Lords of Finance

The prime minister was furious. Having lost two of his sons in the war, Bonar Law had been all along deeply offended by the American view of war debts as just another commercial transaction. “I should be the most cursed Prime Minister that ever held office in England if I accepted those terms,” he told Baldwin. On January 30, Baldwin made a strong plea in the cabinet for accepting the deal. He admitted that the Americans could have been more generous, that they had made great fortunes out of the war, that they worshipped the “God Almighty Dollar” but this was best that Britain was going to get.

Bonar Law spoke for rejecting the American offer. He had consulted Maynard Keynes, who counseled him to hold out, arguing that Britain should refuse the American offer “in order to give them [the Americans] time to discover that they are just as completely at our mercy as we are at France’s and France at Germany’s. It is the debtor who has the last word in these cases.”

But Bonar Law was cornered—to disavow his chancellor who had so publicly endorsed the deal would create a crisis in the government. Outvoted in the cabinet, he accepted defeat, but did take the opportunity to let off steam in the traditional British manner—by writing an anonymous letter to the correspondence columns of the Times in which he vigorously attacked his own government’s decision to accede to the American terms.

Watching Britain strike such a poor bargain for itself, France chose to wait it out. It would eventually settle its war debts in 1926, when it reluctantly conceded to pay 40 cents on the dollar—even then the arrangement was not ratified by the National Assembly until 1929. Italy did even better. When it settled, also in 1926, it would only agree to pay 24 cents on the dollar. As usual Keynes had been right—holding out would have given Britain a better deal.

As the decade went on, and the Americans insisted on extracting these payments, they were shocked to discover how intensely disliked they were in Europe. Journalists sent home articles dissecting the various sources of American unpopularity under such titles as “Europe Scowls at Rich America” or “Does Europe Hate the U.S. and Why?” or even “Uncle Shylock in Europe.” One informal poll revealed that 60 percent of the French regarded the United States as their least favorite nation. The New York Times correspondent in Paris reported that “ninety out of a hundred regard Uncle Sam as selfish, as heartless, as grasping.” Visiting Britain, the veteran American foreign correspondent Frank Simonds discovered that “the great majority of the British people have made up their minds that American policy is selfish, sordid and contemptible.”

But the really pernicious effect of war debts was that they made it hard, if not impossible, for Britain to forgo collecting its own debts from France and Germany, made France all the more obstinate in its efforts to collect reparations from Germany, and led Europe into a self-defeating vicious cycle of financial claims and counterclaims.

IN December 1922, as Norman set out for Washington, the Times of London profiled him: “Mr. Montagu Collet Norman, D.S.O., the Governor of the Bank of England . . . certainly one of the most interesting, as well as one of the most able men who have occupied the Chair for a generation or more.”

“In appearance he recalls the early Victorian statesmen,” it went on, “Aristocratic in manner and temperament . . . his Shakespearian type of head sets well upon his tall, silent and dignified figure. A lover of music, poetry and books, Mr. Norman also possesses a collection of rare and beautiful woods. Many of those who come into contact with him feel that there is an indefinable touch of mystery about him. He has the keen sensitiveness of an ‘intellectual.’ ”

It was remarkable how enormous was the change that had come over Norman since August 1914. Then he had been a pathetic figure, unsure of himself and uncertain about his future, wracked by neuroses, his less than illustrious career cut short by mental illness. Now he was generally recognized as the most prominent and powerful banker in all Europe, if not the world.

From the very start of his tenure at the Bank, Norman had made a point of breaking the mold. Whereas his predecessors had been driven to work, resplendent in top hat and frock coat, he turned up in a business suit by way of the Underground—the Central Line from Notting Hill—with the ticket jauntily protruding from his hatband. His whole persona seemed to have been transformed. Almost everyone remarked on his graciousness, his courtly old-world manners, and most of all, the charm with which he was “singularly gifted.” As one of his fellow directors put it, “He never made jokes or anything of that kind. He was just amusing. A continual bubble of wit.”

In those five years, he had also acquired something of a mystique in the public mind. Before Norman, the governor of the Bank had generally been a figure of relative obscurity, known to only a few insiders within the Square Mile. But Norman’s personality seemed to exert a powerful fascination on the press, which lauded him as a financial genius of great originality. All those traits, once viewed as the harmless eccentricities of a “strange old man”—his flamboyant way of dressing, his slouch hats, his artistic interests, his knowledge of Eastern philosophy—were now invested with great significance as signs of unusual creativity. His unorthodox appearance, his air of aloof amused amiability, perhaps above all his apparent lack of interest in money, for all his place at the very center of its mysteries, all contributed to the image of austere power, half patrician, half priestly.

