiming that the IMF intended to set sterling at $1.50, resulting next day in sterling falling by no less than 7 cents, to $1.55; and by Thursday the 28th it had hit a new low of $1.53. ‘Turmoil is everywhere, discussion is confusion and exchange rates move over wider and wider ranges as if capable of being blown almost in all directions at once,’ noted without exaggeration an end-October report by Barings.

On 1 November the IMF mission arrived in London. It was headed by an Englishman, Alan Whittome, who had been at the Bank between 1951 and 1965, rising to become deputy chief cashier before moving to the IMF; and, befitting a Bank man, he would be evoked in his obituary as ‘elegant, courteous but firm and blessed with a dry humour’. Over the next six weeks, during the negotiations between his team and government, and then within government, the pound remained fairly stable, mainly between $1.62 and $1.67, nudging upwards as it became clear that a package of cuts was going to be agreed in return for the IMF’s massive loan. The Bank seems to have been relatively marginal in the process. ‘Officials in general,’ recalled Dow of both the Bank and the Treasury, ‘cut no ice with ministers at this juncture. There had been so much talk of British officials getting together with those of the IMF and agreeing a package they would jointly sell to ministers – talk, after all, not entirely beside the point – that the PM resolved to keep officials right out of it.’ The Bank’s major formal input came from McMahon, who for all his Keynesian sympathies was adamant that the government had no alternative but to take the IMF medicine and thereby pacify the markets. ‘If the markets do not accept that we have done enough and the rate starts to slide,’ he reflected in late November, ‘there are no shots left in the locker.’ And accordingly, he sent a paper to Healey proposing spending cuts of £2 billion and tax increases of £1 billion.²⁸ In the event, the package of cuts that Healey announced to the Commons on 15 December amounted to £1 billion for 1977–8 and £1.5 billion for 1978–9. Press comment was generally critical, but the markets responded just about enthusiastically enough, with the pound closing the year worth £1.70. Altogether it was, from the Bank’s perspective, a tolerable end to a very long ten months.

The mid-1970s, from the onset of the secondary banking crisis in late 1973 through to the succession of sterling crises in 1976, had been in their way as tumultuous as any short period in the Bank’s history – and the upshot, perhaps inevitably, was a reputational hit. ‘THE BANK OF ENGLAND’S FALL FROM GRACE’ was the title in March 1977 of a lengthy article in the American magazine Business Week, with the general unflattering thrust being that the Bank had become increasingly aloof, blundering and irrelevant. Among those quoted were the monetarist economist Brian Griffiths and a key figure in the eurobond market, Stanislas Yassukovich. ‘If you take the record of the Bank of England over the last five years in terms of technical expertise,’ declared the former, ‘you have to say that it is incompetent.’ While according to the latter: ‘There has been a clear-cut diminution of the Bank’s independence. In the past, the Treasury set policy, and the Bank set tactics. But now the Treasury even sets the tactics.’ And after noting that ‘for the first time in memory, banks are beginning to ignore the Old Lady and talk directly with government departments in Whitehall’, the article concluded portentously that ‘the decline of the Bank of England as paramount central bank in the West casts a gloomy cloud over the future of The City’. Three months later, on a Saturday in Basle, the head of Business Week’s European Bureau called on Richardson to apologise for the piece: ‘The Governor accepted the apology, commenting only that he had found it a stupid and ignorant article.’

The very next day, however, there appeared in the Observer a major broadside entitled ‘THE LAX OLD LADY OF THREADNEEDLE STREET’, with the two writers, Robert Heller and Norris Willatt, seeking to draw a portrait of an institution that ‘never locks any stable doors until far too many horses have bolted’. The relaxation of controls that had led to the secondary banking crisis, the inflationary expansion of the money supply, sterling’s unhappy experiences on the foreign exchange markets – all these were blamed squarely on the Bank, where because of its lack of accountability ‘no important heads have been seen to fall in public’. Further criticism came in October from the Guardian’s influential political commentator Peter Jenkins, who reacted to Richardson’s monetarist-flavoured Mansion House speech by arguing not only that it was ‘unacceptable in its practical implications and presumptuous in spirit’, but that it highlighted the Bank’s ‘unsatisfactory’ constitutional position. ‘The idea of autonomous control of money supply is impractical and in spirit antidemocratic,’ he declared, invoking the deflationary ghost of Norman, and added that the Bank was ‘too much of a lobbyist on behalf of City interests to perform the more independent role envisaged by the Tories [who had recently been making vague noises to that effect] or to perform effectively as the agent of the Government’. Jenkins did not explicitly touch in his piece on the question of the renewal of Richardson’s governorship for a second five-year term; but later that autumn ‘for a week or two’, in Dow’s words, he ‘ran a very virulent and personal campaign against his reappointment’. It is possible that Healey and Callaghan hesitated, but in early 1978 the governor’s reappointment was duly announced.²⁹

