Up Catto

"Britain has been conquered only twice in its history. The first time was by William the Norman in 1066 and the second by Montagu the Norman in 1931."

So cried Socialist Harold J. Laski in 1940. The British professor, making a routine denunciation of the Bank of England (much as a New Dealer attacks Wall Street), hoped then that "the reign of Montagu the Norman" would now "ebb peacefully to its close."

Four years later the reign ebbed. Last week, after a quarter of a century in which he dominated every move of the world's greatest banking institution, Montagu Collet Norman, 73, resigned the Governorship of the Bank of England, and prepared to go into permanent retirement.

Into his place stepped a hardheaded Scotsman, 65-year-old Thomas Sivewright Catto, First Baron Catto of Cairncatto,* a British businessman of worldwide experience, who during the last three years has been joint advisor, with John Maynard Keynes, now First Baron Keynes of Tilton, to his Majesty's Treasury in Whitehall.

So close has been the association of Catto and Keynes--sometimes referred to as Lords Catto and Doggo--that some observers predicted a revolution in Britain's financial policy. In fact, Lord Catto's appointment was simply one more instance of Britain's genius for adapting all kinds of talent to the service of King and country.

It was given to Montagu Norman to attempt to reconstruct a worldwide financial system after World War I. Last week few doubted that Britain had chosen well and shrewdly in selecting Lord Catto to shoulder the even tougher responsibilities that will emerge out of World War II.

The Old Lady. Technically Lord Catto heads a private bank. Actually, few institutions have cast a more pervasive influence on history than the Old Lady of Threadneedle Street, which rises like a fortress from the center of the City--London's bomb-scarred financial district.

Founded in 1694 in the reign of King William of Orange, expressly to make credit available to that hard-pressed monarch in his wars with the French, the Bank of England is the heart and center of Britain's far-flung financial system. Under its leadership the pound sterling became, in the 19th Century, a universal currency.

World War I shattered this system, broke up the gold standard, left England burdened with debt. But the war also gave one man his supreme opportunity. Montagu Norman, descendant of three generations of bankers, veteran of the Boer War (wounded, D.S.O.), had entered the Bank's employ in 1907, fresh from an apprenticeship with Brown, Shipley.

Norman the Man. It was Norman's ambition to re-establish the world system of trade and investment which the war had shattered. In 1920 he became the Bank's Governor--until then by precedent usually a two-year job. Shy, retiring, yet possessed of an iron will, Norman held office for twenty-four momentous years. During these years his motto was: "Never explain, never apologize." He prided himself on not being a theorist. His rare speeches were poorly delivered generalities. He rarely wrote anything for publication. Though bitterly attacked, he never retorted to criticism.

To discover the importance of Norman, men had to study his actions as Governor. Under his leadership Britain floated the first loans to Austria, strongly influenced central banking institutions throughout Eastern Europe. In 1925 Britain herself returned to the gold standard at the old prewar rate of $4.86 to the pound.

Few decisions have been more bitterly criticized. In fact, England's return to gold resulted in widespread unemployment and suffering at home. But Norman knew that England's life-blood--her revenues from banking, foreign investments and insurance--depended on the integrity of the pound sterling. He also knew that a banker's reputation is fragile--he can only welsh once on an obligation.

Norman the Legend. Norman nearly succeeded. A different policy on the part of the U.S. as regards tariffs, war debts, and the maintenance of world order, might have made his dream come true.

But in the crash of 1929 his world came unstuck. In May 1931 followed the failure of the Credit Anstalt in Austria. In September 1931 Britain herself was driven off gold. Desperately Norman tried to glue his world together. He worked with New York. He journeyed to Berlin to see Hjalmar Schacht. And steadily Montagu Norman the man became Montagu Norman the legend.

Norman worked, not at a desk, but at a big table, writing longhand clearly in a remarkably concise style. Said he: "I learned not to waste words when I worked in Brown, Shipley; in those days a short telegram often meant the difference between profit & loss." He always wore a soft felt hat at a rakish angle; usually traveled by subway with his ticket stuck in his hatband. He played the piano gently, walked a lot, carpentered very well. He is devoted to the gardens of his London house, Thorpe Lodge, where he occasionally gives long lectures to his servants.

