Former HSBC boss Stephen Green, now a minister in the government and an adviser on banking to George Osborne. Photograph: Dominic Lipinski/PA Wire
When the latest financial scandal hit HSBC yesterday, Ed Miliband pulled out his phone and sent a tweet: “HSBC scandal shows why we need a wide, judge-led inquiry on culture and practices of the industry. Cannot bring change we need without it.”
The Labour leader is right, of course. We badly need an independent public inquiry, so that more people understand the danger of banks that are too big to fail, too big to rescue and too big to manage. But Miliband’s tweet also unwittingly brings home the absence of any coherent counternarrative about finance on Labour’s part. What exactly is Miliband’s “change we need”?
Over the last 10 months I have kept a banking blog on the Guardian website, featuring interviews with people working in finance. The blog has elicited thousands of comments, many of them bristling with anger and despair over a crucial sector that shows every sign of being seriously out of control. Yet in those 10 months not a single reader left a comment along the lines of “if only Labour was in power …” or “This latest scandal shows once more the need for swift implementation of Labour’s plans for …”
It’s one of the defining issues of our time â€“ how to bring the financial sector back under control. But as it stands, all three major parties seem to be in the same camp: implementing the Vickers report which mandates the untested “ringfencing” of investment and retail banking plus more capital reserves â€“ in 2019. If there is a fundamental, paradigmatic difference in approach between the government and the opposition, the public has yet to be told about it.
This is not how democracy is supposed to work, and the consequences can be felt with every new scandal. In the absence of a credible alternative vision about financial reform, we are left with outrage and futile symbolism each time a new scandal breaks. It’s always a variation of the following sequence: denials, apologies, hearings, sacrificial sackings or resignations â€“ followed by calls for more sacrificial sackings. Every now and then a knighthood gets stripped, but that’s it.
How bad does it have to get before politicians act? Four months ago the scandal season kicked off when Goldman Sachs banker Greg Smith published a resignation letter in the New York Times accusing his superiors of ripping off clients whom he alleged were referred to as “muppets”. Huge uproar ensued, but in retrospect that affair looks like a minor skirmish compared to what was to come. Since then we had the IT mess at RBS and the huge loss at JP Morgan â€“ demonstrating that America’s biggest too-big-to-fail bank is still not under control. We had more revelations about “mis-selling” (essentially defrauding) by British banks, and of course the Libor scandal â€“ suggesting that big banks colluded to rig a crucial interest rate.
Then yesterday this week came revelations that Europe’s largest financial institution, HSBC, accepted around $15bn in cash from money laundering Mexican druglords, al-Qaida sympathisers and sanction-busting Syrians and Iranians. Fifteen billion dollars. All of this happened under the leadership at HSBC of Stephen Green who is now a minister in the government and an adviser on banking to George Osborne.
If there was ever the time for Ed Miliband to lay out his vision for financial reform, it’s now. Does the UK want to have banks each with a balance sheet the size of the whole economy, making them too big to fail? Can those balance sheets grow further, making those banks too big to rescue â€“ if they aren’t already? Is it even realistic to assume that a highly complex global bank with tens if not hundreds of thousands of employees can be adequately managed at all?
A compelling vision of the future ofÂ finance would weave answers to thoseÂ questions into a coherent oppositional narrative. Is this the time? Maybe Miliband is more strategic than he is given credit for. Maybe he is biding his time, thinking that with the state of the banking sector today, the scandals will keep on coming. And so far, each has been worse than the last.
Follow Joris Luyendijk’s banking blog atÂ guardian.co.uk/bankingblog