It has taken £37 billion of public money to unseat four senior board members from some of the largest of the UK banks. Despite weeks of turmoil in the financial markets, caused largely by banks who had got themselves involved in trading financial derivatives of dubious value and provenance, until today few heads had rolled at the banks.
The Uk governments bail out of the banks which was this morning revealed to be costing around £37 billion has it appears come with strings attached and this has included severe restrictions on remuneration packages and bonuses for the members of the boards of the banks. The report that four senior Bank board members are resigning also appears to have been part of the package that was negotiated over the weekend.
The largest part of the bailout money has gone to Royal Bank of Scotland and seen the resignation of Fred Goodwin its chief executive. Not before time will be the reaction of many to this news. Indeed the surprise is not that resignations have now happened but that it took this long for corporate responsibility to be demonstrated.
HBOS ( Halifax bank of Scotland) has also now negotiated a major re-capitalisation fund with the UK government and this leaves both RBS and HBOS now in effect as part nationalised banks.
Both of these banks are nominally Scottish institutions and on one view it could be seen that this is a massive failure of the Scottish financial establishment. It is arguable that the last time that Scottish finance was so near disaster was during the 17th century Darrien adventure when Scotland had to be effectively bailed out by the Union to prevent financial collapse.
This analogy has some merit but it should be noted that RBS and HBOS, although nominally Scottish, are in reality cross national institutions with major business across the UK and worldwide so this is not so directly a bail out of Scotland. Nevertheless this debacle has not been good for the Scottish financial brand. The largest financial Scottish business brands have in effect now been nationalised by the state to prevent them going under.
The longer term political ramifications of all this are still to emerge. It is unclear what lessons the Scottish ( or indeed UK) electorate will draw in regard to the question of possible Scottish Independence. Alex Salmond of the SNP has been remarkably quiet over the last week so the assumption must be that he sees little advantage for the case for independence at this point.
The impact on Gordon Brown's standing in the short term will almost certainly be to the good. He has been seen finally to have acted with good firm leadership. Indeed the bailout plans emerging around the world bear a striking resemblance to the plan that first emerged in the UK. For this he and the chancellor may be able to take much credit. The markets appear to have stabilised today and hopefully the worst of that turmoil is behind us.
In the medium term though the electorate may not judge the matter so kindly. it may have been Thatcher who first de-regulated the markets but this crisis has its roots and developed during Gordon Browns watch. In the near future he must answer some pointed questions about the failure to monitor and regulate what was going on on the markets.
The Tories are unlikely to take much comfort from what has happened either given that they are the prime proponents of de-regulation.
So who wins out of Darrien 2? Well no one really. We will all pay over the next year or two for the overwhelming greed of the bankers and financiers and from our own desire to expand our lifestyles through excessive credit.