\u2018It seems to be that every big trading disaster happens in London,\u201d U.S. congresswoman Carolyn Maloney observed last June. \u201cAnd I would like to know why.\u201d The disasters she was referring to were the ones that bankrupted Lehman Brothers and nearly bankrupted some other American firms, such as A.I.G. and MF Global, as well as causing JPMorgan Chase\u2019s $6 billion loss at the hands of the trader popularly known as \u201cthe London Whale\u201d\u2014all of these happened to a high degree in the London branches of those firms and have cost the American taxpayer billions of dollars.<\/p>\n
To answer her question and to understand why so much of the world\u2019s money goes to London in the first place, you need to go back hundreds of years, to the emergence of what must be the most peculiar, the oldest, the least understood, and perhaps one of the most important institutions in the menagerie of global finance: the City of London Corporation. It is the local authority for \u201cthe Square Mile,\u201d the pocket of prime financial real estate centered on the Bank of England and located about three miles to the east of Knightsbridge, along the Thames River. But the corporation is also much more, its identity embedded in\u2014and slightly apart from\u2014the British nation-state. The corporation has its own constitution, \u201crooted in the ancient rights and privileges enjoyed by citizens before the Norman Conquest, in 1066,\u201d and its own lord mayor of London\u2014not to be confused with the mayor of London, who runs the Greater London metropolis, with its eight million inhabitants. One sign of the City of London\u2019s distinct identity is the fact that the Queen, on official visits there, will stop at the boundary of the Square Mile, where she is met by the lord mayor, who engages her in a short, colorful ritual, before she may proceed. Most Brits see this merely as a relic from a bygone age, a show for the tourists. They are wrong.<\/p>\n