:00:10. > :00:14.-- boat overturned. Now it is time I talk.
:00:14. > :00:19.Britain's politicians seem to have conflicting impulses when it comes
:00:19. > :00:23.to the banks. They advocate root and branch reform to tame banking
:00:23. > :00:29.excesses. They bristle at suggestions that London might
:00:29. > :00:35.forfeit its status as the world's pre-eminent financial centre. My
:00:35. > :00:40.guess today, John Mann, was at the centre of the heated debate of UK
:00:40. > :00:50.banking. Can politicians impose their will on the huge banks
:00:50. > :01:10.
:01:10. > :01:15.without damaging Britain's economic prospects?
:01:15. > :01:22.John Mann, welcome to HARDtalk. Earlier this summer, you made a lot
:01:22. > :01:27.of headlines when you characterise to Barclays Bank as a "a rotten,
:01:27. > :01:31.thieving bank". Do you stand by that phrase? Absolutely, that's
:01:31. > :01:37.what they were doing by manipulating the market specific at
:01:37. > :01:42.the time - the LIBOR rate. inter-bank lending rate. So many
:01:43. > :01:47.banks depend on that. Fundamentally, that costs people money. It costs
:01:47. > :01:51.the poorest people money, who have sub-prime mortgages. It cost local
:01:52. > :01:56.authorities money, they lost money in the United States because of
:01:56. > :02:00.what they did. There were real losers, that is why what they did
:02:00. > :02:04.may well be criminal. It was certainly ethically and morally
:02:05. > :02:10.wrong. And we know that the bank has now accepted responsibility.
:02:10. > :02:20.The CEO, Bob Diamond, he has gone along with other senior staff. I
:02:20. > :02:23.come back to the phrase "Ben Rutten and feeding bank". -- a rotten. Are
:02:23. > :02:27.you suggesting that everyone better get out of that bank right away
:02:27. > :02:31.because it simply cannot be trusted? No, I'm not, because what
:02:31. > :02:35.I said at the time and repeatedly since is that Barclays was one of
:02:35. > :02:40.wants to many, over 20 banks that appear to be doing exactly the same
:02:40. > :02:43.thing. So they are all rotten and thieving, are they? It's the
:02:43. > :02:46.investment bank that's the problem. Not the retail bank, the high
:02:46. > :02:52.street bank that people see in their everyday lives, but
:02:52. > :02:56.investment banking. At its very core, investment banking that
:02:56. > :03:01.trades the financial crash from 2008, remains a rotten to its core.
:03:01. > :03:04.Excessively greedy, excessive risk. Also, clearly, potential
:03:04. > :03:09.criminality. That is why I used that phrase, it's absolutely
:03:09. > :03:12.accurate. I'm interested in language, you are a politician and
:03:12. > :03:17.language matters and the way you use it matters. You sit on the
:03:17. > :03:21.Treasury Select Committee in a certain position of influence.
