Cable has talked about the urgent need to make Britain’s banks safer - notably by splitting off banks’ investment operations so that they could fail without the taxpayer having to step in and bail them out. He added that the uncertainty in the markets only made that need all the more pressing. But now it seems Cable’s calls are being drowned out by the PM and George Osborne, who are happy to delay reforms and instead push for banks to lend to businesses in order to generate growth and jobs across the beleaguered economy.
Any delay is good news for the banks of course, who came out fighting yesterday when Cable, having accused the banks of ‘special pleading’, argued that they were using the Eurozone crisis to push their own interests. As the banks have pointed out, bank lending tends to be quite handy to businesses, which are in turn fairly essential if you want to get the whole machine firing again. They are arguing that any ringfencing of their retail arms from other banking operations, a key tenet of Sir John Vickers’ banking commission recommendations (due out 12 September), would be way too big a job at a time when they are being told to focus on increasing business lending. And it would mean one arm could not add to the reserves of the other, thereby raising the cost of capital.
Of course, Cable is all-too-happy to support the counter argument, that banking interests have simply got too much pull with those at the top. If this is just the Government capitulating to the all-powerful banking lobby then that simply isn’t healthy, especially when it was the banks that got us into this mess in the first place.
No one’s saying this debate is simple, and there’s probably truth to all sides. It’s just a matter of putting it in an order that makes the most sense and involves the least risk. Yet it’s telling that it’s not only banking interests who oppose immediate reforms. CBI boss Sir John Cridland has argued that to press ahead at a moment of economic peril would be ‘barking mad’.
So it seems the business secretary can’t even get his message across to business. He may be forced to howl his message at the moon by night instead. Whatever happens, at least Cable can console himself by reading Alistair Darling’s memoir, due out imminently. According to the Labour Uncut blog, Darling uses the book to reveal his fear that UK bankers are ‘so arrogant and stupid that they might bring us all down’. So Vince, you're not alone after all…