Why Barclays can’t take the moral high ground

It’s a myth that the bank didn’t benefit from state support.

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The Barclays chief executive, Bob Diamond, attempted to seize the moral high ground today when he told the Treasury select committe that those banks that get into trouble should be allowed to fail. The man once described by Peter Mandelson as the "unacceptable face of banking" told MPs: "It is not acceptable for taxpayers to bail out banks."

Barclays, of course, did not receive any direct state support during the financial crisis, a fact that Diamond has often cited in his favour. But, as my colleague Mehdi has previously pointed out, although Barclays did not receive a pound of taxpayers' money, it benefited immensely from the emergency measures introduced by the government to prevent a sector-wide collapse.

As John Varley, the outgoing chief executive at Barclays, conceded in 2009:

There are two ways I would say the system as a whole benefited generically.

One was in the injection of liquidity undertaken by the Bank of England and a new structure put in place in March 2008.

And the other was the making available of guarantees from government for funding undertaken by banks. It is important to recognise that in each case the banks were encouraged to use these new structures that were put in place and we did.

It is also important to recognise that we were required and we did pay a price for these things, but I'm not trivialising the importance of the intervention. It was important.

And remember, too, as the Labour MP Chuka Umunna pointed out during the hearing, that Barclays narrowly missed out on buying the Dutch bank ABN Amro – the deal that brought Royal Bank of Scotland to its knees. Had history turned out differently, it would have been Barclays, not RBS, that required a £20bn bailout from the government.

As Umunna said to Diamond today, "You could have been the Fred Goodwin of the financial crisis . . . do you see why people don't think you are a suitable person to be running one of Britain's biggest banks?"

George Eaton is assistant editor of the New Statesman.