“The hounding of Bob Diamond is disgraceful.” So said a tweet from our old friend Jim Mellon last night. He obviously thinks – as many in the City do – that the media and the political establishment are making the Barclays debacle just a bit too personal.
Some of our readers feel the same. When I wrote the blog below about trust in banking, I tweeted that while Bob Diamond was on to a good thing with his “no jerks” policy, he clearly hadn’t applied it to himself (I’m @merrynsw on Twitter, and you can follow me here).
I felt slightly ashamed the second I sent it – after all, that’s a pretty mean insinuation to make. So was I wrong to suggest that Diamond is a jerk and is the wave of criticism against him disgraceful?
I’ve thought about this overnight and I’m pretty sure that the answer is no. It doesn’t make sense to blame one man for everything, but as the CEO of Barclays he has been responsible for a great deal.
It was heavily involved in the PPI scam. It recently had to pay a huge amount to HMRC for its crummy tax avoidance scheme. Like the other high street banks it provides a pretty awful customer experience riddled with inappropriate cross selling and thievingly low interest rates.
At the same time, it is one of the largest private sector employers the UK (it employs 140,000 odd people) and so it benefits not only from the implicit subsidy that comes simply from being a big bank with the right to create money, but also from all the implicit subsidies of our welfare state. Finally, it has just come clean about fraud on a huge and market-moving scale (that’s what manipulating Libor amounts to).
Barclays may think of itself as a private company accountable to no one, but like all banks it just isn’t. That means that the media and the public have every right to criticise it – and those responsible for it.
Diamond’s defenders say that in the midst of all this he remains a great banker – one of the best of his generation. I dare say a case could be made for that if one were to try. After all, the competition doesn’t appear to be all that great. However, he clearly wasn’t on top of things (and who could know what was going on everywhere in such a vast organisation). As MP Teresa Pearce said on interrupting him yesterday: “Mr Diamond you have told us repeatedly that you love Barclays, but from what you are saying you have not even met Barclays… You keep saying ‘I didn’t know, I didn’t know’.”
And in the end, if you look at the charts you will see that however great a money man his City peers might think him to be, his organisation has not created much wealth for the rest of us.
If you’d invested a pound in the FTSE in 2005 (when Diamond joined the board) and hung on to your dividends you’d now have £1.08, notes a story in today’s Times. If you’d invested it in HSBC you’d have 78p. If you’d invested it in Barclays you’d have 29p. Which is rubbish, really. In the same time period, Diamond has been paid £119m.
Here we come to the second main point. The ‘not getting it’ bit. Diamond set himself up to be the poster boy for the UK banking industry with his ill-judged Radio 4 talk last year and with his famous (in a bad way) comment on the “time for remorse” being over.
His institution has public elements to it and it is somewhat in debt to the public (those low interest rates that are rebuilding bank balance sheets aren’t doing much for ours). But he has catastrophically failed to judge or perhaps even to care about the public mood.
The transformational event that has been the financial crisis demands change from big companies and from banks. Diamond has just kept doing the deals, taking the money and ignoring the shift. He and others like him should have realised some years ago that it was in their interest to help create a better balanced society, and got on with having a go. They didn’t. Which is why he is being ‘hounded’ and the rest will be too.
So it is disgraceful? No. It isn’t very nice, but it is an utterly inevitable part of the crisis cycle. Hyman Minsky talks about the ‘revulsion stage’ being critical to recovery in a wake of a stock market bubble and crash. But it is just as vital to a great crisis such as this: you need revulsion before you can get change.