Bob Diamond was always greedy and dangerous

Warren Buffett says that the secret of good investment is to be fearful when others are greedy and greedy when others are fearful.

Back in 2010, I wrote that the plaudits that commentators were showering on Bob Diamond for snapping up Lehman Brothers’ trading desk cheaply in 2009 were misplaced because his record showed he never displayed any discrimination, but was simply greedy* all the time.

Martin Taylor, a former chief executive of Barclays, writing in the Financial Times today, provides more evidence of that greed and bad judgement.

He reveals that Diamond was pushing for Barclays Capital to increase its exposure to Russia shortly before the country defaulted in 1998.

Taylor claims he said “no” to Diamond and set tight on his Russian exposure. But BarCap, under Diamond, extended it anyway:

“It had falsely marked some Russian banking counterparties as Swiss or American, and had blasted through the ceiling.”

So next time you hear Diamond’s much diminshed band of defenders reach for the Lehmans acquisition to justify his record remember that the man had only one setting: load up on risk and expand. Is that someone you’d want in charge of your money?

Taylor goes on to claim that he left Barclays because the board would not listen to his proposals to split up Barclays or his arguments that it was too dangerous to mix BarCap-style investment banking with ordinary retail banking.

He also says that this problem is what the reforms of the Vickers Commission, of which he was a member, will resolve.

Sadly, that’s hopelessly optimistic.

As I wrote last week, Vickers is a half-baked measure. It would “ring-fence” retail banking operations within a larger group. But those operations would remain firmly a part of the larger organisation. And remember that these businesses – RBS and HSBC and, until last week, Barclays – are run by investment bankers.

Only a full break-up of our banks will protect taxpayers from being forced to underwrite the gambling debts of the Bob Diamonds of this world. The Government needs to scrap Vickers and go back to the drawing board.

*And greedy in a personal sense as well. Taylor suggests that Diamond made a personal profit out of the deal that saved Barclays from nationalisation.

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  This is no defence of Mr Diamond but he was one of a kind and it seems every major bank had one. HBOS & RBS certainly had their own greedy high flyers. It doesn’t seem to matter whether they were investment bankers or retail bankers – the end result has been the same & two things are amazing about these people:

  1. They were allowed to destroy the economy unhindered by either conscience or regulation.
  2. Successive governments absolutely refuse to acknowledge these people, in positions of ultimate responsibility for major banks, should be held responsible.

  And here’s a true picture of our political class: Ed Miliband is admirably calling for banking reform and a full public inquiry after previous labour leaders refused for years to stop bankers bankrupting the Country; meanwhile, Mr Cameron, who got into power with his admirable words about how he would make sure bankers were brought to book, has done a complete U turn and chosen austerity for the masses as opposed to reining in his banker buddies or the major institutions who refuse to pay their taxes.

  The icing on the cake is how the public are now expected to accept the myth that there is no law applicable to bankers. None of the laws relating to fraud, theft, corruption or money laundering can be applied to our masters of the universe because, very clearly, this Government, like the last one, has given them immunity.

  Are we a democracy? I don’t think so.