Alert Sign Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to turn off Adblock on

Alert Sign Dear reader, please upgrade to the latest version of IE to have a better reading experience


A long, wet summer

July 08, 2012

IT’s been a horribly cold and wet June in the UK, and July seems to be no better. In fact, the last couple of days have seen rain amounting to a full month’s quota. Large areas of northern and central Britain have been flooded. Luckily, Devizes is not close to a river, but we have had a lot of rain.

Adding to the misery of people in the west who commute regularly from London are the traffic jams caused by a crack in the aqueduct at the beginning of the M4, the much-used motorway that goes from the capital to Wales. This is the motorway we use when we go from Devizes to London, and we were trapped on a diversion when returning after an afternoon in London.

It took three hours for us to get back when normally, the trip would have taken half this time. Readers flying into Heathrow over the next few days are warned.

The unending rains have washed out the cricket and badly affected the tennis at Wimbledon. Mercifully, the iconic Centre Court now boasts of a roof, so the final will go ahead this afternoon as scheduled. Brits have invested a lot of hope in Andy Murray – the finalist with Roger Federer – and so far, he has delivered with some fine tennis. The fact that he is the first British player to make the final in 74 years shows how long people here have waited for this moment.

Even the Observer, normally a sober Sunday newspaper, has a photo of Murray across three-fourths of the front page under the headline: “Andy, Make Our Day!” I almost feel sorry for the poor tennis player with the weight of the nation’s expectations on his shoulders.

In this rainy weather, I have been watching quite a lot of television, including large bits of Bob Diamond’s testimony before a select Parliamentary committee looking into the manipulation of Libor rates by traders at Barclay’s. Unsurprisingly, the street-smart American ex-CEO of the venerable British bank ran circles around the MPs over nearly three hours.

To virtually every question, Diamond would preface his reply with: “That’s an excellent question. Allow me to put it into context.” He would then launch into a lengthy technical reply that would confuse matters even more. Or he would just say he had no recollection of the issue raised. So frustrated did the MPs get towards the end that one of them said to Diamond: “In your three hours at the crease, you have played with a dead bat, just like Geoffrey Boycott would have done.”

The inability of the committee to uncover any direct culpability just shows that more professional expertise is needed to nail the crooked bankers behind the Libor scandal. Ed Milliband, the Labour leader, has called for a judge-led enquiry of the kind Leveson is heading to look into the links between the media and politicians. This demand was defeated in Parliament as the government pushed through its proposal for a parliamentary enquiry.

The acrimonious debate in the House of Commons revealed the underlying tensions over the issue. The fact is that the Libor rate rigging went on during the Labour government’s stint, and the opposition fears that the Conservatives will use the enquiry to smear Ed Ball, the shadow Chancellor, and his Labour colleagues. In politics, tactical advantage always trumps uncovering the truth.

And the truth is that both political parties have been deeply complicit in the casino banking that has brought the world economy to its knees over the last five years. But despite the trillions of dollars that have gone down a black hole, the millions of jobs lost and lives ruined, not a single banker anywhere has been jailed. On the contrary, top bankers continue to pay themselves obscene salaries and bonuses. Small wonder that rage against them is growing.

And yet, George Osborne, the Chancellor of the Exchequer, is heading for a meeting of EU finance ministers, carrying a brief seeking to block a proposal that limits bank bonuses to the size of the salary. The Conservative Party counts bankers and hedge funders as their biggest donors, and have always supported them in return. Under Tony Blair and Gordon Brown, the Labour government did its best to woo the financial sector, much to the anger of its traditional left wing.

This cross-party complicity explains why public fury over banking excesses has yet to be properly articulated and channelled by politicians. And the worst is yet to come: the police has now opened its own investigation into the Libor scam, and in the US, the Security and Exchange Commission has launched an enquiry into other banks said to be involved. We’ll be hearing about this for a long time to come.

Had it not been for generous government support on both sides of the Atlantic, many of these over-leveraged, over-exposed banks would have gone under by now. But by bailing them out, politicians have shown that when it comes to profits, perks and bonuses, banks are private entities free to do what they like. But when they lose money, the taxpayer has to take the hit.

In the annual BBC Reith Lecture, Niall Ferguson, the well-known British historian, reminded us of the Darwinian nature of capitalism. Inefficient and loss-making firms collapse, to be replaced by more nimble and competitive companies. In time, these, too, lapse into complacency. Thus, evolutionary capitalism constantly weeds out the weak, just as nature does. But when the state intervenes to save corrupt and bankrupt banks, as it has just done, it discourages competition and rewards failure.

And yet, despite the support banks enjoy among the British political class, their day of reckoning is approaching. Apart from a cap on bonuses proposed by some EU members, another proposal aims at placing a ‘transaction tax’ on all foreign exchange deals. As these run into millions every day, even a small tax would raise a lot of money. Unsurprisingly, bankers are squealing at the prospect.