Whether he knew or not, it's looking bad for big banks

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Bob Diamond is clever. But he's not clever enough to oversee an organisation with assets of more than $2tn

On the question of Bob Diamond and Barclays, there are two possibilities:

a) Either he knew his traders were involved in a systematic plot to fix interest rates, possibly ripping off every single home owner, pension fund and business in the UK and America. In which case he should go, and probably to prison.

b) Or, he had no idea it was happening, which shows that such gigantic financial institutions are a rampant and unmanageable danger to the rest of us that should be smashed into pieces in the public interest. And he should go.

What became clear when the banking crises started in 2008 is that Wall Street banks in particular, of which Barclays is one, were beyond control. The man in charge does not understand his own company. He simply cannot.

Chief executives at Lehman Brothers, Bear Stearns, Merrill Lynch and others had no proper concept of what the banks they ran were really doing. Of what chances they were taking.

They took advice from the risk management division, checked in regularly with the head of trading, and let their eyes glaze over at screens of numbers describing positions they did not understand.

This is not because Dick Fuld at Lehman was stupid or lazy. And let's concede that Bob Diamond is a clever bloke. He'd kill you at chess.

He is still not clever enough to oversee an organisation with assets of more than $2tn, because the human who could has yet to be born. The human that can grasp what a trillion is in the first place is rare enough. (Thanks for asking. No, not really.)

So where we are is that big banks must be broken up, and not into two. At least four sounds better.

If banks want to give share tips to investors, fine. Advise on takeovers? Knock yourselves out. Trade on their own account in the derivatives market? Please do be careful. Take in savings and give out mortgages? Thanks very much.

But universal banks that do all of these things and more should be consigned to history as a terrible experiment gone wrong.

Barclays likes to insist – perhaps "pretend" is a better word – that it did not require taxpayer support to survive the credit crunch.

In reality, it benefits from a too-big-to-fail subsidy that puts the rest of us permanently in the frame for picking up its losses, even when it isn't ripping us off by manipulating interest rates.

Perhaps Bob Diamond's last – first? – act of public service will have been to demonstrate that Barclays in present form is too big to exist; that it should be broken up.

He could say that he had finally realised all this in his letter of resignation.