Parliament was at its worst yesterday. The mud wrestlers Osborne and Balls were so dementedly determined to lay toxic blame on each other for the shocking LIBOR scandal that the City escaped with hardly a bruise to its name. The difference between a judge-led inquiry and a special parliamentary select committee inquiry is not that huge, but as at Ypres those few yards of terrain were fought over with such ferocity as though the next election depended on it. But one question hung over the assembled battleground, unanswered. Why were Osborne and co. so obsessively manic about blocking a judge-led inquiry?
It’s a fair guess that after Leveson tore a trail of damage through the Establishment, they were apoplectic about avoiding a repeat. After all, the City is an extremely hard-nosed institution, and it doesn’t year after year give the Tories half their entire annual income without expecting, and getting, a big deal in return. Exposing that could be quite embarrassing.
Is that why the banks have never been held to account for one of the most heinous scams in history – the securitisation of next-to-worthless financial derivatives which nearly crashed the entire global economy? Is that why the repeated wheezes that keep tumbling out of the City under the facade of financial innovation – the mis-selling of private pensions in the 1990s and more recently the mis-selling of PPI and now credit default swaps – just get a ticking off, never root and branch reform? Is that why the Vickers reforms, already weak because the City will always get round Chinese Walls with regulatory arbitrage, were then weakened further by Osborne when he cut back the capital ratios imposed and postponed their introduction till 2019?
Is that why demands by Germany and France for a Financial Transactions Tax in the wake of the 2008-9 financial crash were batted away so cavalierly by Cameron and Osborne? Is that also why the pressure from Germany and the US to wind down egregious tax avoidance/evasion on an industrial scale, largely centred on Britain’s own Crown Dependencies, got such short shrift at the behest of the City? Is that why too the complex derivatives which were at the heart of the sub-prime fiasco have still been retained by the government within the Vickers ring-fence and therefore covered by the implicit taxpayer guarantee? And is that why also the incestuous relationship that the credit-rating agencies have with those institutions whose creditworthiness they are supposed to be independently assessing have been allowed by the government to remain, when it led in the past to junk derivatives being passed around with the imprimatur of triple A status?
But those are only the bits we already know about. How much else lies hidden in that murky financial-political nexus that a Leveson-style inquiry into the City might bring to light?
