The financial chaos around the world is obviously going to dominate the first few weeks of the new Parliamentary session. I noticed a few commentators wondering why Parliament wasn’t recalled early – maybe yesterday’s response to the Chancellor’s statement provides sufficient answer.
The markets are so very jittery – nervous wrecks might be a more apt description – that any word out of place by the wrong person and calamity follows almost immediately in its wake. In the case of Alistair Darling’s statement yesterday it seemed to be more about which words didn’t find a place in his statement, rather than any that did. The markets wanted to hear that the government had found a magic wand, one wave of which would solve all their problems. In practical terms they were probably looking for a huge injection of capital with as few strings as possible attached. They really were in fairyland.
It looks ever more likely that there will be a further offer of public funds to shore up British banks but it will have tough conditions attached to it. These may come in the form of high dividend expectations, profit shares that guarantee and eventual benefit to the public purse and tough restrictions on the levels of pay for executives and traders. It is simply impossible to imagine anything less getting through Parliament. After all, the political centre of gravity of our Parliament is several paces to the left of that of the US Congress and they extracted a heavy price for backing the $700bn bail out package
Another parallel with the US that we can expect to experience here is a severe grilling of anyone with any taint of guilt when it comes to causing the crisis by any Parliamentary committee that can get its hands on them. Yesterday’s grilling by House of Representatives oversight committee of ex-Lehman boss Richard Fuld gives a very appetising taste of what is to come on both sides of the Atlantic: it certainly won’t be for the squeamish.
I relish the prospect of John McFall’s Treasury Select Committee sinking its teeth deep into assorted regulators, bankers and traders during the autumn; it will be real political blood sport. Given the recent record of that committee, it should also be quite revealing and give us some idea whether any of them have a clue as to what they have unleashed, let alone ideas for controlling it.
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