Chewed up and spat out

<strong>Freud in the City</strong>

David Freud <em>Bene Factum Publishing, 386pp, £18</em>


Only rarely does literature about the world of finance break out of its "special interest" bracket and grasp the imagination of the wider public. Certainly in Britain, where public share ownership lags far behind that in the US, it is rare for a book about the City to cross over into the mainstream the way Michael Lewis's Liar's Poker did in America in the early 1990s. The world of finance is full of arcane terminology and abstruse ritual; most of the time, it is rather boring. Anyone's attention can be gripped by tales of swindling villains and rags-to-riches heroes, but there is little to attract the layman in descriptions of the everyday workings of the financial machine.

In his memoir, Freud in the City, David Freud valiantly attempts to make this world come alive. Freud (the grandson of Sigmund) will be remembered in the City as one of the key players in several of the most embarrassing and badly managed deals in investment banking history - Eurotunnel, Euro Disney and Railtrack. The Eurotunnel farce ended with Freud begging John Prescott for £1.2bn to plug the gap in accounts left by our hero's optimistic projections; and it is at this crucial point that Freud in the City opens. We then trace Freud's path from his initial steps in the City to his eventually fruitless rendezvous with Two Shags.

Freud's anecdotes about his time in finance capture trading-floor banter in all its earthy glory. Fairly typical is this conversation with a colleague following a fractious meeting with his boss regarding the valuation of EuroDisney: "I feel like I've been raped." "Well, if you were raped, you were standing round the Place Pigalle with your blouse undone swinging your handbag and asking for it."

Freud came from the Lex column of the Financial Times to the broking house Rowe and Pitman shortly before the big bang - the deregulation of the financial markets in October 1986 - and rose swiftly towards the top of his organisation, which was soon bought out by the domestic banking giant Warburg. Freud's talents helped to build up this sleepy UK investment bank into a major European player, and his description of its demise in the wake of an abortive merger with Morgan Stanley (then, as now, led by the enigmatic John Mack) is fascinating to those on the inside of City life. Indeed, it is before Freud reaches the pinnacle of his career that his account is at its best, offering an intimate insight into the workings of an investment bank in the 1990s. In tatters as a result of the media and market mauling that followed the merger's collapse, Warburg was bought by SBC in 1995, then swallowed up by UBS in 1998.

Yet, despite the bruising encounters with other bankers, investors and pugnacious politicians, Freud's book is striking for how little it reveals about how the City works today. No doubt for outsiders (such as David Hare, who states on the jacket that the book reveals "what on earth people do in the City of London") Freud's experiences chime with how they believe things should be behind the mirrored glass windows of Canary Wharf. In truth, the markets have changed so much since the events of the 1990s that reading Freud in the City is like sitting in an armchair at Boodles and listening to the stories of an amiably port-soaked war veteran.

Mergers and acquisitions - the deal-making that Freud practised to such acclaim in the early days of his career - has been relegated to the sidelines in the list of priorities of the big investment banks. The advisory teams at the banks are now far more focused on the identification of leveraged buyout targets - inefficient public companies whose shareholders can be bought out through the issuance of debt. Perhaps traditional M&A business will come back in vogue, but the sort of deals Freud struck in the Nineties are to the current world of finance what Shed 7 are to the world of popular music - a fondly remembered footnote. Of Goldman Sachs's 2005 total earnings - a huge $8.3bn - only $413m was made from investment banking: less than 5 per cent. The big money is now made in the trading of fixed income products, derivatives and commodities. Were Freud to enter the City now, he would be a hedge fund manager or in charge of the proprietary trading desk at one of the major banks. M&A is yesterday's news, so there is something touchingly old-fashioned about Freud's story.

Freud lived through a revolution that paved the way for the sophistication and dynamism of today's markets. His memoir of this experience is no less valid because the world that chewed him up and spat him out has changed beyond recognition. Despite, or perhaps because of, its occasionally clumsy turn of phrase and ethical haziness, Freud in the City is a moving and acutely observed view of a man who, by a series of lucky chances and brave calls, rose to the top of the banking world. Fittingly, the book ends with Freud drunkenly vomiting in his office bin after being elbowed out of his firm by a younger, even more aggressive generation.

Alexander Preston is a portfolio manager at a Mayfair investment company

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