The Devil and Mrs. Maxwell: Rogues and Regulation in Global Finance

Abstract

In this paper, I explore the culture of the finance industry in general and in particular, the problems of dealing with so-called rogue behaviour in the context of regulation and regulatory regimes. The reference points for analysis are the recent cases of Robert Maxwell, the British entrepreneur who is thought by many to have systematically "fleeced" his companies' pension funds to finance complex corporate deals, and Nick Leeson, the Baring trader (in Singapore) who, it is commonly believed, single-handedly bankrupted the bank. While no doubt provocative and the subjects of considerable speculation regarding their true motives, I argue that Maxwell and Leeson cases are representative of a strategy of demonisation and selective representation, designed to protect the reputations of existing institutions. In this respect, I focus upon three issues: the representation of behaviour, the significance of an industry's culture forindividual behaviour; and, the scope of regulation. The paper includes a discussion of the flawed logic of "explanations" of individual behaviour that do not take seriously the context of behaviour. To illustrate, I begin with Mrs. Maxwell's recent biography of her late husband and then concentrate on recent government reports and commentaries related to Leeson and the Barings collapse.

JEL Classification: G28