Book Review: Lords of Finance

When you hear the name George Harrison, if you’d rather have someone other than a musician be the first person who comes to mind (thinking instead of the head of the Federal Reserve Bank of New York), I have a book recommendation for you. A short review of a book I finished a few months ago but finally got around to writing about: Lords of Finance, The Bankers Who Broke the World, by Liaquat Ahamed.

Great read. Pulitzer Prize Winner. The stories of the 4 men who led the central banks of the U.S. (Benjamin Strong mostly, then Harrison), England (Montagu Norman), Germany (Hjalmar Schacht) and France (Emile Moreau) as the countries tried to reconstruct the world economy after WWI, considered the Dawes Plan and eventually moved from the gold standard. Essentially the decade or so before the Great Depression began. It goes so far beyond the basics everyone learns about reparations/reconstruction, the Depression, interest rates, the international monetary system, inflation, and the role of the central banks. The book is particularly interesting to read now in light of the current global economic climate and the wealth of misunderstanding of history that abounds.  It works both to reassure me that the alarmists have no real concept of what "bad" is, but it also scares me that things are setting up similarly to the alignment that led to Hitler's rise.  If any of that doesn't sound interesting, it's my fault – the book is anything but boring!

This book was a compelling read. There was so much extraneous detail that the characters came to life and it didn’t feel like a dry economic history text. Here’s one example, about the 1927 meeting of the 4 big central bankers:

“Norman dominated the proceedings, seated at one end of the conference room in a fan-backed oriental chair. In spite of the warm weather, he insisted on wearing his velvet-collared cape, which only added to the picturesque figure he evoked. He made it clear that his gold reserves were critically low. Any further erosion would force him to put up rates. The link between the pound and gold was seriously in peril.” Hahahahaha! Suck it, Bank of England!  There are later references in the book too to Norman wearing his cloak, like when he was questioned by the select committee in 1930 and was described by Keynes as looking like "an artist, sitting with his cloak round him hunched up, saying, 'I can't remember,' thus evading all questions."]

That’s just a taste. The best way to show some of the detail that makes the book so captivating may be to share a few paragraphs. I tried to pick a couple themes: facial hair and homosexuality.

I looooooved the facial hair comments.

“As the stresses of raising money for the war mounted, tensions between the Bank and the government escalated, finally coming to a head in 1917. The governor was then Walter Cunliffe, a tall barrel-chested, John Bull sort of character who sported an imposing walrus mustache, was a renowned big game hunter, and looked more like a gentleman farmer than a City grandee. Over the years, he had become increasingly autocratic and erratic in his judgments and had developed an exaggerated sense of his own importance as the governor to the point of insisting that his status required him to deal with the government through the prime minister alone, not even through the chancellor of the exchequer.”

[The walrus comes out again later -- when Schacht is tried by the Americans at Nuremberg, he is described as glaring "like an angry walrus" throughout the proceedings.  Do walruses glare?  I guess I haven't spent enough time in that part of the zoo...]

“Few people were surprised that with this sort of pedigree, Montagu Norman should end up at the Bank. Nevertheless, when he joined in 1915, he had had only a short and not particularly illustrious career as a merchant banker and was not very well known in the City.” Wait for it, here comes perhaps my favorite line of the ENTIRE BOOK: “In his first few weeks, Lord Cunliffe, then governor, was heard to remark, ‘There goes that queer-looking fish with the ginger beard again. Do you know who he is? I keep seeing him creep about this place like a lost soul with nothing better to do.’”

I love it! The queer-looking fish with the ginger beard. The descriptions made these figures from the past come alive again!

And just to make it into a nice, even facial hair trilogy, here’s another gem:

“Von Havenstein, a lawyer by training, did not have the same background but was universally acknowledged to be one of the most dedicated, upstanding, and loyal officials in the entire Reich. With his piercing eyes, long and luxuriant, well-waxed whiskers, and pointed beard, he looked like the impresario of a Victorian music hall.”

And it goes beyond facial hair to actual head-placement:

“‘In appearance [Norman] recalls the early Victorian statesman,’ it went on, ‘Aristocratic in manner and temperament … his Shakesperian type of head sets well upon his tall, silent and dignified figure.”

And there are several pince-nez references, a sure sign of a good book!