This aura was reinforced by his policy of avoiding public appearances. He was rarely seen at the social events of the City, never made any speeches apart from the annual Mansion House toast required by tradition of the governor, and never submitted to newspaper interviews on the record.

It was during those early years that Norman got into the habit of traveling under pseudonyms, which became so much a part of his myth and mystique. It was the high point in the era of the transatlantic liner. The Times of London and the New York Times regularly ran features listing the most notable passengers on the ocean liners scheduled to leave each week—generally extensions of the social pages heavily populated by ambassadors, film stars, and European nobility.

News that the governor of the Bank of England was traveling to the United States inevitably gave rise to rumors: a settlement of war debts was imminent! Or Britain might return to the gold standard that week! To avoid all this unfounded speculation, Norman’s secretary, Edward Skinner, began booking Norman’s passage under his own surname.

At some point in Norman’s travels across the Atlantic, plain old Skinner became Professor Clarence Skinner. The story goes—one among many—that during one such trip, a Professor Clarence Skinner, professor of applied christianity at Tufts College in Medford, Massachusetts, and a well-known Universalist who had actively campaigned to repeal the statutes prohibiting blasphemy, happened to be traveling on the same liner. The reporters, hovering at the West Side piers of Manhattan for a dockside interview, mistook Norman, with his professorial demeanor, for Professor Clarence Skinner. Norman did nothing to disabuse them of their misconception. Nor did the real professor, who, it seems, was quite

amused. The whole incident so appealed to Norman’s characteristically quirky sense of the absurd that, thereafter, he always traveled under the pseudonym, Professor Clarence Skinner. Over time, his alias was unmasked by the press. Nevertheless, he continued the practice, and talk of Professor Skinner and his travels became something of an in-joke among the cognoscenti.

Norman’s dislike of any sort of press coverage and his attempts to conceal his activities from reporters only further fed their curiosity. Even the most ordinary incidents of his daily life were magnified and nourished speculation. The results could be comic and at times absurd.

Take a typical incident in March 1923, only days after France had occupied the Ruhr: Norman had left for his annual month’s vacation in the south of France, where he generally stayed either with his half uncle at Costabelle, near Hyères, or at the Hermitage Hotel in Nice. On this occasion, he decided to stop off in Paris for a few days of meetings with his counterparts at the Banque de France. Making no attempt to keep his trip a secret, he stayed at the prominent and well-known Hôtel Crillon, on the Place de La Concorde. Nevertheless, because the Crillon had mistakenly registered him under the name Norman Montagu, the papers claimed that he was attempting to visit Paris incognito. When his valet was seen buying train tickets from a source other than the hotel’s bureau, and was rumored to have been overheard asking the concierge about trains to Berlin, a wire report speculated that Norman was preparing to travel to Germany, and furthermore was attempting single-handedly to negotiate a settlement to the problem of reparations. The story ran in half the London press, and was picked up by many American papers, including the New York Times, the Washington Post, and the Chicago Tribune. In fact, after a few days in Paris, he left for Nice as usual.

Winston Churchill, who would come to know Norman all too well for his liking over the next few years, would later portray him in the Sunday Pictorial: “Mr. Norman’s dislike of publicity in any form has enshrouded him with an air of mystery, which has led to ordinary and casual incidents of his daily life being scrutinized and magnified by the money markets of the world. . . . The more he seeks privacy, the more significant his acts become. He travels under an assumed name, and is instantly identified. He remains in seclusion in his country home, and the United States is searched to make sure that he is not there. Indeed the very process of self-effacement has proved—to his added disgust—the most subtle and effective form of advertisement. . . . It may well be that a little more plain speech . . . would have served his real purpose better than so much silence and precaution.”

Not everyone was taken by his charm or his personality. Hating arguments or direct confrontations, he got his way by going around opponents and consequently developed a reputation for subterfuge. Some people retained a suspicion that Norman’s attempts to cloak himself in mystery were simply a more subtle and sophisticated form of showmanship. Lord Vansitartt, head of the British diplomatic service between the wars, dismissed him as a “poseur.”

