Treasure Islands - Nicholas Shaxson [148]
23.Martin Wolf, “This Time Will Never Be Different,” Financial Times, September 28, 2009.
24.“Capital Inflows: The Role of Controls,” IMF Staff Position Note, February 19, 2010.
CHAPTER 4 THE GREAT ESCAPE
1.Catherine R. Schenk, “The Origins of the Eurodollar Market in London: 1955–1963,” Explorations in Economic History 35, no. 2 (1998): 221–238.
2.Ibid., p. 225.
3.Ibid., p. 227.
4.Anthony Sampson, Who Runs This Place?: The Anatomy of Britain in the 21st Century (London: John Murray, 2005), p. 246.
5.David Kynaston, The City of London Volume IV: A Club No More 1945–2000 (London: Pimlico, 2002), p. 54.
6.Ibid.
7.U.S. banks had started expanding overseas after the First World War but mostly in Latin America and Asia, and in the 1950s their presence was still hardly discernible in London.
8.E. A. McCreary, The Americanization of Europe: The Impact of Americans and American Business on the Uncommon Market (1964), quoted in Stefano Battilosi and Youssef Cassis, European Banks and the American Challenge: Competition and Cooperation in International Banking under Bretton Woods (Oxford: OUP, 2002).
9.Until then, London’s role as a financial center had been based primarily on the British Imperial currency zone, whose member countries banked in London and whose nations used the pound sterling as their currency or pegged their currencies to the pound. Inside the zone trade and capital could flow quite freely, but flows in and out of the area were closely controlled. The pound sterling still financed about 40 percent of world trade, and the Bank of England wanted it to stay that way. See Gary Burn, The Reemergence of Global Finance (New York: Palgrave, 2006), p. 26.
10.These terms are a bit of a misnomer today: They are neither named after today’s euro currency nor are they a creature only of American dollars. All the world’s main currencies are traded in this stateless unregulated space today.
11.“With the creation of the Euromarket,” wrote Helleiner, “bankers in both countries stumbled on a solution to the problem of how to reconstruct the London-New York financial axis that had been prominent in the 1920s.” Helleiner, States and the Reemergence of Global Finance, p. 89.
12.P. J. Cain and A. G. Hopkins, British Imperialism: Crisis and Deconstruction 1914–1990 (London: Longman, 1993), p. 293.
13.Quoted in Kynaston, The City of London Volume IV, pp. 696–97.
14.Ibid., p. 697.
15.See “Linklaters Sees Fallout from Repo 105,” Financial Times, March 13, 2010; and “Report of Anton R. Valukas, Examiner,” Southern District Court, Jenner & Block LLP, vol. 3 of 9, March 11, 2010. The loophole was neither purely a UK matter nor a U.S. matter but derived from arbitrage between the two jurisdictions. See “FSA on Defensive over Lehman Failings,” Financial Times, March 18, 2010.
16.In this process an investment bank, say, lends money to a hedge fund, and the hedge fund posts collateral against that loan, but then the investment bank is allowed to reuse this collateral for its own business, as if it were its own collateral.
17.See Manmohan Singh and James Aitken, “The (Sizable) Role of Rehypothecation in the Shadow Banking System,” IMF Working Paper WP/10/172, IMF, July 2010. See also Gillian Tett, “Web of Shadow Banking Must Be Unravelled,” Financial Times, August 12, 2010. If you take this practice into account, the IMF reckoned, then the shadow banking system in the United States—the giant, unregulated financial marketplace that lay at the heart of the global financial catastrophes that erupted from 2007—was in fact a full 50 percent bigger than had previously been thought. The IMF concluded that “the United Kingdom provides a platform for higher leveraging not available in the United States.”
18.“Energy Market Manipulation and Federal Enforcement Regimes,” Michael Greenberger Testimony to U.S. Senate Committee, June 3, 2008, http://commerce.senate.gov/public/_files/IMGJune3Testimony0.pdf.
19.Michael Foot, “Final Report of the Independent Review of British Offshore Financial Centres,” HM Treasury (UK),