Bob Diamond had thought it safe to take a bonus this year. His record, he thought, spoke for itself: Barclays had steered its way through the financial crisis without taking a penny of government subsidy. In 2012, it was making profit, paying tax, providing mortgages and being a model corporate citizen. His zombie rivals, RBS and the other state-owned banks, he thought, now had to dance to the politicians’ tune — but not Barclays. The whole point of taking a £7 billion bailout from Qatar and Abu Dhabi was to stay politician-free, believing that even a smidgeon of government direction would harm the bank. Perhaps he thought he was in such a strong position that, out of the 16-odd banks being investigated in the Libor and Euribor fixing scandal, he would be the first to confess, settle and take the media flak that ensued. If this was his calculation, it was calamitously wrong.
The Libor scandal involves emails about bottles of Bollinger and prima facie evidence of collusion, perhaps even criminality. No one spoke about 14 rogue traders; everyone spoke about systemic moral corruption in Barclays made possible by the triumph of casino-style investment bankers (like Diamond) over the old school bankers. Osborne was out like a bullet from No.11 to condemn it in parliament, going as far as to claim that bankers had brought Britain ‘to its knees’. Nigel Lawson was calling for Diamond to resign. RBS may have been guilty too, and many other banks may yet be found guilty of even greater skullduggery. But Diamond has become the face of the Libor crisis at an age where banking has never been more politicised. Even I argued that he needed to resign, if only to show where the buck stops.
As Isabel said, his statement citing ‘external pressure placed on Barclays’ is banker-speak for saying that the wicked politicians made his job impossible. The implication is that he’d face a never-ending Leveson-style witch-hunt in front of a judge who knows as little about banking as Leveson knew about the media. This would have been incorrect. Andrew Tyrie, a highly numerate MP chosen to lead the inquiry, intends to look only at wholesale lending and stick to his remit. Another MP may have expanded it to a McCarthyite hunt on bankers — but Tyrie won’t. His inquiry may not go ahead if Labour refuses to participate, but Diamond evidently didn’t want to hang around to find out.
Atop of Diamond’s many mistakes was the belief that Barclays did not need to dance to a political tune. All banks, independent or state-owned, are now operating in a highly politicised environment with the threat of inquiries and ministerial condemnation hanging over them all the time. And rightly so.The crash showed that, in the end, the taxpayer is on the hook for banking misdeeds. Barclays is not your average FTSE100 company. The de facto governmental insurance policy, and the ‘too big to fail’ principle, means that whether we like it or not (and we don’t), the taxpayer is providing a safety net. All banks are now operating in a political environment. Barclays share price is soaring on Diamond’s exit, presumably on the assumption that he’ll be replaced by someone better tuned to adjust to the new, politicised banking world.
P.S. The headline of this blog is in homage to the Telegraph’s sketchwriter Michael Deacon, who tweeted it before The Sun made it famous.
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