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and they were not allowed to lend against deposits in foreign currencies. Midland Bank was apparently contravening UK exchange controls by taking U.S. dollar deposits that were not related to its commercial transactions, and it was also offering interest rates on these dollar deposits that were substantially higher than those permitted by U.S. regulations. A Bank of England official called in Midland’s chief foreign manager for a chat, to ask why the bank was contravening official controls. Afterward he noted down that the Midland official “appreciates that a warning light has been shown.”2 Luckily for Midland, though, Britain was struggling to shore up its shaky foreign exchange reserves, and the Bank was reluctant to snuff out a new area of international business. “We would be wise, I believe, not to press the Midland any further,” the Bank concluded.3

Regulation in the City of London in those days typically consisted of your being invited to the Bank of England for tea, where an eyebrow would be raised in your direction if you were out of line. The tradition in London then, as today, was to rely heavily on self-regulation by financial firms, in stark contrast to the United States and its regulatory authorities’ far more activist, rules-based approach. The City of London proceeded along the lines of a grand British Old Boys network, bound by elaborate rule and ritual. Discount brokers would wear top hats, and every evening in the rush hour a platoon of guardsmen would troop through the City in scarlet tunics and bearskins. “A banker could show his disapproval of sharp practice by crossing the road,” wrote Anthony Sampson in the 2005 edition of his book Anatomy of Britain. “Behind all the conventions lay the assumption of a club based on common values and integrity. It was a club which could easily work against the interests of the public or outside shareholders, through insider trading and secret deals; and it was based on cartels which could exclude competitors and newcomers. But it was also quite effective.”4 A firm handshake and membership in the right kind of club was often enough to secure a man’s credit.

As in the United States, however, finance was still relatively closely tethered, at least when compared to today, and the City of London was deep in a slumber. “By Thursday afternoon at four,” one U.S. banker remembered, “one of the senior partners would come across to the juniors and say, ‘Why are we all still here? It’s almost the weekend.’”5 Oliver Franks, a chairman of Lloyds Bank, compared it to driving a powerful car at 20 miles per hour. “The banks were anaesthetised,” Franks said. “It was a kind of dream life.”6 American banks overseas were similarly quiescent.7 For much of the time since the turn of the twentieth century they had been, as one account describes them, “courtesy stations where rich aunts could get their checks cashed or have a trust officer keep an eye on investments. Their nephews and nieces on short European tours used the bank, and so did a few vacationing businessmen.”8 Ambitious U.S. business school graduates would prefer cutting-edge manufacturing jobs than stodgy, old-fashioned banking.

It is hard to imagine those days now: an era when international bankers took a backseat and fumed impotently at politicians’ mighty powers. Those few years after the Second World War were, in fact, the only time in several hundred years when politicians had any real control over the banking sector in Britain. And with Midland’s funny trades from 1955, and the Bank of England’s decision not to interfere to stop it, that control began to unravel.

Just then, Britain’s formal empire was starting to crumble too. India had secured independence in 1947, communist guerrillas were attacking British colonialists in Malaya, Egypt had broken free, civil war was breaking out in Sudan, and Ghana was preparing for independence. In July 1956, just over a year after the Bank started noticing Midland’s funny trades, Egyptian president Gamal Abdel Nasser nationalized the Suez Canal. Britain and France, trying to adjust