October 2008: 'Testing Times' for Financiers - BBC Interviews Evelyn de Rothschild - Ethics in the Financial World? - Failures of Leadership

 

BBC News: But now on to matters of the economy – not just here, but in America. All eyes are on Washington as the amended version of the Bush Administration's bank rescue plan is put to another vote in the House of Representatives tomorrow. Financial markets around the world have been waiting on the bill with bated breath this past few days; and these are very testing times for financiers. Joining us is one of the City's most experienced and most respected bankers, Sir Evelyn de Rothschild: he's chairman of the investment company E.L. Rothschild, and ran the merchant bank N.M. Rothschild for more than twenty years. Thank you very much indeed for joining us.

Evelyn de Rothschild: Thank you.

BBC News: If this bill doesn't go through, even now, what is your thought about the results of that?

Evelyn de Rothschild: I think it's pretty certain it will go through: because the Senate, being the senior house – although perhaps the House of Representatives doesn't like that thought – has put quite a lot of pressure. And I'd be very surprised if it doesn't go through; but obviously if it doesn't go through, we have a[n] impasse which is very serious. And what does that mean? I think we have to learn.

BBC News: You've been around in senior position in the City for a very very long time indeed. Do you think what we're looking at here is not just a failure of sort of technical matters, but a change in the way people do business, in the way that ethics work in the financial world?

Evelyn de Rothschild: Well, I wrote about this some time ago – and I think that it is right. I think what's happened is that the expansion of financial world is huge. If you look back over fifty years, there was only probably about fifty banks in the world. Today it's not just banks: it's financial instruments. And if you do not regulate them, and you let everyone do what they want to do, then you're bound to get sometimes trouble which ensues. And that is what's happened.

BBC News: Big City bonuses played their part?

Evelyn de Rothschild: Well, of course that's the first thing they look at; that is something which I believe that the shareholders should have a much bigger say. I don't think shareholders have been asked before the bonuses have gone out, in many cases. I also think the other thing which is very very serious is a lot of directors – not just of banks, but of financial institutions – didn't understand some of the instruments which were being used for financing. And you saw that in the submortgage scandal in America.

BBC News: Forgive me: you're got a few grey hairs, and so have I: so we remember recessions and problems before. Is it not important that there be experienced people at the top of these institutions? In other words, has there been some failures of leadership?

Evelyn de Rothschild: Oh, absolutely. I mean you've seen that in America: you saw that with Lehman Brothers; you saw that with Bear Stearns; you saw it with numbers. I mean, I think it's very easy to criticise and jump on people who haven't shown leadership; but I think it's also the system has not kept up with the pace. If I may say, I'm not sure – do you have a Blackberry under the table?

BBC News: I don't; but most people do.

Evelyn de Rothschild: But you see, that itself, if you remember the number of people today who talk through a machine, a Blackberry, or an Internet – and everything has got to be done in such speed. Do you people really think through what they're doing before they do it? That's one of the big questions. And supervision has not been up to scratch. And if you have regulation, you've got to have supervisors. And supervisors have got to be well paid: they've got to be just as well paid in many ways as the bankers they are supervising.

BBC News: Unfortunately, we don't have a lot of time for this. We're very grateful to you indeed – 

Evelyn de Rothschild: Oh.

BBC News: – for sharing your thoughts. Sir Evelyn de Rothschild, thank you.

Evelyn de Rothschild: Always nice to see you.

BBC News: Thank you very much indeed.

Evelyn de Rothschild: Thank you.

BBC News: Thank you. Hm hm. Well, people do get up and leave the studio from time to time: we don't mind that at all.