A Bunch of Old Bankers and Life with a Beach.

The City of London is full of old bankers. When I started working for the Bank of England in the early 1980s, I remember encountering a string of names that sounded Dickensian, or at least from an earlier century--Schroders; Rothschilds; Warburgs; Baring Brothers; Singer and Friedlander; J. Henry Schroder Wagg; Morgan, Grenfell. Like the bespoke tailors of Jermyn Street, The City had "bespoke" banks, especially what were called "merchant banks" as the names listed represented. Many regard these banks as the original banks, which put themselves in place to provide credit and insurance. Many had their origins with medieval Jewish traders, especially in grain trading. In the UK, they had a special function by acceptance and guarantee of "bills of exchange", thereby facilitating the lending of money, as these bills could then be "discounted" or resold, at the best prices offered by the central bank (Bank of England). A select group of these banks were aptly named "Accepting Houses", and their committee members were amongst the most respected and revered pillars of the English banking system. They were the "good names", because they could be relied upon to handle money safely and were trusted in transactions, and that led to expressions like "putting your good name" behind something.

I was offered a job with one of these banks, but declined, yet rubbed shoulders with such institutions and their employees for several years, and know of their revered status. They sponsored me at an early stage in my career, putting me on the "super highway" of finance.

But times change. Many of these names are no longer known in their original form. Some banks folded, such as Barings: founded in the 1760s and famed as the oldest bank in England, with historic influence in the "Louisiana Purchase" in 1802; the bank got into serious trouble through overexposure to Argentine and Uruguayan debt, and the bank had to be rescued by a consortium organized by the Governor of the Bank of England in the "Panic of 1890"--yes, financial crises recur). The bank collapsed in 1995 after one of the bank's employees, Nick Leeson, lost £827 million (about US$1.4 billion) speculating primarily on futures contracts. Some banks have been merged--for example, Morgan, Grenfell (originally founded in the 1850s by some of the Morgans of J.P. Morgan bank, but taken over by Germany's Deutsche Bank in 1990).

Singer and Friedlander was a City merchant bank, founded in 1907. Apart from their general banking name they are famed as the former employers of the almost-legendary currency speculator, George Soros. However, in 2005 they were taken over by Iceland's largest bank, Kaupthing. Two days ago, Kaupthing, went kaput, and the Icelandic government had to nationalize it and the other top two banks in Iceland (see report). Iceland is an island with a population of 300,000, and that link with Barbados is just one in what may turn out to be an interesting tale.

The collapse of Iceland's banking sector this week should have come as no surpise because months ago they were flagged as top of the "riskiness" league (see report). The nationalisation of the top three banks has already had major repercussions outside Iceland (see report), and the repercussions will be financial and diplomatic. Kaupthing is pointing the finger of blame at the British Government/Treasury for their collapse (see report), after the Treasury used anti-terrorist laws to seize the British arm of the bank on October 7 (see report) because it could not honour its obligations to customers, and transferred deposits to ING Direct (a Dutch bank). The UK Chancellor of the Exchequer, Alistair Darling, was being no one's darling with that move. Many English local governments held deposits with the Kaupthing Singer & Friedlander subsidiary (see report), and the list reads like an electoral roll of England's county, city, and borough councils (see report). The UK government did not allow Kaupthing to participate in this week's announced £500 billion bailout plan. This was limited to the so-called "clearing banks" (Barclays, HBOS or Lloyds TSB); but Kaupthing-Singer & Friedlander is reportedly the 12th largest bank in the UK. While the financial dust settles and the 30,000 shareholders of Kaupthing, many of whom are British, wonder what will happen, the Prime Ministers of Britain (Gordon Brown) and Iceland (Mr. Geir Haarde) are saying nasty things to each other. The wags in the crowd will have fun with this episode for at least a few days. How Gordon browned off and put the freeze on the Icelanders. Who's Haarde now? Skip to me my Darling.

All this has to come back to Barbados, right. The former Kaupthing Singer & Friedlander was heavy into providing Internet banking for British expatriates: bank from anywhere, baby. They were also involved in Caribbean property development (see website): "Kaupthing Singer & Friedlander Ltd provides property finance to enable our clients to undertake development projects in certain select locations."We are currently financing projects in the Caribbean...The level of funding we are willing to undertake ranges from £7.5m to £50m." The website indicates Kaupthing Singer & Friedlander have financed 15 transactions in the past 4 years with a total funding requirement in excess of US$250m. These included the Sandy Cove project, in St. James (see website and picture to tempt you). I know from anecdotal contact that the banking relations in property deals goes wider.

So, here's the rub, no one can say that the financial turmoil will not touch far from its origins. The problem is knowing where the tentacles have stretched and if the body is damaged whether those in the grip of the tentacles will be squeezed and die with it. Gruesome imagery, perhaps, for the weekend.