Looking at the latest British banking scandal

Bob Diamond is a smooth-talking, Massachusetts-born banker. Until this week he was earning some twenty million dollars a year as chief executive of one of Britain's most successful international banks, Barclays. Not any more.

He's just been forced to resign in the latest scandal to hit the banking industry, and on Wednesday he was grilled by legislators here about how much he knew about what was going on. His answer - that he knew very little - has been widely condemned as unconvincing.

The details of what was going on are frankly lost on most of us, but it has fueled a growing conviction amongst the public that the banks and especially the wealthy executives at the top have been looking after themselves and not their customers. Government Ministers have been quick to condemn them, perhaps trying to deflect blame for an economic crisis that shows no signs of ending any time soon.

But now there's a new question. Did the previous British Government itself encourage the malpractice? Basically, traders at Barclays were reporting figures for the interest rates the bank had to pay on its borrowing that were lower than the true ones. The effect was to make it look as if Barclays was in a stronger financial position than it really was. And lower interest rates also made it look as if the national economy was doing better. So you can see why the Government would have been keen on that.  

As I said, the details aren't easy to follow. What is clear, however, is that an almighty blame game is being played out. The stakes are high. But my guess is that the public are getting pretty sick of it. Our economy is not going to get moving again until confidence returns. For two years or more, businesses large and small have been crying out for easier borrowing to help them invest.

What the public do understand is that the economy can't grow and new jobs can't be created until that happens. Quite rightly they are looking for a bit - no, a lot - more concerted action by banks and governments alike and a lot less point-scoring over who was to blame in the past. 


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