In fact there is evidence to suggest that the Bank – including Richardson himself – retained during the mid- to late 1970s considerable authority, even if life was made significantly more complicated (and liable to interference-cum-politicisation) by managing a floating rate as opposed to defending a fixed rate. The Orion episode in early 1976 was a good example of the governor’s eyebrows at their most classically raised. The context was a large UK Electricity Council issue, which was being lead-managed by the consortium bank Orion, relied heavily on Arab money and sought to exclude Rothschilds and Warburgs from the underwriting group. Those two Jewish houses complained bitterly to Richardson, who summoned Orion’s William de Gelsey and told him to halt the issue. The latter protested that it was too late, to which Richardson countered, ‘I think that you will find that it is not too late.’ Orion had no alternative but to change the arrangements rapidly, with lenders found elsewhere and Rothschilds and Warburgs reinstated. Or take the sale in June 1977 of the BP shares that had come into public hands following the Burmah Oil rescue. The world’s largest-ever equity offering at the time (£564 million), it hit a serious last-minute obstacle on the afternoon of Monday the 13th, with an underwriting price of 845p settled upon but still needing final government approval. At which point Richardson was asked to go to No. 10, where he was told that some Cabinet members were objecting to the sale. Confronted by this development, Richardson rang the government broker, Tommy Gore Browne, to ask him what the consequences would be of not going ahead. Gore Browne’s uncompromising reply was that even a twenty-four-hour delay might well defer the launch for months. As a thunderstorm over London began to build up that evening, the City’s key figures in the BP sale waited for another call from Richardson, who in turn was also waiting for the phone to ring. Finally, as recorded by his private secretary, ‘the Chancellor called the Governor at 8.30 pm and reported that, with extreme reluctance, the Prime Minister had given his approval for the sale to go forward, at the suggested price of 845’. Richardson duly rang Gore Browne, telling him to proceed, and next day the issue was successfully underwritten by 782 institutions.³⁰

Yet overall, notwithstanding these episodes as well as the Bank’s successful resistance to index-linked gilts and tender selling (prompting Donoughue’s comment at the No. 10 Policy Unit that ‘it was clear that the Bank considered its own mode of working both to be perfect and nobody else’s business’), there perhaps was some erosion of authority. Within the City, the so-called ‘Sarabex affair’ was a significant pointer, arising in autumn 1977 when a London-based foreign exchange and money broker, dealing mainly for Middle Eastern banks, filed a formal complaint to the EEC about the restrictive practices operating in London, above all the impossible-to-fulfil, Bank-imposed, catch-22 condition that one could not become a member of the Foreign Exchange and Currency Deposit Brokers’ Association (FECDBA) unless one was already providing BBA (British Bankers Association) banks with ‘a full service’ – rather difficult, given that the Bank insisted that members of the BBA and other authorised banks in London solely used members of the FECDBA to conduct their foreign exchange business. The Bank itself, in a public letter to the EEC in November 1977, strongly defended existing arrangements, mainly on the basis that they were necessary to preserve an effective and orderly market; and it now looked to the clearing banks, the main users of the foreign exchange market, for support in this stance. Here, however, it was disappointed, giving the NatWest’s Bill Batt (acting head of the foreign exchange sub-committee of the BBA) a difficult meeting with the Bank’s John Page. ‘I had hoped the clearing banks would support the Bank of England,’ remarked the chief cashier frostily but to no effect, and the following year the Bank retreated from its position, with Sarabex becoming a member.³¹

Restrictive practices also operated on the Stock Exchange; and though the Bank added its lobbying support to the Stock Exchange’s efforts to avoid having its rule book referred to the Restrictive Practices Court, it was to no avail, with the Labour minister Roy Hattersley formally making the reference in February 1979 – a crucial step on the eventual road to the Big Bang of 1986. Then of course there was the rumbustious Healey:

I did introduce an innovation when I was Chancellor [he told a Select Committee in the 1990s] because before I became Chancellor the Bank would not allow Chancellors to talk to people in the City because it regarded itself as God’s appointed ambassador on earth from the City to the Treasury. It is one of the few things I had an argument with Gordon Richardson about … I said I wanted to hear not from the chairmen of the banks, who are usually time servers, but from the chief executives who are often very, very able indeed like Alex Dibbs who was at NatWest in my time … I said I wanted to have them in myself and talk to them about their problems. ‘Oh, no; this has never happened before’. In the end they agreed but only on condition that I had a spy from the Bank of England, Charles Goodhart, who I like to hope was perhaps a double agent in the end.

