Why are Swiss bankers called gnomes?

They've been called many things in recent months, but "gnomes" is one moniker for bankers - particularly Swiss ones - that has a long history, says the BBC's Chris Bowlby.

There's been a lot of name calling when it comes to those who work in the world of finance recently, most of it unprintable.

But the current financial turmoil in Europe, as well as news that London's best bankers are considering moving to Switzerland to avoid stricter regulation and public hostility, has resurrected an ancient and intriguing phrase - the "gnomes of Zurich".

First coined by British politicians facing a currency crisis in the 1960s, the phrase has lurked ever since whenever speculators are suspected of destabilising a country. But why gnomes? And why Zurich?

Labour politician George Brown coined the phrase

Forget kitschy garden ornaments. These gnomes emerged from medieval fascination with the secrets of wealth, especially gold, buried underground and mined by mysterious beings. Goethe writes about them in his epic Faust - ambiguous characters creating wealth which others, depending on their morals, use for good or evil.

So as the secretive world of Swiss banking took shape, centred on Zurich, and based on underground vaults with anonymous numbered accounts in a fiercely independent, mountainous country, you can see why the idea of gnomes sprang to mind.

Armed with bars of gold, currency trading accounts containing very large sums and the utmost discretion, Swiss bankers were admired - and feared. But in the 20th Century their reputation, especially among those on the political left, darkened.

The secretive Swiss were seen as helping ruthless international capitalists and dictators avoid taxes and protect their wealth. In World War II, neutral Switzerland appeared to help Nazi Germany financially, while taking deposits from Jewish victims of the Holocaust. It failed to return many of the assets after the war and in recent years some Swiss banks have agreed multi-million pound settlements with families to avoid being sued.

Mischievous

When post-war Labour politicians worried about whether speculation against sterling would undermine their economic plans for Britain, those financiers in Zurich made a convenient scapegoat.

Disparaging references to Swiss bankers had already been heard in Britain in the 1950s. But it was the intervention of the leading Labour politician George Brown in November, 1964, that made headlines. Emerging from a crisis meeting at which the Labour government discussed the plummeting pound, Brown snapped: "The gnomes of Zurich are at work again."

Mr Brown, famous for forthright utterances, had created a new catchphrase. Soon it was on many other lips, including those of the prime minister at the time, Harold Wilson, promising to resist the gnomes' "sinister" power.

Swiss banking is viewed as a secretive world

The Swiss were unrepentant. "In the world it is not the image, but the substance behind the image which counts," sniffed top banker Paul Rossy at the time.

When they heard news of Mr Brown's hostility, they were perhaps reminded of a great local scandal in 1958 when a Briton also named Brown dared to hold up a Zurich bank and was arrested by an angry mob before the police needed to intervene.

Some Zurich bankers took to answering the phone to British callers with "hello, gnome speaking". Others retaliated mischievously by suggesting that trade union power - "the gnomes of Transport House" - rather than currency speculation, was weakening the British economy.

One enterprising, and courageous, Zurich banker moved to London to set up in business, where he was promptly dubbed "the gnome of Notting Hill".

The Americans took up the phrase too, with the Wall Street Journal mentioning the Zurich gnomes alongside the military-industrial complex, the Establishment and the Illuminati, as the people who allegedly ran the world.

Hostility

It may all have been hugely exaggerated, but such was the secrecy surrounding Swiss banking, no one could tell. There were, as Donald Rumsfeld might have put it, so many "gnome unknowns".

However great their influence really was, the Zurich money men seemed to lose influence in more recent decades. Gnomes in modest, discreet buildings were dwarfed, so to speak, by the skyscrapers of the City of London, New York and, more recently, Dubai and Shanghai.

But they are still there, still holding enormous private and commercial fortunes. And Jurg Conzett, of the Zurich Money Museum, where they proudly display a Swiss gnome sculpture, says today's bankers sometimes see the gnome label as "almost a noble title".

Goethe wrote about gnomes in his epic Faust

He says the global crisis has led to an intense debate in Switzerland, as elsewhere, about the role of bankers. The inventors of apparently miraculous new products like derivatives or sub-prime loan packages are viewed like those medieval gnomes conjuring gold, he adds.

Today's bankers, like Goethe's gnomes, say they are not to blame if others act irresponsibly with their creations. Those Swiss financiers may become still more confident if they acquire new recruits from the enemy territory of Britain.

Bankers currently based in London, fearful of higher taxes, stricter regulation and public hostility, are said to considering moving in large numbers to Switzerland where banking, the humorist George Mikes once said, is "the state religion".

And what if they then start speculating against sterling during a crisis? How might British politicians react to such apparent treachery?

A new hostile catchphrase, perhaps, which will then remain, stored in the underground vaults of our subconscious, ready for when we next need someone, somewhere, to blame for a crisis.