James Moore: Only the US has muscle to make banks behave

Friday 22 January 2010 01:00 GMT
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So plucky little Britain stands alone as the only country to set out concrete proposals to crack down on the appalling greed shown by bankers.

France has said it is planning a similar move, although there are no details yet and a fight is already brewing. Meanwhile other financial centres have discretely been running marketing events in an attempt to spirit away at least some of London's business. There appears to be plenty of interest.

As any number of banking executives have pointed out, the financial services industry is very mobile. The threat to quit Britain over the tax made by some bankers is both sickening, and cynical. But it is real.

That's the problem with unilateral measures. And that's why they have yet to be followed by anyone else. Until, that is, President Barack Obama decided to join in. The advantage he has is that it's much harder to threaten the US President. He sits at the head of the world's biggest economy, many of the world's biggest banks are American and he has the tools to haul them into line.

Even places like Switzerland fights shy of taking the US on. Just ask UBS which has been forced to provide details of hundreds of suspected US tax evaders to the authorities. In terms of finance you just don't mess with the US. Which is why Mr Obama can table a plan such as his "crisis responsibility fee" which will raise $90bn over 10 years. The US banks might moan, but they know they had better not start making threats, or it will be the worse for them.

Bankers are cynical people, devoted solely to the cause of making money. Their executives are adept at playing national governments off against each other. One reason that Britain was so attractive to them was that its "light touch" regulatory regime imposed so few burdens on them. Much less than in most other major economies. Given that, we can hardly be surprised if they fail to follow our lead.

Ultimately, though, even Britain's rivals know that action does need to be taken to rein in this bloated and grotesque industry. The only way to do that is through co-ordinated international action. Action that will, because of its pivotal position in the global economy, have to be led by the US.

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