There was poetic symmetry in a move by Parliament to outlaw the English gentleman's sport of fox hunting last week just as authorities hunted down the fugitive who reputedly outfoxed the ultimate English gentleman's bank.
These otherwise unrelated events provided a sterling reminder of how, despite the leveling effects of two world wars, the issue of class still thoroughly permeates British life, from country sports to the City--London's equivalent of Wall Street.
When it was discovered that 28-year-old Nicholas W. Leeson had brought down the 2-centuries-old Barings Bank with $1.4 billion in trading losses, newspapers zeroed in on the "Humble Origins of Man Who Toppled Aristocrats." That is what the Independent newspaper here wrote under a picture of a garbage-strewn back yard in the public housing project where Leeson grew up and a 1920s portrait of four gentlemen in the Barings boardroom.
Stunned by his family bank's sudden ruin, Chairman Peter Baring suggested to the Financial Times newspaper that Leeson had deliberately set out to wreck the bank, which counts Queen Elizabeth II and the Church of England among its clients, and to profit from its demise.
Leeson's 18-year-old sister, Sarah, responded in suburban Watford's newspaper that the banking Establishment was "playing on his background, making him the scapegoat because of his upbringing."
By week's end, the Times of London agreed that the case had pitted the "vulgar and arrogant" lad against the elegant brass of Barings, "with their royal connections, their rounded vowels and their hints of moral inferiority in the lower social ranks."
In fact, the blueblood world of banking has long been infiltrated by the so-called lower social ranks of outsiders and self-made men--much as fox hunting has been taken up by mere professionals--and their class background seems to be an issue only when they fail.
During the years Leeson was earning a fortune for Barings, he was an admired risk-taker in the banking world, a successful maestro of the global financial markets.
Bad bets turned him into a gambling "barrow boy," the upper crust's word for a worker in the market stalls.
"If his big trades had worked out," City historian Andrew St. George said wryly, "it wouldn't have been interpreted as an attack on the aristocracy."
By some measures, the Barings themselves could be considered Johnny-come-latelys to a British nobility that traces its roots to William the Conqueror.
The British Baring family was founded by a German Lutheran who made his way north from Bremen in 1717 and whose son, John, formed the Baring Bros. merchant bank 45 years later.
They were soon joined in the financial world by a German Jewish family, the Rothschilds.
Nathan Rothschild, who moved to England in 1799, founded N. M. Rothschild & Sons, which quickly became one of Barings' biggest competitors.
The families were "both immigrants," said St. George. They arrived with some money of their own and set about handling the dirty work of finance and commerce for the "landed interests who were here already with money to invest in projects around the empire."
As merchant bankers, they made loans to big business and governments, netting great fortunes for themselves and for the British Empire.
The Barings helped the British government fund the Napoleonic Wars and financed the United States' Louisiana Purchase, while the Rothschilds came up with an eleventh-hour loan for Britain to buy the Suez Canal.
With their growing wealth, the Barings collected a string of peerages, or noble titles, throughout the 19th Century.
Nathan Rothschild's son, Lionel, became the first Jewish member of Parliament in 1858 as members of the Baring family became colonial rulers in Egypt, India and Kenya.
A century after their landing in England, the Duc de Richelieu called the Baring family "the sixth great power of Europe."
In effect, English merchant banking has always been open to a newcomer with a good idea, St. George said. Such a man nearly broke Barings once before, in 1890.
The Barings were investing heavily in South America and doing well until "an American quack," as St. George calls him, lured them into jointly financing a waterworks company in Argentina and the multimillion-dollar deal went bust.
The British banking community, including the Rothschilds, the Hambros (another "immigrant" family, from Denmark) and the Bank of England, closed ranks to bail them out--something it could not do this time.
Barings remained a traditional merchant bank, relying on traditional business and old-boy ties for much of the 20th Century, until Prime Minister Margaret Thatcher's "Big Bang" in 1986--the dramatic deregulation of banking that allowed mergers among banks, brokerage houses and other financial institutions.
