Ben Chu: It was lobbyists' influence that fostered this crisis

The banking lobby is a machine to turn profits into influence into rules to help keep profits high
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The Independent Online

What on earth did the banks need the services of firms such as Bell Pottinger, Finsbury and Lansons for? Britain's massive financial institutions surely have more than enough access and influence without the need to hire lobbying and public affairs firms to smooth the way.

As The Independent revealed last month, senior bankers met Treasury ministers nine times in the weeks after the publication of Sir John Vickers' report on structural reform of the sector last September. David Cameron's personal business adviser, Tim Luke, is an alumnus of Lehman Brothers and Barclays Capital.

When the banks want the ear of a minister, they don't need to hire anyone – they only need to pick up the phone. And yet six different firms were hired by RBS in 2010. It all looks like another case of a taxpayer-owned bank wasting public money.

But there's a logic to the banking sector's obsessive cultivation of its political connections. The banking lobby is part of a machine that has traditionally functioned by turning large profits into political influence which, in turn, is transformed into legislation and regulations that help to keep profits high.

Last month, one of Britain's top regulators, the chairman of the Financial Services Authority, Lord Turner, described in an interview with Prospect magazine how US financial lobbyists deliberately exerted their influence over members of Congress to starve American regulators of the funds they need to perform their oversight of the system.

"If I were American, would I be worried about... the power of big lobbyists in general and the financial system in particular? Yes, I'd be hugely worried," he said.

And what of British politicians? Here's how Lord Turner summed up the problem before 2008: "There was a belief that light-touch regulation would make the City bigger, and that the City was a source of employment and tax revenue in particular. And therefore there was clear pressure on the FSA at times to say, go easy on the City." And what did that disastrous mindset say to our political leaders? Look to the influence of the indefatigable financial lobby.

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public," wrote Adam Smith in The Wealth of Nations. Today, one suspects, he would find the biggest conspirators against the public interest lurking in the sprawling financial lobby.