:03:21. > :03:25.Other words you have used recently - you are talking about Morgan
:03:25. > :03:33.Stanley and other investment banks and use a "investment banks operate
:03:33. > :03:36.in cartels. They hunt as a pack and their profit as oligarchs". That's
:03:36. > :03:43.because they do. That's the fundamental problem with investment
:03:43. > :03:50.banking. I illustrated that with an ongoing example, the attempt to
:03:50. > :03:54.sell off Direct Line Insurance where a whole raft of insurance,
:03:54. > :03:59.investment banks, have been invited in to assist the process. That is a
:03:59. > :04:03.cartel situation. Do these words I am quoting from you - they make
:04:03. > :04:06.great soundbite and people like me love quoting them, but they're not
:04:06. > :04:11.really responsible politics, are they? They are not really practical
:04:11. > :04:15.in any way because you are surely not suggesting that these banks,
:04:15. > :04:18.which you describe as cartels, you like and then to wolves hunting in
:04:18. > :04:22.packs, profiting as oligarchs, you are not suggesting they should all
:04:22. > :04:25.be rendered illegal and tossed out of the country? No, but the culture
:04:25. > :04:30.within the in the way that they have behaved as fundamentally
:04:30. > :04:34.flawed. It is forward economically and it has created this financial
:04:34. > :04:39.crisis, the biggest crisis we have had since the 1930s. It's because
:04:39. > :04:43.of the way investment banking operates. It's been easy profits,
:04:43. > :04:48.excessive risk, but they have operated together in setting up
:04:48. > :04:51.these systems. The way this really works is the mergers and
:04:51. > :04:57.acquisitions, the asset stripping it takes place, whereby they
:04:57. > :05:02.getting to a company, as they have to do, under domestic laws, in
:05:02. > :05:06.order to advise those companies on a takeover. Having got the inside
:05:06. > :05:09.information, they are able to use their market position in order to
:05:09. > :05:13.manipulate the share price to ensure that whatever happens, they
:05:13. > :05:19.get their huge fees. That has happened routinely across the world
:05:19. > :05:22.and that is a fundamental weakness in the world economy. With your
:05:22. > :05:29.extraordinarily negative view of the integrity and value systems
:05:29. > :05:34.that operate within the big banks, why is it that when the New York
:05:34. > :05:41.State Department of Finance regulators, when they launched an
:05:41. > :05:46.attack on Standard Charter and other big British banks, you cried
:05:46. > :05:49.foul and appeared to suggest in public that they had no right to be
:05:49. > :05:52.castigating Standard Chartered Bank. Surely they would say exactly the
:05:52. > :05:58.things about Standard Chartered that you would say about other
:05:58. > :06:02.banks? No, I had castigated Standard Chartered and what they
:06:02. > :06:06.had done, and I was calling for them to be held to account. What I
:06:06. > :06:11.was challenging is the idea that this is a British problem, a London
:06:11. > :06:16.problem. I was doing so for two reasons. Firstly, because if it was,
:06:16. > :06:21.that creates a particular problem for our economy. Secondly, and more
:06:21. > :06:24.fundamentally, if it's wrong, that it's not a London problem, and
:06:24. > :06:28.that's how it's been analysed in the United States and elsewhere,
:06:29. > :06:33.then we would get the remedies. This is just as much a problem of
:06:33. > :06:36.America and the United States as it is of anywhere else in the world.
:06:36. > :06:42.It seems here that you as a politician allowed your nationalism
:06:42. > :06:48.to trump your stand against the banks. No, exactly the opposite has
:06:48. > :06:55.been going on. What is happening is that I would call it a political
:06:55. > :06:57.imperative in the United States that is restricting what they're
:06:58. > :07:01.doing in challenging their own banks. What we are doing is
:07:01. > :07:06.challenging foreign banks, in particular British banks. That's
:07:06. > :07:09.not true, you know that's not true. You cited, chapter and verse, or
:07:09. > :07:14.Morgan Stanley being hauled through the regulatory system time and
:07:14. > :07:19.again for alleged abusers. Whereas the publicity and the headlines in
:07:19. > :07:26.the US on that? They're all over the press, if you care to look for
:07:26. > :07:29.them.... It has been shown that Morgan Stanley violated the rules
:07:29. > :07:34.and the US regulatory authorities had come down like a ton of bricks.
:07:34. > :07:37.What's interesting is that we have to search for it. We have to look -
:07:37. > :07:41.because of the US banking secrecy Act we have to look at what the
:07:41. > :07:45.courts were seeing in order to get the reporting from the courts, in
:07:45. > :07:50.order to see what was happening. That contrasted totally with the
:07:50. > :07:53.way in which they have put British banks on the front pages,
:07:53. > :07:56.suggesting, and it is their language, that this is a London
:07:56. > :08:00.problem. It isn't a London problem, it's a problem of investment
:08:00. > :08:06.banking. But there is a profound problem in London, he would accept
:08:06. > :08:09.that? And also in Germany, Japan and the United States. But as an MP,
:08:09. > :08:19.it seems you would want to focus on the London problem. '' Boris
:08:19. > :08:22.
