I went on the Today programme this morning to talk about Bob Diamond. Last night, he gave a lecture for the BBC on the nature of banking. You can read the full text here. Do so, and I suspect you will end up as irritated as I did. The whole thing reads like a junior PR executive’s attempt to rehabilitate the image of the man Peter Mandelson once called the “unacceptable face of banking”.
In his talk, Diamond, who only a few months ago announced that banks should give up “remorse” and get on with making money, devoted himself to good citizenship. He also appeared to suggest that banks are nothing more than charity type enterprises.
They take risks to offer mortgages and loans to small businesses and they trip over themselves to provide liquid markets for sovereign securities – without which we would all be sunk. But what they do not do, he said, is gamble. This is of course nonsense.
If all that banks did was provide good loans on good interest rates to good businesses and well-financed home buyers on the one hand while making transparent, liquid and competitive markets for corporate and government securities on the other hand, there clearly wouldn’t be a problem.
What’s more, there is no way that the likes of Barclays would be able to make the kind of super-normal profits that allow them to pay Diamond millions and millions of pounds a year (another subject he failed to touch on in his not particularly wide ranging speech). Those profits come from more oligopolistic and speculative activities.
And as for the business of being good citizens, I suggest you listen to Paul Lewis’s comments on this on the Today programme this morning. I give you PPI (payment protection insurance), the extraordinarily high level of customer complaints to the retail banking branch of Barclays, and packaged bank accounts (see this week’s magazine for more on this). And that’s before we start on the sales techniques used in branch and the fees investors are charged via the fund management arm.
If Barclays was a good and trusted citizen, Diamond would make sure all these problems disappeared overnight. At the same time, he would cancel all the bank’s various tax avoidance schemes.
That isn’t going to happen: for all Diamonds witterings, the fact remains that Barclays doesn’t have a mandate from its shareholders to be a good citizen: it just has one to make as much money as possible. Until that changes – and please read my comments on that matter: Was the big bang a huge mistake? – Barclays won’t change.
Diamond and his peers are still the unacceptable face of modern banking: the metaphorical ‘Hello Kitty’ mask he donned for an hour last night doesn’t do much to change that.