A Bad Week for Bankers... and Politicians

Even in the context of the age of banker-bashing, the last few weeks have been particularly painful for our financial institutions.

Two weeks ago, RBS suffered the triple whammy of announcing hundreds of job cuts, seeing its credit rating downgraded (along with several other global banks), then suffering a humiliating technical failure. It’s been so bad, in fact, that Stephen Hester has even given up his bonus for the year.

But for the past week, it’s been all about Bob Diamond and Barclays. Everyone knows, however, that this is merely the tip of the iceberg.

As politicians argue themselves hoarse about processes and procedures in a typical display of their detachment from the real world, the financial services industry is reeling from revelations and rumours that threaten to undermine some of its core values.

The idea that throughout the boom years and the subsequent credit crunch, any number of banks were colluding to inflate their profits whilst deceiving and defrauding their customers is truly shocking… or at least, it should be. That the scale of the media’s (and therefore the public’s) response has been muted only by this being an apparent confirmation of enduring suspicion makes the situation no less difficult for those involved.

An inquiry, whether parliamentary or judicial (does it really matter that much?), will follow and should report at least some findings and recommendations by the end of the year, and the government is promising new legislation early in the new year that will aim to find resolutions to the various issues at stake. It is unclear what this new probe means for the prospects of similar punishments for other banks to those imposed on Barclays by regulators last week.

Though the Sage is somewhat cynical of the contrived political theatre being staged this week (which does beg questions about how effective a political inquiry-cum-blame game can be) the row does speak volumes about the relative positions of the two main party leaders.

David Cameron must be at a loss to explain why he can neither find cross-party consensus on the government’s response to the scandal, nor accuse his opponents of obstructing the truth – let alone land a blow on the Shadow Chancellor who surely bears some culpability).

Ed Miliband, on the other hand, finds himself on something of a roll against a Prime Minister for whom a U-turn seems likely at any moment, so long as he is asked sufficiently difficult questions for long enough. A quotation revealing Mr Cameron’s free-market, anti-regulation instincts was an extremely powerful climax to an otherwise lacklustre PMQs performance in which the Leader of the Opposition again struggled to come up with enough worthwhile questions to fill his slot.

In fact there was a striking resemblance between the performances at the despatch box and that of Mr Diamond himself in Parliament on Wednesday – lots of bluster and plenty of humility, but precious little substance. The only difference is that one finds himself out of the job – albeit a whole lot richer for the experience. For the others the (increasingly personal) battle rages on.

Next week’s burning issue for the residents of the Westminster village to shout and scream about is House of Lords reform... The summer recess cannot come quickly enough.