And while Norman’s public persona may have changed dramatically, he still carried within him many of the same private demons that had beset him before the war. He was by nature a pessimist, prone to bouts of despair, unfortunate traits in a central banker confronted with the task of nursing a crippled economy back to health. During that first grim year in office, as he struggled with a weak pound and the depths of a recession, he wrote of his “sensation of being as it were tossed about on a sea in which I can hardly swim.”

Francis Williams, then city editor of the left-wing Daily Herald, considered that though Norman was able to exert a strange fascination over the City, he was “secretive, egotistic, suspicious of intellectual ability, and almost incapable of normal human relationships.” Lord Cunliffe may have got the best measure of him when he confided that he thought Norman, “a brilliant neurotic personality [who] is certain to cause trouble. . . .” He added, “He’s not an ordinary personality. . . . He needs the power just to keep going and he won’t give it up until it’s too late.”

DURING THE EARLY 1920s, Norman would often talk of creating a league of central bankers to take responsibility for stabilizing European finances and promoting world economic recovery. No government seemed capable of doing it and he thought—a little grandiosely—that his guild could somehow fill the vacuum left by politicians. He liked to envisage himself and the other members of his small brotherhood as elite tribunes, standing above the fray of politics, national resentments, and amateur nostrums. Though Norman “delighted in appearing unconventional,” his views about society were very much “those of an old Etonian.” Still an Edwardian, he clung to the belief in aristocratic government.

In March 1922, he wrote to Strong in that elliptical way of his, “Only lately have the countries of the world started to clear up after the war, two years having been wasted in building castles in the air and pulling them down again. Such is the way of democracies it seems, though a ‘few aristocrats’ in all countries realized from the start what must be the inevitable result of hastily conceived remedies for such serious ills.” He obviously thought that the “few aristocrats” were bankers like himself.

At this stage, though, he was the one building castles in the air. His notion that the world’s central bankers would not be subject to the same nationalistic pressures to which politicians were also responding was curiously naive. His vision of a league of the lords of world finance was at this stage largely a pipe dream. He could not even get Strong to support him fully. After the Genoa Economic Conference of 1922, he floated the idea of a grand conclave of central bankers. But Strong resisted the idea, fearing that the United States, as the world’s major creditor, would be ambushed by a concert of its European debtors, all clamoring for America with its vast gold reserves to refloat them. As he wrote to Norman, “Anything in the nature of a league or alliance, with world conditions as they are, is necessarily filled with peril.” It would, he feared, be like “handing a blank check to some of the impoverished nations of the world, or to their banks of issue, and especially to those whose finances are in complete disorder and quite beyond control.”

By 1923, Norman’s club consisted essentially of himself and Strong, commiserating with each other over their respective health problems and the economic anarchy that seemed to surround them. Their friendship, however, had blossomed.

After Norman’s three trips to the United States in 1921 and 1922, they did not see each other again for almost eighteen months. Falling ill once more, Strong had to take a leave of absence for most of 1923. Thereafter, they agreed to meet at least twice a year, alternating generally between Europe in the summer and New York in the winter. They wrote to each other every few weeks—a combination of financial gossip and views about economic policy. Despite their closeness, they usually addressed each other, in the quaintly formal style of the day, as “Dear Strong” or “Dear Norman,” although letting their hair down on occasion with “Dear Strongy,” “Dear Old Man,” or “Dear old [sic] Monty.” They furnished each other with advice, often revealing confidential details to which even their own colleagues were not privy. Occasionally they scolded each other. When Norman operated too much on his own and failed to consult his own directors, Strong admonished him, “You are a dear queer old duck and one of my duties seems to be to lecture you now and then.”

It was not all about work. They often ribbed each other affectionately. On one occasion, Norman, who had just returned from a visit to Strong in New York and discovered that he had packed one of Strong’s jackets by mistake, wrote:Dear Ben,

Since I wrote on the steamer, a further crime has been discovered. The second evening I was home, as usual I changed clothes in the evening and on going downstairs discovered myself in the disguise of a gentleman, if not a dude! This was due to velvet jacket of good style, fit and finish: In other words, Ben, I can only look respectable with the help of your wardrobe!

At times, they sounded like a couple of harmless old bachelors who took great pleasure in joshing each other—whether over an oil portrait of Strong upon which Norman had stumbled in the pages of Town and Country , or Norman’s irritability when Thorpe Lodge was under repair, or his engagement with the philosophy of Spinoza.