:08:22. > :08:30.Johnson who took a stand - Chartered -- standard Chartered
:08:30. > :08:34.were found... Boris Johnson said the US regulators were in danger of
:08:34. > :08:38.launching a self-interested attack on the London stage as the pre-
:08:38. > :08:42.eminent global drive off. I can understand why he was worried about
:08:42. > :08:46.that, why aren't you worried about that? The problem isn't London
:08:46. > :08:50.banks, not what's happening in London, but with international
:08:50. > :08:53.banks and the international banking community. If it was a situation
:08:53. > :08:58.that we are the ones who have got it wrong, then we could put that
:08:58. > :09:02.right. In a sense, it would be easy for politicians because we would be
:09:02. > :09:05.the ones who would have to catch up. I am not saying the exact opposite
:09:05. > :09:09.- there are things we need to put right in this country, because
:09:09. > :09:13.there are things. We have lax regulation. I have maintained that
:09:13. > :09:21.for a long time. As a Labour MP it's a bit embarrassing for you,
:09:21. > :09:25.isn't it? To use the euphemism of Tony Brown and Gordon -- Tony Blair
:09:25. > :09:30.and Gordon Brown, it's a light touch. We have had that from
:09:30. > :09:34.successive governments here. under Tony Blair and Gordon Brown
:09:34. > :09:37.there was a particular policy too, used the phrase again, engaged in
:09:37. > :09:41.the light touch regulation to make Britain an international financial
:09:41. > :09:46.powerhouse. There were very few of us who were outside that consensus
:09:46. > :09:49.in Parliament and around Westminster who said that that
:09:49. > :09:54.wasn't a good thing. Some of us thought that was a mistake at the
:09:54. > :09:58.time. The Americans thought it was a mistake at the time, which brings
:09:58. > :10:06.us back to this debate, I do want to take it too far, but the fact is
:10:06. > :10:09.there is a lot of evidence to support him died no -- the people
:10:09. > :10:14.who say that the light touch approach taken by Tony Blair and
:10:15. > :10:18.Gordon Brown was a catastrophic mistake. The lack of transparency
:10:18. > :10:24.in American investment banks that led to the situation of Lehman
:10:24. > :10:28.Brothers collapsing, accounting systems that allowed it to collapse
:10:28. > :10:33.with no-one intervening, that is just as much part of the problem.
:10:33. > :10:37.What we need to do is ensure we tackle the problems, not the wrong
:10:37. > :10:41.perceptions. London has problems, but they are not London problems,
:10:41. > :10:47.their international banking problems. Our regulation is to
:10:47. > :10:51.relax, but is what America had, Germany, Japan and the others. It
:10:51. > :10:54.is a world financial crisis. If it just was a British problem I would
:10:54. > :10:59.be there every day shouting that we get our act together and catch up
:10:59. > :11:04.to the rest of the world. If it were as simple as that... But it is
:11:04. > :11:08.not. The Americans concentrating on the London problem of the eggs them
:11:08. > :11:13.of their responsibility to look at why at this moment in time, for
:11:13. > :11:15.example, Mexican drug cartels have been highlighted with HSBC, but the
:11:15. > :11:21.vast majority of their money laundering is done through American
:11:21. > :11:25.banks. American regulators have sat on their farms about it. They
:11:25. > :11:29.should be even-handed with what they do. There are major problems
:11:29. > :11:33.in terms of the lack of transparency, the official culture,
:11:33. > :11:37.the amount of greed. We have spoken to American politicians and
:11:37. > :11:40.regulators and we challenged them about what they are doing. It seems
:11:40. > :11:44.that your responsibility right now as an MP and a member of the
:11:44. > :11:51.finance committee is to consider Britain's position, not the United
:11:51. > :11:54.States' position. You have got a problem because, just as you demand
:11:54. > :11:59.new regulation, new integrity in the British banking system, you
:11:59. > :12:06.cannot afford to see one of the most powerful sectors of the
:12:06. > :12:10.British economy neutered. response we should have to the
:12:10. > :12:14.international banking crisis is to ensure that our systems,
:12:14. > :12:20.transparency, regulation is effective. A simple question - do
:12:20. > :12:24.you want to see financial-services account for something like 10% of
:12:24. > :12:28.British GDP as they do at the moment? Would you like to see
:12:28. > :12:31.almost a million jobs in financial services? It is that something to
:12:31. > :12:36.be sustained and welcomed or is it something that Britain needs to
:12:36. > :12:40.leave behind? What I want to see is a financial sector here that lends
:12:40. > :12:45.to British businesses, that doesn't undermine the British economy
:12:45. > :12:51.because of its short-term culture. What effect would regulation, with
:12:51. > :12:55.fat sound basis... Answer the question, do you want a British
:12:55. > :12:59.financial sector that is as powerful in the future as it has
:12:59. > :13:04.been in the past? As successful in the future as in the past? If we
:13:04. > :13:08.can keep that many jobs, we should. The only way we will do it is by
:13:08. > :13:12.being ahead of the Game in terms of the regulation and the transparency.
