It used to be said that if you owed the bank £500, you had a problem but if you owed the bank £500 million, the banker had a problem. Since the near collapse of the global banking sector in 2008, we’ve discovered that the banks are largely problem-free, thanks to a secret sugar daddy in the form of a taxpayer-funded safety net.
Last week, we learned that a number of bankers have been manipulating LIBOR, or inter-bank interest rates. This little ‘win-win’ had the benefit of reducing the interest rate the bank paid to borrow from other banks, thereby improving the bank’s profit margins, whilst providing a nice little ‘kicker’ for the banker’s personal bonus. Barclays was first to fess up and agreed £290 million in fines and an act of public contrition in full and final settlement.
But over the weekend, in response to public grumbling, one elected representative after another queued up in front of the TV cameras and radio microphones to declare war on the greedy bankers and promise revenge.
“Bob Diamond must pay with his job,” they demanded. “A Levesonesque inquiry or the full wrath of a Home Affairs Select Committee would restore common decency,” they promised. The government was talking tough and would reinstate honesty with an iron fist. On hearing the news, the greedy bankers cowered in fear in boardrooms across the square mile. It must have felt as if they’d been threatened with a mauling by a baby sheep.
The chairman of Barclays resigned today while the CEO has refused to budge. Government action holds no fear for banking executives because the Government has already shown its hand and its hand says it fears little more than it fears a troubled bank. That’s why the Government has committed up to £1.3 trillion of tax-payer funds to bailout the banks after they’d over-stretched themselves buying sub-prime assets and full value prices.
These are the same politicians that near nationalised two of our largest and most troubled banks in a panic in 2008, asking only for a vague commitment to keep lending to business in return. The banks accepted the terms and then declined the loan applications. David Cameron and Nick Clegg talked tough but delivered little.
The banks lost all fear of politicians when they effectively told the banks that there was nothing the state wouldn’t do to keep the banks afloat, however turbulent the sea becomes.
And that’s the thing about a threat. It holds no fear for the threatened if he’s bigger than you and he knows that you fear him more than he fears you.