The banking crisis goes political

The UK banking crisis is now heading in a different direction. In the last week or so, four new themes have emerged.

We are bored with blaming the bankers

Blaming bankers for the crisis hit a high watermark last week with the treasury committee meetings.

Their apology went some way to defusing anger. With the exception of Crosby and the HBOS whistle-blower, the bankers managed to deflect many of the most serious charges. With Crosby's head now on the proverbial pole, the public are now looking elsewhere for culprits.

Certainly, bankers did their part in creating the crisis. However, it is hard to explain the entire economic crisis in terms of bonuses, corporate greed, and a lack of bank capital.

The Bonus issue is now settled

Finally, Brown got the message. It can not be business as usual. From now on, there will be no more taxpayer sector financed banking bonuses. The public simply won't allow it.

With all parties now firmly against banking bonuses, there is now little to be gained politically from actually stopping them. The issue was a missed opportunity for New Labour. If Brown and Darling had moved earlier, they could have rode out the anti-banker bonus popular sentiment.

The credibility of the FSA is irreparably damaged

The FSA is beyond saving. No one is prepared to defend it. With the UK now in the middle of the greatest financial crisis in a century, the public has lost confidence in the institution. It is only a matter of time before the government puts it to sleep.

The crisis will destroy New Labour

There are no more wild and whirling policy options left. The crisis is moving decisively from the economic to the political arena. As such, there is a heavy reckoning waiting for Brown and the New Labour project.

The list of economic difficulties facing the UK is now daunting; a comprehensive banking crisis, contracting economic activity, rising unemployment, falling living standards, an exploding fiscal deficit and a collapsing national currency. In short, the government has created the greatest economic disaster in a generation.

With a deep recession projected for the rest of this year, any recovery in 2010 will be too late to placate voter anger and we are in no mood to forgive the architect of boom and bust.