:13:12. > :13:17.If we are behind, we will lose those jobs. Our banks will keep
:13:17. > :13:22.being hit. Well, that brings us to the specifics of regulation. The
:13:22. > :13:25.government is keen to act, it is pushing through this financial-
:13:25. > :13:28.services legislation which will beef up the banking. They have
:13:28. > :13:34.learned a painful lesson, perhaps, a Labour government has learned it
:13:34. > :13:37.too late from the past 12 years, that the tripartite system of the
:13:37. > :13:39.Bank of England, the Treasury and the fine edge will services
:13:39. > :13:49.authority acting together to regulate the financial sector
:13:49. > :13:51.
:13:51. > :13:55.doesn't work. -- financial-services authority.... I wish it was as
:13:55. > :13:58.simple as shovelling the decks and hoping everything will work out.
:13:58. > :14:02.That is not the Game we are in. Simply changing the structure does
:14:02. > :14:06.nothing. I fear that what we will have is the perception of strong
:14:06. > :14:12.regulation but the reality of nothing changing. An all powerful
:14:12. > :14:16.Governor of the Bank of England who doesn't, in fact, have the
:14:16. > :14:20.practical powers, the basis of legislation behind him in terms of
:14:20. > :14:24.criminal sanctions. Especially, doesn't have the effectiveness of
:14:25. > :14:28.driving down the transparency we need. None of that is there. In
:14:28. > :14:33.particular, the one thing we could do to improve international banking
:14:33. > :14:37.is put real pressure on the UK crown dependencies, the Cayman
:14:37. > :14:42.Islands, the Virgin Islands and others, where money is hidden away
:14:42. > :14:51.and no-one knows who has got what and where it is. It is fundamental
:14:51. > :15:00.to the financial crisis that we He would close down Britain's
:15:00. > :15:05.sovereign tax havens, were due? would use the full might of the
:15:05. > :15:09.British authorities. I would put that to them bluntly. If we don't,
:15:09. > :15:13.we are not fulfilling our proper responsibilities. It seems to me
:15:13. > :15:19.that you're putting the Governor of the Bank of England in a tough
:15:19. > :15:29.situation. You say he won't be able to deliver. At the same time, when
:15:29. > :15:32.he does deliver, as he did recently, leading to Bob Diamond walking out
:15:32. > :15:38.of the door of Barclays, you and your committee criticised him by
:15:38. > :15:42.saying it was not his right and duty to offer that explicit advice
:15:42. > :15:47.to a CEO of a bank. As you know, my comments at the time were to
:15:47. > :15:52.congratulate him and say he was quite right to use his perceived
:15:52. > :15:56.power in order to ensure that Bob Diamond went. I didn't criticise
:15:56. > :16:02.Mervyn King, I congratulated him. You know full well your committee
:16:02. > :16:08.did. The committee, some of them did. The chairman and I clashed
:16:08. > :16:12.over it. I think he was wrong on that. Mervyn King is the perception
:16:12. > :16:17.of power, though. What we need is someone getting in before these
:16:17. > :16:21.problems occur in the way we have seen. If he had intervene in the
:16:21. > :16:25.LIBOR three years ago, it would have fed a three -- huge difference.
