Banker-bashing gathers momentum post Pittsburgh

In his post-G20 interview with Andrew Marr yesterday, Gordon Brown vowed to introduce legislation to curb bankers' rewards and stop the banks returning to the sort of irresponsible behaviour that triggered the financial meltdown last year.

The Prime Minister told Marr he believed the British public, with its innate sense of fairness, was "appalled" by what it had learnt of the practices of the banking system.

"I have become utterly convinced as I talked to my colleagues in Pittsburgh just how far we have to go... We are going to clean up the system once and for all," he said, adding that the measures will "represent the toughest action of any country in the world".

Despite fears that banks will simply move their operations if politicians seek to over-regulate, the drive towards forcing social and economic responsibility on the profession and its institutions appears to be gathering - at least rhetorical - momentum.

On Friday, President Obama hailed "tough new regulations" for global financial institutions after the G20 summit in Pittsburgh.

But while they may enjoy taking the moral high-ground on the issue, politicians are correctly nervous of introducing bonus caps or other regulatory measures on the banking system. Western banks may have recorded $1.6tr in losses and write-downs, and the global economy may still be dependent on central banks assuming ever greater long-term stimulus debt, but capping bankers' pay is a certain way to alienate not only bankers' votes but, more importantly, a vital source of party funding.

And for all the high-minded talk and bluster, G20 members came away from Pittsburgh with no framework on how the international financial community could force bankers towards long-term financial responsibility or methods of curbing "multi-year guaranteed bonuses."

In the Unites States, bureaucrats are promising increased enforcement of existing regulations by stepping up the prosecution of wealthy individuals suspected of dodging taxes through off-shore accounts. In a classic carrot-and-stick approach, authorities have extended an offshore amnesty programme while promising to make individual tax prosecutions public "every couple of weeks". Government officials are greatly encouraged by the successful pursuit of UBS, the bank that agreed to disclose the names of 4,450 US clients holding secret offshore accounts over the summer.

"The UBS case has been a great success for the government," Kevin Downing, a senior attorney in the tax division of the Department of Justice told an American Bar Association tax conference. "It is not an anomaly. It is the beginning of what is now a resource-intensive, process of going after other banks and countries."

US prosecutors say they are finding juries amenable and attentive to cases involving fraud or tax evasion - "especially in these tough economic times."

Is this really just a vogue for punishing the rich? Possibly. But in the aftermath of the Madoff swindle the rich are in a mood to punish their financial experts, too. Investors have grown contemptuous of their advisers and bankers, says the US financial weekly Barrons. "I'm better off assuming that all these people are only out for themselves," said one ultra-high-net-worth investor, responsible for billions of dollars in family investments.

That kind of deep distrust is starting to dramatically reshape the world of wealth management, where banks, brokerage houses and other investment outfits compete to serve millionaires and billionaires, says the publication. It cited consulting firm data showing as many as four out of five wealthy investors are now thinking about firing their wealth managers and selecting new ones.

"If there isn't an extraordinary degree of transparency and communication, it's inevitable that the level of trust in their adviser will decline," says Maurice Schweitzer, an associate professor at Wharton, the US business school. "They're going to be asking for extra reassurance in many areas."

It's completely reasonable, Schweitzer adds: "The Madoff debacle showed people that they might not be able to trust the printed statements they got from their adviser."

But Madoff, now safely tucked away in prison in Butner, North Carolina, is an easy target. Prosecutors said last week that a review of most accounts held by the infamous swindler when he was arrested shows that about half of his customers had not lost money - because they withdrew more money than they originally invested.

Their disappointment and rage, then, was over returns they merely anticipated at Madoff's generous rates of return...