What on earth is wrong with this Government? At a time when ministers could, if they wished, cast caution to the winds and get on with some really radical programmes, they pussyfoot around like maiden aunts trying to choose a hat for the church fete. Yet they have nothing to lose and the possibility – albeit remote – of substantial gain.
Nothing has demonstrated this pusillanimity more starkly than the Treasury’s handling of the banks as they emerge, more arrogant than ever, from the crisis from which Gordon Brown rescued them. The Government’s piddling proposals for the regulation of the practices which almost brought down the entire financial system have earned the scorn not only of the Governor of the Bank of England but even of the Daily Mail.
When most of the banks announced a return to substantial profitability this week and it emerged that they were preparing another round of the grotesque bonuses which were largely responsible for the disastrous risk-taking of the past 20 years or so, the Mail reached into its font box for its largest and blackest type.
“Biggest bank bonuses ever”, it thundered across it front page and added in smaller type: “After bringing the economy to its knees and taking billions in public bailout money, fat cats are set for record £4 billion bonanza”. But the response of the Government – a Labour Government, as I have to remind myself from time to time – has been a gentle tut-tut.
Alas, we have to look across the Atlantic to see something like old-fashioned political radicalism in action. There, much the same scenario has been enacted in the boardrooms of the banks, which were bailed out so recently – and so expensively. Just like the City’s fat cats, Wall Street’s even fatter cats have been paying out gigantic bonuses. But Barack Obama and the congressional Democrats are set to follow up some tough talking with some tough action.
Most notably, the Democratic majority in the House of Representatives approved a bill last week – over vehement Republican opposition and some Democratic defections – which will impose limits on executive pay. Its terms, said the White House spokesman approvingly, largely reflected ideas submitted to the House by President Obama. Similar proposals are to be considered by the Senate as part of a wider regulatory package next month, after the summer recess.
This reflects the enormous wave of public outrage in the United States against the greed of bankers, following the huge expenditure of taxpayers’ money needed to save them from disaster.
As Harvard’s Professor Elizabeth Warren put it: “The people who invested billions in tax revenue in these banks expect them to join the effort to fix the broken credit market, not to fight every inch of the way to defend business as usual.”
Obama put it in similar terms. “If you’ve presided over an enormous meltdown that has resulted in about $10 trillion worth of wealth being lost, you might want to be a little self-reflective and perhaps change your business goal. When I see Wall Street not doing that, it tells me not only that they have forgotten the recent past but that they are willing to put the country’s economy at further risk”, he told Business Week.
Joe Nocera, business columnist of the New York Times, pointed out that bankers saw it differently. They claimed, he said, that they were doing the best they could, but that it wasn’t their job to save the US economy but to maximise shareholders’ profits. To ask them to put aside the profit motive for the good of the country, even temporarily, wasn’t even in their frame of reference.
But Nocera didn’t conclude tamely that this was the way of the world and nothing could be done about it. On the contrary, he concluded that, if the bankers could not be persuaded to change the whole ethos of their business, even in the public interest, then they would have to be forced to do so.
That’s what President Franklin D. Roosevelt had done in the Great Depression, he said. And what FDR had thought about the bankers he’d rescued was encapsulated in his scornful remark that they were like a drowning man who had been saved by a lifeguard and then returned to the beach four years later to ask angrily: “Where’s my silk hat? You lost my silk hat.” The 1936 joke has a grimly contemporary ring.
Happily, there has been still more good news from the other side of the Atlantic this week. On the same day that the House approved the measure to cap executive pay, one of its committees endorsed the outline of a bill to set up Obama’s promised trillion-dollar healthcare scheme. It isn’t a final victory for Obama – not by a long way. But it gives hope that a deal is on the way.
However, what is happening in Washington raises the question of whether our present lot in Whitehall would have had the courage to do what Clem Attlee and Nye Bevan did in 1947 and introduce a comprehensive free health service in the middle of a massive financial crisis. On the basis of present performance, I doubt it.