On his great country estate, St. Clere, in Kent (now a nursery), he was always known as Captain. One of his tenants thought he could always tell whether the financial news was good or bad according to whether Norman sported a red or blue beret. His devotion to the Bank was fanatical. Looking out over his garden, Norman once said: "I wish they would let me stay here." Said an old servant: "Surely you can if you wish." Replied Norman: "No, it is impossible" -- and left at once for the Bank.

New Blood, New Brains. By last week 'it was apparent that devotion to duty was not enough. Norman, weak after a bout with pneumococcal meningitis, left for his gardens. What would the newcomer, Lord Catto, put in place of that devotion? By inheritance and training Lord Catto, 5 ft. 1 in. tall, is a very different figure. Where as Norman was Old School Tie, Catto is a native of Aberdeenshire, was educated at Peterhead Academy, and the provincial Rutherford College at Newcastle. At 16 he got his first job in a shipping office. He was at first refused. Wall telephones were the style then and sawed-off Catto couldn't answer the phone, which was part of his job. In true Alger-boy fashion he demonstrated by piling books on the floor, answered the first incoming call, got the job.

Typewriters were just being invented, and were so precious that the office locked theirs in the safe each night. The future Governor of the Bank of England discovered the combination, burgled the vault nightly, practiced on the typewriter for hours until he was an expert.

By answering a newspaper advertisement, he got a position with a firm doing business in Russia and the Middle East. At 29 he became vice president of a large trading company, MacAndrew and Forbes, and managed their business in America for eleven years.

Catto became the Admiralty representative of the Russian Commission in America during World War I, later transferred to the British Food Mission. Between wars his career was solid business. He went to India for the great Andrew Yule & Co. (cable address: Yuletide), and in 1930 became a partner in Morgan Grenfell & Co., at that time J. P. Morgan & Co., which still has a large investment in the company. In 1940 he resigned all director ships to accept an unpaid, specially created job as advisor to the British Treasury.

In the Treasury Catto first came into intimate contact with John Maynard Keynes, another wartime Treasury advisor. Chance gave the two men adjoining offices in the old Board of Trade building. To the surprise of all they became fast friends. The gaunt, six-foot Keynes had an unparalleled intellectual equipment. Plump, Pickwickian, smiling Lord Catto had the practical experience which Keynes lacked. Together they made a sure-footed team -- Keynes operating in the world of high theory, always able to give three solutions to any problem; Catto insisting that only one could be chosen. When the time came for Britain to propose a plan for the stabilization of postwar currencies (TIME, April 5, 1943), Lord Keynes drew the basic document. But Catto was there at his elbow with advice on the practical details.

The Grand Objective. The fact that Lord Catto, the practical banker, could work so closely with Keynes, the intellectual, was not surprising. Their cooperation grew out of a simple need, the same need which old Montagu Norman had felt at the end of World War I--the need for a worldwide currency and financial system.

That need will be paramount in Lord Catto's mind, just as it was paramount in Montagu Norman's mind a quarter-century ago. The means may have to be new: the grand objective is the same. Lord Catto is the first to acknowledge that Britain cannot exist unless some kind of system of trading and credit can be reestablished at war's end. The paramount question will be: What kind of system?

Lord Catto knows that his country faces profound difficulties. Burdened by debt, faced with the loss of revenues from overseas investment and shipping, faced too with the problems of a Europe in reconstruction, postwar Britain must inevitably maintain all manner of exchange and trade controls for the short run. The temptation will be to let these controls become permanent--to try to enter into a whole series of bilateral "deals" of the Schachtian variety with Europe, with South America, and within the Empire.

But Lord Catto also knows that an attempt to build up a great Sterling bloc in opposition to a Dollar bloc would be fatal to British interests. His training as a banker and as a trader put him inevitably on the side of those who in the long run wish to see the creation of a larger multilateral system of trade and investment in which Sterling and the Dollar are bound together. The question mark in his mind is whether the U.S., through its tariff and currency policies, will in fact help or hinder the growth of such a system. In the 19th Century the Bank of England could go it alone. In the 20th, leadership must come from both sides of the Atlantic.

*Lord Catto last week explained his crest, which is "Touch not gloveless." Said he: "It Is a Scots motto, and means literally, do not touch the cat with a gloveless hand; it may scratch you. Appropriate, yes, but it has nothing to do with my name. The College of Heralds would not make a pun, you snow. Catto means fight, battle."

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