3rd July 2012
Just who called whom in the middle of the night to turn the Barclays chief executive from diamond geezer to another unemployment statistic is unclear. But that, and the decision to bring back Agius, must have involved the very apex of government and Bank of England.
The Libor rate-rigging scandal has taken its biggest catch so far. Where this will stop, no one knows – it could spread beyond banking into hedge funds or question the probity of the bond markets.
But for now, the unveiling of the interest manipulation has been the aftershock of the 2008 banking crisis – in terms of damage to the City of London's reputation for honest dealing, fair play and cricket, this is more harmful than the collapse of Northern Rock and the state rescue of RBS and Halifax-Bank of Scotland.
Scapegoat move failed
The "scapegoat chairman Agius to get the heat off Diamond" move failed – as it was always bound to do. It bought exactly 24 hours of reprieve. Investors have to ask what will come next. Ex RBS chief Fred Goodwin was the big banking scapegoat before Diamond – his disgrace pleased the crowd but achieved nothing in terms of re-inventing the banks, let alone reinvigorating the economy.
The question now is whether Diamond himself is the latest scapegoat – taking the problems of the whole City on his shoulders out into the wilderness – and whether his sacrifice will be sufficient. In ancient Greece a cripple or beggar or criminal (the pharmakos) was cast out of the community, either in response to a natural disaster (such as a plague, famine or an invasion) or in response to a calendrical crisis (such as the end of the year). In the Bible, the scapegoat was a goat that was designated to be outcast in the desert as part of the ceremonies of the Day of Atonement.
Restoring social order with a sacrifice
French philosopher Rene Girard believes that humans are driven by desire for that which another has or wants (mimetic desire). This causes a triangulation of desire and results in conflict between the desiring parties. This mimetic contagion increases to a point where society is at risk; it is at this point that the scapegoat mechanism is triggered, where one person is singled out as the cause of the trouble and is expelled or killed by the group. This person is the scapegoat. Social order is restored as people are contented that they have solved the cause of their problems by removing the scapegoated individual, and the cycle begins again. Scapegoating serves groups as a psychological relief valve.
Flying too close to the sun
Or is this a case of the Myth of Icarus? Icarus (Diamond) was given wings by his father Daedalus (the bank/the public) so he could escape the labyrinth (create greater shareholder value). His father warned him not to fly too close to the sun (not to be too greedy with bonuses) but he ignored that. So wanting more and more, he flew straight towards the sun where his wings melted.
Yesterday while still chief executive, Diamond sent out his latest missive to staff. In it, Diamond clearly believed he was uniquely positioned to deliver everything from shareholder value to community involvement. He told the 150,000 employees (of which he was one): "I love Barclays, and I am proud of all of you. We all know that these events are not representative of our culture, and it is my responsibility to get to the bottom of that and resolve it. Make no mistake the actions taken in this incident were against all of the principles we live by."
From bikes to billions
He had cut his way through a swathe of rivals to emerge at the top of the Barclays tree. Ultimately, he was responsible for everything the bank touched from trading billions in complex derivatives to deciding how many Barclays-branded hire bikes to sponsor on the streets of central London.
His self-belief was one hundred per cent – or more. His earnings were immense – what he wanted, he got. While he lasted, he was banking's Louis XIV, the French Sun King or Roi Soleil.
He dazzled the Barclays board until he quit. The directors believed (perhaps some continue to believe) that only Diamond could bring the benefits that the bank and its shareholders – equity price down some 40 per cent over the past year – so clearly need. He was seen as omnipotent just as Louis XIV said he was the source of all power, that all decisions must flow from him.
Under the reign of Bob Diamond, his personal fortunes and those of his entourage have waxed. Those of his employees (his "subjects") and those in wider society have waned by comparison. Huge bonuses have come to Diamond – small shareholders have seen their fortunes diminish.
Compare this with Louis XIV. According to this potted history, "during the reign of Louis, unrealistic spending habits and numerous wars put a great strain on France's economy. The financial standing of France appeared to be bleak and dwindling. Louis caused France's bankruptcy problems. In order to solve this problem, Louis developed a tax policy in attempt to offset the added expenses. Louis attempted to free France from its economic problems, but failed. The Nobles and clergy members were not taxed at this time and remained unaffected by the increase in taxes while the members of the working class were excessively taxed. This caused economic hardship and discontent among members of this lower class."
Louis XIV is also reputed to have said: "Apres moi, le deluge" (after me, the flood).
Will Diamond sing?
So what will be flood that follows Diamond? It could well start to flow at tomorrow's Treasury select committee when he is due – now without the constraints of a job although with an unknown severance deal – to give evidence. Will he sing? Or will he stay silent?
Will Diamond's resignaion start to clean the Augean Stables? Investors must first find a Hercules to take on this task. But in the meantime, it's down to Agius, criticised widely for his choice of Diamond and his acquiescence in the erstwhile chief executive's demand for a legendary remuneration package, to find a new king for Barclays.
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