“Looking ‘grave’ and ‘gesturing idly with his pince-nez as he spoke,’ he began by announcing, ‘There has been a little distress selling on the Stock Exchange.’” [Keep in mind, this was on Oct. 23, 1929!]

“Tardieu, with his bejeweled pince-nez and his gold cigarette holder, his boulevardier taste in silk hats and fancy waist-coats, his fondness for raffish company, his involvement before the age of thirty-five in at least two financial scandals, was the embodiment of all that the British despised about French politicians.”

Besides the vivid facial hair descriptions, there also may have been an underlying current of homosexuality, or at least my husband thought so (I enjoyed this book enough that I got him to read it). A few examples:

“On the stormy Atlantic crossing, which took twice as long as normal because of rough seas, gale-force winds, and fog, Baldwin and Norman became fast friends. Norman was usually suspicious of politicians, claiming somewhat disingenuously to have no political views himself – he bragged that he had never voted. The stolid uncharismatic Baldwin was the quintessential nonpolitician. They would remain lifelong friends, sharing a common taste for the pleasures of silence, of country walks and string quartets.”

“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.’”

“Strong and Norman in particular spent hours ‘closeted together.’”

“They [Strong and Norman] 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!’”

Oh, one more: "A small, sallow, birdlike man with a close-cropped mustache, Hatry was so flamboyant it was said the he even had the bottoms of his shoes polished."
“While the American delegates [to the World Economic Conference in 1933] may not have matched these luminaries in prestige, they made up for it in colorfulness, Senator Pittman [Nevada] in particular providing great fodder for scandalmongers. At an official reception at Windsor Castle, he broke with all social convention by wearing his raincoat and a pair of bright yellow bulbous-toed shoes while being presented to King George V and Queen Mary, greeting them with the salutation, ‘King, I’m glad to meet you. And you too Queen.’ He was usually drunk but even then amazed everyone by his ability to spit tobacco juice into a spittoon from a great distance with remarkable accuracy. One night he was discovered by floor waiters at Claridges sitting stark naked in the sink of the hotel pantry, pretending to be a statue in a fountain. Another night, he amused himself by shooting out the streetlamps on Upper Brook Street with his pistol.”

I don’t think any of them were actually gay, and there were better examples in the book that might suggest that they were, but I can’t remember them, but it was just a different era. Well, some were gay, like WAlter Funk, who replaced Schacht under Hitler as minister of the economy -- he was "an alcoholic homosexual."  Anyway, I think it's just that the drama of the time was high. One of my fave examples:

“The leader of the French delegation, Prime Minister Herriot, by background a historian more at home in the Left Bank literary salons of Paris than laboring over financial minutiae in a conference room, came to the negotiating table radically unprepared and found himself outfoxed at every turn. A passionate and emotional intellectual, he injected a certain operatic quality into the proceedings by more than once publicly bursting into tears of frustration.” Can you imagine being in that meeting to negotiate the Dawes Plan??!! Awkward! “At one point, Herriot and his minister of war, General Charles Nollet, got into such a long altercation at an evening meeting at 10 Downing Street that MacDonald [PM] declared an adjournment and went to bed. Even then, the two Frenchmen continued to harangue each other as they left the building, and stood screaming insults at each other in the middle of Downing Street.” That, I can imagine.

The book isn't all just descriptive details, there are also lots of analogies:

"For some reason Nomran thought the Fed could pierce the bubble with a surgical incision that would bring it back to earth without harming the economy.  It was a completely absurd idea.  Monetary policy does not work like a scalpel but more like a sledgehammer." 

But really, the detail just makes the book more fun to read. The events themselves are captivating. Reading about the standoff between Hoover and Roosevelt as to who would be the one to close the banks. The drama of abandoning the gold standard: “As his friend Baldwin put it indelicately, ‘Going off the gold standard was for [Norman] as though a daughter should lose her virginity.’” How’s that for a hook?!!

Either way, whether historical economics is a subject in which you already feel well-versed, or whether you know that you don’t know enough about it, I highly recommend this book. Those Pulitzer Prize voters know what they’re doing! When you add in things like the dances being done by “the bright young things who set the pace for London society,” “the jog-trot, the vampire, the camel-walk, the shimmy, and most infamous of all, the Charleston,” it’s a book that is a joy to read.