Politicians are the last people who should investigate corrupt City spivs

Published in The Daily Mail (July 4th, 2012)

So farewell then, Bob Diamond. Few will mourn the departure from British public life of this arrogant and over-paid American, who only a year ago was lecturing us that it was time for ‘remorse and apologies’ over the banks’ behaviour to end.

Like so many prominent figures in torrid scandals, he sought to cling to his post as Barclays chief executive rather than do the right thing and resign, despite the disturbing revelations of his bank distorting a critical financial yardstick that impacted on everything from company loans to household mortgages.

Already there have been fines of £290m — only about ten days’ profit for this money-making machine — while everyone from shocked FBI investigators to salivating lawyers are circling one of Britain’s oldest and most famous financial institutions.

We are just at the start of this sleazy and sordid scandal. Many more banks will be snared. And more of these strutting, self-aggrandising masters of the universe will be brought crashing to earth.

We have learned with incredulity the laxity of controls over critical tools used to manipulate the financial markets.

We have been given a glimpse of a world in which a microscopic modification of 0.01 per cent in an inter-bank interest rate can net a couple of million dollars for pin-striped hustlers.

And we have seen how bottles of Bollinger are bandied around between back-slapping bankers indulging in reckless behaviour.

It is vital that there is a full-scale judicial inquiry into the financial sector. The Prime Minister’s proposal of a parliamentary probe is inadequate — a weak response that allows Ed Miliband to make the running on the major political issue of the moment.

This is surprising, given the sure-footed way David Cameron responded in opposition to issues such as the parliamentary expenses scandal, forcing shadow cabinet colleagues to pay back questionable claims and his MPs to publish their expenses online.

This latest financial scandal highlights the emerging confidence of Mr Miliband, who has caught the public mood on corporate malfeasance and is playing hardball over insisting on a judicial inquiry, and the Coalition’s post-budget lack of direction.

It also raises issues over the uncomfortably close relationship between financiers and politicians. It is one I saw on election night as Mr Cameron’s speechwriter, watching brash millionaires in bespoke suits toast Tory victories with champagne at a celebration bash for party funders.

After all, who can really trust our representatives in Westminster to kick out the cancer of corruption eating away at the heart of the City of London when financiers fund their parties, have a hotline to their leaders and — like Mr Diamond — successfully stopped tougher regulation?

Earlier this year, for example, newspaper reporters posing as international financiers exposed Tory party treasurer Peter Cruddas offering them input into policy-making and access to the Prime Minister. Cruddas instantly quit in ignominy.

But it is not just the Tories who are in hock to hedge fund potentates and financial kingpins.

It was New Labour that knighted Fred Goodwin, courted the super-rich and protected the banks from regulation, just as it was their soulmate Bill Clinton who allowed the unleashing of the sub-prime debt explosion in the U.S. And leaked documents have dragged senior members of Gordon Brown’s team closer and closer to the emerging scandal over inter-bank interest rate-fixing.

This is why Mr Miliband deserves credit for demanding a robust inquiry, given the central position that he and Ed Balls, the shadow chancellor, held alongside Mr Brown as the Labour government encouraged reckless financial behaviour.

It is quite extraordinary that four years into the calamitous banking crisis there has been no official and far-reaching inquiry into events that devastated public finances, destroyed thousands of businesses and caused such despair to millions of families.

We have, after all, had a £200m judicial inquiry into the Bloody Sunday killings in the Bogside area of Derry in 1972. And we have the never- ending Leveson inquiry into events at the News of the World which, however damaging and deplorable, were insignificant compared to the bankers’ misbehaviour and consequent economic devastation.

In the U.S., a bipartisan panel sought to clarify the causes of the crisis in the same way the much-praised 9/11 Commission shone a light on to the terror attacks at the start of this century.

But it served only to demonstrate the problems of party appointees investigating the arcane, complex and highly politicised world of finance. The ten-strong team was hobbled by internal divisions, struggled to grapple with the issues and ended up split along partisan lines.

In Britain, no one should hold any delusions over the need for a deep-rooted and independent inquiry into this latest financial scandal.

These bankers have scored a grotesque own goal for what is — like it or not — Britain’s biggest and most important industry. This time, there can be no rapid reversion to business as usual.

Those involved deserve everything coming their way. It is all too easy, however, to assuage our anger by lashing out at a few prominent figures. By all means, fling rotten tomatoes at Bob Diamond, just as they were flung at the equally arrogant and avaricious Fred Goodwin. They deserve it.

But ousting a few chiefs does not solve problems that run far deeper. Forget the obscenely vast bonuses that tainted everything they touched.

This is just the latest — and most serious — of a series of scandals infecting the financial sector. Even the Bank of England, that saintly old lady of Threadneedle Street, is embroiled.

So what reforms are necessary? Many of the solutions being proposed are far too simplistic.

Breaking up the big banks, for example, sounds good — but small does not necessarily mean sensible. Small German regional banks, for example, were the biggest suckers when daft debts were packaged up and passed on before the 2008 collapse.

The answers may be troubling for those of us who believe in the essential strength of the free market and the power of capitalism to change lives, since clearly many people can’t be trusted to behave honourably when vast sums are at stake. 

We need effective regulation of these corporate behemoths — together with enforced transparency of their dealings and as much scrutiny as possible from strong independent watchdogs, an unruly blogosphere and an unshackled media.

Our pensions and our nation’s future prosperity rely on the well-being of the City of London. We have a shared interest in nursing it back to health and restoring its ancient reputation at a time when it has never been under great threat.

Not all banks are bad, just as not all bankers are immoral. We simply cannot afford to be motivated by the populist thirst for revenge, nor by the cheap, short-sighted political machinations of Westminster.

This is why David Cameron needs to perform a very rapid U-turn — or should be forced into one by MPs when they vote on the issue tomorrow. For the sake of the entire country, we need a full-blooded judicial inquiry into the lack of ethics in the world of finance.

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