Unlike other small and mid-size banks, Barings did not seek a merger with larger banks or try to become a Jack-of-all-trades. But it did move into the Far East and, when Peter Baring took over in 1989, into high-risk, potentially high-yield futures trading.
The British press has duly noted that Baring had 200 years of banking in his blood, a Cambridge education and a love of hunting--all the right stuff to manage his family's marble-interiored bank.
Barings needed new talent for the rough-and-tumble futures market. For that, management turned to a new generation of macho, nervy traders, quick-on-their-toes people like Leeson with a different attitude toward money: They didn't have it, and they wanted it.
Leeson is the son of a plasterer (father Leeson has a "stomach hanging out of his shirt," sniffs the Daily Telegraph). He failed math in school but went on to become a financial whiz on the Singapore exchange.
In the press, he is the church rat who made his way to the altar to scarf communion wafers. He lived in a fancy, company-paid apartment, drove an expensive company car, earned a salary of more than $300,000 a year plus million-dollar bonuses--and broke the bank. Then, he had the bad taste to appear in the custody of German police wearing a baseball cap and carrying a Tom Clancy paperback.
The class issue was not lost on British newspaper readers, especially workers disinclined to shed a tear over a fallen bank.
"I don't like all this innuendo that, if you come from the working class, you're likely to steal," said Cornelius Kennedy, a taxi driver for the past 20 years. "We know he wasn't there because they liked him or because he's one of them. He made them a lot of money."
That he did, at first.
In 1992, Barings put Leeson in charge of its futures-trading operation on the Singapore International Monetary Exchange, where he dived into the growing derivatives market, betting on the movement of the Nikkei index, which monitors the Japanese stock exchange.
Baring Futures made more than $14 million in Singapore in 1993, eight times the profit of the previous year. And 1994 was going to be even better, since Leeson's operation made more than $32 million in profit in the first half--a third of total profit for the period.
But Barings also let Leeson settle his own accounts, a nearly unheard-of practice.
In Singapore, Leeson's colleagues admired his energy and fearless betting. But the figures implied that large sums of Barings money were being committed to the Singapore operation, and an internal audit was ordered to make sure everything was under control.
It wasn't. Last August, the auditor reported minimal controls over Leeson's operation and "a significant general risk" that Leeson could override the few that existed.
The findings were discussed at a meeting of Peter Baring's board in London, but they were ignored, reportedly because the Singapore operation was making so much money with those newfangled financial instruments.
By the end of the year, Leeson was getting into trouble, overcommitting Barings on the Nikkei, forecasting that shares would rise when, in fact, they fell.
The volume of his trading was enormous--about $7 billion--and set off rumors around Asia about just what the conservative bank was up to.
Barings in London sent about $650 million to Singapore between mid-January and the end of February, according to press reports, that was used to cover Leeson's "margin calls," or payments on his bets, and for new transactions. But it was not enough. The bank went bust, and Leeson fled.
As in 1890, the banking world tried to rally behind Barings, one of its own.
Britain's top banks met to put together a rescue package, but in the end the damage was too great. Barings was still bleeding cash, and its directors were dangerously out of touch, still looking for money to pay $160 million in bonuses when the whole ship was about to go down.
It is still unclear on what terms Barings authorized the transfers.
The bank says Leeson set up false client accounts to persuade the home office to finance him, while Leeson reportedly has told friends that his superiors knew and approved of his deals.
Over the weekend, the government of Singapore revealed that management had received and ignored yet another internal warning, this one as early as 1992.
"My concern," wrote a manager from Singapore just before Leeson arrived, "is that once again we are in danger of setting up a structure which will subsequently prove disastrous and with which we will succeed in losing a lot of money or client goodwill or probably both."
These revelations have led many in the banking world and even, finally, in the press to ask whether Leeson was really a lone rogue from the wrong side of the tracks. Was there a conspiracy of upper-class mismanagement that allowed him to gamble away so much money, or even an attempt to help him win it back?
In other words, was Peter Baring really dumb to all that was going on? Or is the old aristocrat dumb like a fox?