:16:25. > :16:29.It seems that the Government's reforms are going to lead to a
:16:29. > :16:33.beefed up Bank of England, which will have extraordinary powers to
:16:33. > :16:38.regulate and monitor and oversee the financial sector and will not
:16:38. > :16:43.be tied down by politicians. You want the politicians to have
:16:43. > :16:49.authority. The Government says it is much better in the Independent
:16:49. > :16:52.tens of the Bank of England. Exactly the opposite. I wanted
:16:52. > :16:58.regulated independent of the Government. The Bank of England can
:16:58. > :17:01.never be fully independent of politicians. Politicians, the
:17:01. > :17:08.Chancellor and Parliament sets the remit of the Bank of England on
:17:08. > :17:11.monetary policy. That is why it can never be wholly independent. The
:17:11. > :17:16.policy parameters are set by politicians. That is the weakness
:17:16. > :17:19.in what the Government has done. can't do you get away with this.
:17:19. > :17:25.You've written that you want to see, for example, the most secret
:17:25. > :17:30.minutes within the Bank of England open to MPs to investigate and to
:17:30. > :17:35.look out. And to you, as a journalist. But why do you think
:17:35. > :17:37.the public, which has seen everything exposed about MPs
:17:37. > :17:42.fiddling expenses, what they've done with their own efforts to
:17:42. > :17:46.acquire money for themselves, why would the public want to see MPs
:17:46. > :17:52.given new powers over the Bank of England? Transparency creates
:17:52. > :17:56.better behaviour. We've seen that with MPs' expenses. The same thing
:17:56. > :18:01.that baking. You bring transparency into the arrangements, then the
:18:01. > :18:08.behaviour changes. A fundamental problem with the Independent --
:18:09. > :18:12.international banking has been risked taking. The best way to hold
:18:12. > :18:18.people accountable despite better transparency. That should be the
:18:18. > :18:21.aim of the regulation. That regulation. It's not all about
:18:21. > :18:27.regulation as far as you're concerned. You want to see a
:18:27. > :18:31.complete change of policy toward the city of London. You talk about
:18:31. > :18:36.taxes on derivatives trading and a ban on short selling. You want to
:18:36. > :18:44.reintroduce the bank bonus tax. You want punitive taxes on giant
:18:44. > :18:49.digital companies. If you got your way, the city of London as we know
:18:49. > :18:55.it today would be massively diminished, agreed? If I got my way,
:18:55. > :19:00.with those modest proposals, the city of London would actually
:19:00. > :19:07.flourish because it would ensure that will banking, effective risk-
:19:07. > :19:11.taking, fought out risk-taking, proper use of clients' money would
:19:11. > :19:15.happen. I think that would restore confidence, not tarnish it. I tell
:19:15. > :19:22.you what, it wouldn't. John Longworth, who represents the
:19:22. > :19:26.British Chambers of Commerce said, the point is that all businesses
:19:26. > :19:30.that create wealth, pay their taxes and comply with the law are good
:19:30. > :19:33.companies. He is talking about companies that you regard as rotten
:19:33. > :19:38.and thieving. Lehmann Brothers complied with the law and it
:19:38. > :19:41.brought huge financial problems across the world. The problem with
:19:41. > :19:45.Lehman Brothers is the could have been one of many investment banks
:19:45. > :19:49.that did it. That's the danger of banks that are too big to fail.
