Yesterday we saw two remarkable events involving the banking sector. On the one hand, the largest corporate loss ever recorded by a British business was announced by Royal Bank of Scotland. On the other hand, Parliament heard the Chancellor announce yet another huge pledge of public money to the troubled banking sector.
This batch of proposals follows several earlier packages, none of which have done the trick. The banks are still starving businesses of cash. George Osborne is quite right to say that the details of this new package are a mystery. What Conservatives want is a straightforward loan guarantee scheme to encourage banks to lend.
I’d like to make another point, however. How did we ever allow ourselves to get to a position where bankers could legally bet the house on risky deals? Answering that question is likely to take a long time and solutions may be slow coming, but part of the answer has to be moral. Adam Smith wrote a book about the importance of personal ethics before he wrote the Wealth of Nations. If we continue with the cult of celebrity, where megabucks are worshipped and integrity is sidelined, we will not find our way back to the kind of stability which earlier generations took for granted.