My Amazon Review of James Grant's "Bagehot: The Life and Times of the Greatest Victorian"

The Oracle of Lombard Street

I knew Jim Grant in the late 1980s and early 1990s when he was chronicling the commercial real estate debacle of that era is his eponymous “Grant’s Interest Rate Observer”. Grant, the author of several books, has turned his excellent wordsmithing to write the biography of the mid-19^th Century editor of the “Economist”, Walter Bagehot. During the financial crisis of 150 years later, Bagehot’s “Lombard Street” dictum during a crisis of lending freely at a penalty rate against good collateral was widely quoted by central bankers, most notably by the then Fed Chairman Ben Bernanke. According to Grant Bernanke got the lend freely part right, but it was at low rates against less than stellar collateral.

Grant’s Bagehot is very impressive. A polymath country banker who married James Wilson’s daughter, the founder of “The Economist.” On Wilson’s death Bagehot succeeds Wilson as editor. From that post Bagehot wields great influence in Britain’s Liberal Party becoming a key adviser to William Gladstone who would become Chancellor of the Exchequer and later Prime Minister. Bagehot cut his teeth during the 1866 Overend Gurney bank failure that froze the London money market, then the largest in world. London had three times the deposits of New York and eight times the deposits of Paris. In the teeth of the crisis the Bank of England violated its statutes and intervened in the market to stop the bank run.

In 1873 Bagehot wrote “Lombard Street,” his primer on central banking. Grant is sympathetic to his main critic Bank of England Director Thomson Hankey, who argued that to have the central bank be the lender of last resort you create an environment that large banks are too big to fail. We live with that to this day.

There is far more to Bagehot than central banking. He wrote “The English Constitution” and commented on all sorts of developments including his belief that the South would win the Civil War. Grant has written a worthy biography of this truly eminent Victorian.

The full Amazon URL appears at: https://www.amazon.com/review/R38KJVAABISATI/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv