“How is it going?” I asked an old friend from the markets over lunch recently. “You know, Curtains and Tigers,” he replied, cryptically.

I knew what he meant.

Back in 2008 – after Lehman, but before TARP – during the crazy few weeks in which we all felt that the world was on the precipice, I attended a meeting. I can’t quite recall the exact topic, but it was something to do with planning a video to introduce new graduates to the bank.  If you are reading this and work in a big institution, it might not entirely surprise you that such trivial meetings were still being scheduled during the mayhem – you will know that the inertia of routine is a powerful force.

I confess that I was not at my most attentive, sneaking glances at my Blackberry [1] at regular intervals to scan the markets and to check whether a mail would arrive announcing an emergency that needed my immediate attention.

The chairperson eventually called me out on this rude behaviour and wanted an explanation. “To be honest,” I told her, “being here is like being asked to choose new curtain fabric while being mauled by a tiger. I’m a little distracted”. Many attendees laughed nervously; afterwards, word of ‘curtains and tigers’ spread.

So why was my friend using the same expression now, ten years after the crisis?

“These days it’s the threat of jail,” he told me. “It’s terribly difficult to get anyone to focus full time on servicing customers or making money. The moment that anyone sees anything in the long grass that looks like a pair of ears. Boom! Down tools and make sure we have a procedure.”

When I had got over my surprise that maximising shareholder wealth has slipped into the ‘choosing curtain material’ category, I began to see his point.

Nobody likes the thought of being prosecuted and jailed. It’s a terrifying prospect for the middle-class professionals who constitute the backbone of a bank’s workforce. Prioritizing the avoidance of such an outcome is entirely rational.

In the past, the offenses needed to get you jailed were pretty bloody egregious and easy to avoid being caught up in. Take, for example, the case of Nick Leeson who famously brought down Baring Brothers in 1995 and was then sentenced to six and half years in Changi. Q: How should you conduct yourself to dodge that bullet? A: Don’t hide billions of dollars of equity trades from your management and lie through your teeth about it for years. Easy.

But the wave of prosecutions that is now hitting the press is different. While some involve activities that I think a majority of traders would consider to be wrong (and probably would have thought so even in the old days), others inhabit a dangerous grey area. The long grass hides the shape of the prowling tiger.

And while I am not going to comment on the wisdom or justice of all these cases (I have my view, of course, but I am a little too close to a couple of them) one thing about the stories is notable: they tend to feature middle managers. Senior trading MDs, desk heads – the layer of well paid people one or two rungs below the Board. No CEOS, no CFOs, no COOs; but also few VPs either.

Why? In my view, it’s a natural result of the legal process. Prosecutors need evidence: they need phone calls; they need emails. It helps if they can tie wrongdoing to a particular deal or chat room. Human beings like a story and juries are human.

But CEOs are insulated from ‘the particular’ by the nature of their jobs. They don’t sit in chat rooms all day (or if they do, I’d be surprised). They don’t design or execute deals. This insulation has its negative consequences – one of them being that most CEOs haven’t got a damn clue what is happening in their bank – but a positive one for them is that they can’t be easily tied to a crime.

So why no real juniors?   Once again it comes down to the legal process. First off, prosecutors don’t want to waste their time putting some hapless 25-year-old in jail. Prosecutions are complex and time consuming and prosecutors like to get some bang for their buck – they are humans with career ambitions too.

Then there’s ‘flipping’ – the process by which junior participants in an alleged crime are ‘encouraged’ by the promise of non-prosecution to give evidence against their seniors. If you’ve seen Godfather 2 you’ll have seen it dramatised. The idea is to go from the bottom up and catch the biggest fish you can. In the case of banking, that appears to be middle-ranking MDs – senior enough to be worthy targets, but with no opportunity of their own to point their fingers at the higher-ups in their chain of command.

The problem for banks, of course, is that middle ranking MDs are pretty much vital to the smooth running of the institution. Like Captains or Lieutenants in an army, they are the glue between the squaddies and the Generals. They set the tone on the ground. If they are worried and looking over their shoulders at every opportunity, your army (your bank) will be – at best – more defensively minded than if they were not.

And most banks have made the problem more acute by their enthusiastic introduction of the practice of tick box controls (‘Do you certify that you have checked your underlings’ expense claims for this month? Yes/No’) – a procedure that, while it’s admittedly wholly rational from the bank’s perspective, isolates and pressurizes middle-ranking MDs while fulfilling its goal of immunising the institution from legal claims. The tiger of prosecution sharpens its claws on the scratching post of computerised control.

So there we have it: the web of reasons that the people who make up the vital ‘glue’ in a number of banks seem to be spending more and more of their time avoiding anything that might conceivably lead to jail time.

Fair enough I suppose, but it means the curtains will just have to wait.


Why not spend the price of a couple of pints on the new edition of Kevin Rodgers’ book ‘Why Aren’t They Shouting?’ at Amazon?



[1] For younger readers: a ‘Blackberry’ was a type of early iPhone with a microscopic clicky-clacky keyboard and terrible graphics. When they first came out they made you look like a Bigshot; later, a drug dealer; at the end, a delusional retro hipster. Requiescat in pace.