The Bank’s influence was possibly even waning when it came to honours. ‘I said that we were grateful for the work that Mr Goldsmith was doing with Slater Walker,’ noted Richardson in early April 1976 after speaking with Wass about the proposed knighthoods in Harold Wilson’s resignation honours list, ‘but I was very positive that it would be quite unsuitable, and indeed embarrassing for us, for him to be recognised in this way at this particular time.’ Sir James, however, it was.

At a more elevated level, these years also saw an agreement, reached between central banks in Basle in early 1977, to run down the sterling balances – an agreement over which, according to Healey, the prime minister was ‘unfairly grudging’ in his thanks to Richardson for securing it. In effect this meant the running down of sterling as a reserve currency, only two months after the Bank had issued a notice prohibiting the use of sterling as a finance medium for non-UK-related (that is, third-country) trade.³² Would the demise of sterling’s international role handicap London as an international financial centre? It was a sign of how much had changed in the past two decades that most informed people, including at the Bank, were justifiably confident that it would not.

Monetarism, meanwhile, continued to come into increasingly close focus. ‘Reflections on the conduct of monetary policy’ was the title of the inaugural Mais lecture, given by Richardson in February 1978; and in it he endorsed the phrase of Paul Volcker (soon to be his American counterpart) about the need for ‘practical monetarism’ and observed that ‘formulating a line of practical policy and trying to stick to it, while yet remaining appropriately flexible amid the uncertainties of day-to-day affairs, feels very different from devising ideal solutions in the seclusion of a study’. So no doubt it did, but by this time Fforde, one of the unbelieving monetarists, had already done much to improve the quality of monetary data and their regular monitoring and assessment. Was there a hidden agenda behind Richardson’s monetarism? Certainly he believed that Keynesianism and an acceptable rate of inflation were no longer compatible; but there was also a significant phrase in his lecture, where he described monetary targets as representing ‘a self-imposed constraint, or discipline, on the authorities’. Presumably ‘the authorities’ was code for the politicians, and behind them the inflationary demands of a mass electorate. Even so, after Reginald Maudling had written to him following the lecture to express scepticism about monetarist dogma, he was at pains to call the former chancellor and reassure him:

The Governor took the opportunity to touch on a couple of points arising from the lecture. He said that the emphasis in discussion of monetary policy was invariably in terms of restraint, but pointed out that in each year there had been a planned expansion in the money supply. The stance of monetary policy was thus not directed solely to deflationary ends. He touched also on the inter-relation of the growth in the monetary stock and inflation: the relationship was not mechanistic, but there was clearly an equivalence in the longer run between high rates of growth in the monetary aggregates and high inflation. He stressed the importance the Bank attached to restraining inflation but indicated that the Bank differed from pure monetarists in believing that all means available should be used in tackling inflation – including incomes policy.

By this time the Labour government, whose fortunes had picked up post-1976 amid economic recovery and generally greater stability, was approaching its endgame. That endgame featured of course the 1978–9 ‘winter of discontent’, with the mood in Threadneedle Street little better than anywhere else. ‘I recall the Governor being tired and ratty at the beginning of February,’ wrote Dow some months later:

He had been giving too many speeches, a great drain on his energy the way he does them. There was also considerable disagreeableness among us about the state of the economy, which we discussed one afternoon in the Governor’s room. I, of course, deplored having to depress the economy further when it was already depressed, merely to keep public borrowing to last year’s figure. The Governor said aggressively that he did not care about the state of the economy. The Chief Cashier said he didn’t either. David Walker [recruited from the Treasury in 1977 and now running the Economic Intelligence Department] was also there. I learned afterwards that this line of stupidity by John Page had roused him to silent fury. John Fforde was tense and apocalyptic on the other side and talked of the Governor wanting a return to the recession of the 1930s, something with which he, John Fforde, would want to have nothing to do. I certainly felt out of favour …

The election was eventually set for Thursday, 3 May 1979, one of the turning-point dates in modern British history. Two days before polling, Richardson characteristically took the trouble to note down what someone had told him about the previous weekend’s ‘Sunningdale meeting between the Civil Service and Industry’:

Douglas Wass had made a remark which had caught wide attention, to the effect that there had been a great political change over the last years, in which the focus of attention had become inflation while the level of unemployment had diminished in importance, so that its rise from its present level still further was not a central preoccupation. Douglas Wass had then said that some of them in the Treasury were now wondering whether this was the right balance or whether the level of unemployment ought not to swing back into greater prominence.³³

It is impossible to be certain, but the chances are that the governor – despite his ‘ratty’ remark a few months earlier – would not have disagreed.