:19:49. > :19:55.When they go wrong, the taxpayer is required, not just in this country
:19:55. > :20:00.but many countries across the world, to bail them out. All we need to
:20:00. > :20:04.ensure is that there is proper controls to ensure those banks
:20:04. > :20:09.cannot hold the taxpayers to ransom every time they take too much risk
:20:09. > :20:15.for their own good. Not long ago we had David Miller Band on this
:20:15. > :20:21.programme. He made it clear that a return to the big state, as he puts
:20:22. > :20:27.it, is a political dead end. He says, bashing the bridge, bashing
:20:27. > :20:31.banks and big business will not work. He pointed out that at the
:20:31. > :20:36.last election not a single business endorsed Labour. If you get your
:20:36. > :20:41.way, that's just what's going to happen. Having set up and run a
:20:41. > :20:45.successful business, one of the few on the Labour benches, my instinct
:20:45. > :20:50.is that what business wants is the ability to lend money and get it at
:20:50. > :20:55.a reasonable rate. They want certainty in economic policy and
:20:55. > :20:58.banking. If businesses get that, then people are prepared to take
:20:58. > :21:03.risks to invest. That is what I want to see. That's what will
:21:03. > :21:06.create jobs. What is stalling the economy is the lack of that. All we
:21:06. > :21:10.need a banks that we can Reliant and that means that banks that are
:21:10. > :21:15.growing businesses can rely on. That's all we do not have at the
:21:15. > :21:22.moment. Do think there is a battle for Labour's economic policy making
:21:22. > :21:30.Saul at the moment? You and people like you are focused on bashing the
:21:30. > :21:35.banks. You are at one under the agreement -- one end of the
:21:35. > :21:39.argument. Tony Blair said we have to be credible with business. We
:21:39. > :21:44.can't go into the next election without the support of a single CEO
:21:44. > :21:50.from a big corporation. There are two different and so of this Labour
:21:50. > :21:54.Party argument, aren't they? wouldn't say I am at one end of it.
:21:54. > :21:59.I do not think it is nearly as simple as that. The issue is, how
:21:59. > :22:04.do we regulate banks effectively? Its in the interests of the
:22:04. > :22:07.shareholders of banks that fail will represented. It is in the
:22:07. > :22:14.interests of the shareholders of Standard Chartered that there is
:22:14. > :22:18.the transparency. The powers are want to see are the ones whereby
:22:18. > :22:22.there is the ability to ensure that shareholders' interests had been
:22:22. > :22:27.looked after. One of the big weaknesses but investment banks has
:22:27. > :22:34.been the way they have misused their clients' money. They had not
:22:34. > :22:39.looked after it in an honourable way. It is one of the big
:22:39. > :22:43.criticisms that has been there. That is affecting the markets.
:22:43. > :22:47.question is how radical are you prepared to be? De want to see the
:22:47. > :22:52.Labour Party adopt policies which, in essence, would use the law to
:22:52. > :22:56.force these sorts of changes in the way shareholders have powers, in
:22:56. > :23:02.the ways banks remunerate their top staff? Is it the more, you believe,
:23:02. > :23:08.must deliver? The ball is one part of the equation. As they are doing
:23:08. > :23:12.across the west of the world... told me earlier on that the US was
:23:12. > :23:15.lax when it comes to this, you now tell me they are moving forward.
:23:15. > :23:21.They have gone forward with legislation. They are beginning to
:23:21. > :23:26.legislate. It is a balance in the approach that is needed. We need
:23:26. > :23:32.effective regulation here. That's not big states. It's effective
:23:32. > :23:38.regulation. The two do not go together. It isn't about Government
:23:38. > :23:43.intervening. In the last four years, we have seen governments having to
:23:43. > :23:46.intervene with vast amounts of taxpayers'' money. That is what I
:23:46. > :23:51.fundament of the objective. We want banks that can stand on their own
:23:51. > :23:58.two feet, not banks that are relying on the rest of us, the rest
:23:58. > :24:03.of the economy, to bail them out. That actually is a much more open
:24:03. > :24:05.and free market system. In just a very few words, how confident are
:24:05. > :24:09.you that your vision of this radical reform needed within the
:24:09. > :24:13.financial sector is going to be delivered? Talking to people in the
:24:13. > :24:17.city, I don't think it's that radical. I think it's sensible. I