Vince Cable took to the airwaves yesterday to express concern at the appointment of the American investment banker, Bob Diamond, to lead Barclays. My quibble with his comments is that the Business Secretary did not go far enough. He ought to have branded Diamond the most dangerous man in Britain.

Much attention has centred on his remuneration. It is true that Diamond is the very model of the overpaid banker. In 2007 alone he earned $42m (£27m). And he will soon be earning up to £11.5m a year. But disgustingly overpaid bankers are, sadly, no rarity in the City of London. What should concern us is less the size of Diamond's bonus than his gargantuan ambition and his miniscule judgement.

Ignore the plaudits from his cheerleaders and take a close look at his record. Diamond, as head of Barclays' investment banking arm, Barclays Capital, pushed hard for his firm to buy the Dutch bank ABN Amro during the credit bubble. The only reason the deal did not happen is that Barclays was outbid by an even more reckless banker, in the shape of Fred Goodwin of the Royal Bank of Scotland.

Diamond was at it again when the Wall Street firm Lehman Brothers found itself in serious trouble in 2008. The Barclays man was determined that the Wall Street giant would be his. And this, remember, is before Lehman filed for bankruptcy, an event so catastrophic that it sent the global economy into its worst slump since the Great Depression.

Just consider what would have happened if Diamond had got his way on either occasion. The toxic assets of ABN drove the Royal Bank of Scotland to the brink of destruction in 2008. Barclays would have been ruined in exactly the same way if it had secured the "prize" instead. An acquisition of Lehman would have been even more deadly. We now know that the Wall Street bank was already doomed, long before Barclays tried to buy it. A Barclays takeover would have put the British bank at the epicentre of the inevitable global economic meltdown. It was sheer dumb luck that Barclays avoided disaster.

Diamond gets applauded for building up Barclays Capital from a small operation when he joined in 1996 to the "player" it is today. He regularly attracts praise for snapping up the trading operations of the bankrupt Lehman Brothers relatively cheaply last year. But this is like praising the winner of a game of Russian roulette. Diamond seems to have a single strategy: buy, buy, buy. Warren Buffett advises investors to "be fearful when others are greedy and greedy when others are fearful". But Diamond's record shows that he is simply greedy all the time.

What happens when Diamond's luck runs out? What happens when one of his expansionist deals eventually blows up? Or when he aggressively drives the bank into whatever folly follows securitised sub-prime mortgages? Too bad for Barclays and its shareholders? If only the pain could be so quarantined.

The value of Barclays' assets (£1,378bn according to its latest report) is close to the size of the British economy (£1,400bn). This is the quintessential "too big to fail" bank. If this building collapses, we taxpayers will have no choice but to pick up the pieces, just as we had no choice but to rescue the entire banking sector in 2008. With the public finances in such a fragile state (in part because of that earlier effort to rescue the banks), it is by no means clear whether we could afford to do so again without ruining our sovereign credit.

The minister who has likened Diamond's promotion to "bank taken over by casino" has it exactly right. This is the clearest possible indication that the risk junkies of the investment banks are in control. And their focus will be on high-stakes trading, not improving current accounts. Diamond is interested in Wall Street, not the high street. And what makes him especially dangerous is the fact that banks and bankers have a herd mentality. If Barclays makes short-term profits from Diamond's aggression, the managements of other British banks will feel immense pressure from their shareholders to follow where he leads.

Attempts to curb the banks' appetite for risk will be fought intensely. Barclays and other investment banks have already hinted that they might move abroad if the Coalition Government mandates the separation of retail and investment banking. But this must be the most risible threat since Andrew Lloyd Webber suggested he would leave Britain in the event that Labour won the 1997 election.

A relocation of Barclays Capital to New York, spinning off the retail bank, would actually be good news, because the British taxpayer would no longer be underwriting the casino's bets. It must be very doubtful whether any bank would actually leave because they presently enjoy a taxpayer guarantee of their liabilities that drives down the cost of their funding. Sir Martin Taylor put it well when he told the recent Future of Banking Commission that "the investment banking activities of a universal bank [are] at all times parasitic on the retail bank balance sheet". As a former Barclays chief executive, Sir Martin should know.

And yet there remain defenders of the universal banking model in British politics. The former chancellor, Alistair Darling, was arguing again this week that he does not see the case for splitting retail from commercial banking. The mystery here is that Darling has experienced first-hand the dangers that attend the universal banking model. It was Darling who vetoed Diamond's efforts to buy Lehman Brothers in 2008, telling the US Treasury Secretary, Hank Paulson (who was pushing for a deal), that he did not want Britain to import America's financial "cancer".

In his blow-by-blow history of the financial crisis, the New York Times journalist Andrew Ross Sorkin quotes a message Diamond sent on his BlackBerry after the Barclays man had been informed that the British Government had quashed his plan to buy Lehmans: "Couldn't have gone more poorly, very frustrating. Little England." The implication being that this country was too small to accommodate Diamond's massive ambitions. No longer, though. Big Bob is now going to be in complete control of a very big bank in little England. And we taxpayers should be very scared indeed.

b.chu@independent.co.uk

For further reading

'Too Big to Fail', by Andrew Ross Sorkin (Allen Lane, 2009)