A Martian checking in on Earth News for the first time since 2008 might well wonder whether our global banking history is repeating itself.

One of the world’s gold-plated banks goes rogue, the eurozone in crisis, and the bond market experiences a collective nervous breakdown.

It doesn’t take a Martian to work out that maybe all but nothing has been learned from the financial meltdown of 2008. Indeed, stop more or less anyone on any European street, or any American street, and they will tell you nothing’s been done to address the ingredients of the 2008 crisis.

JPMorgan: a tempest no longer in a teapot?

JPMorgan: not just any bank

The ‘tempest in a teapot’ at JPMorgan – first spotted by other traders and financial experts four weeks ago – involves all the stupidity and miscalculation that described the elements of the 2008 banking crisis. When a bank anticipates $17bn in profits in 2012, a $2bn loss may not sound too bad. But JPMorgan isn’t just any bank.

I have spoken with a close contact who worked in the upper echelon of the bank. He tells me that there has been a ‘cultural breakdown’ at the bank, not by a lone ‘rogue trader’ but by the entire team in the trusted department in which the losses occurred.

JPMorgan, largely spared in the 2008 crisis, has sported more than a century of ‘gold plated’ behavioural reputation. Not any more.

Greek tragedy

And all this against a backdrop of the Greek shambles and the vulnerability of the eurozone that it exposes. Beware Greeks bearing splits, the democratic crisis in the country, the uncertainty over its membership of the euro threaten banking and currency stability well beyond the eurozone, including our own here in Britain.

This is a dangerous time. We have become inured to financial scare stories. But this is no longer a scare, it is a fact. It might be wise for us all to tune in, and hang on to our hats, or should that read back pockets?

Amazing to consider that leaking budget secrets cost a chancellor his job way back in 1947. Hugh Dalton had a chat with a hack about possible tax changes, and the rest is history.

It’s taken 64 years but suddenly there is seemingly little or no budget “purdah”. The options are out there in the public domain being raked over by the minute and the red box is still several days from being opened by Mr Dalton’s current successor, George Osborne.

But where once a Budget leak was a leak, is it now perhaps a signal of open government? Why shouldn’t the priorities, options, deals, and the rest, be out there for public debate? The Budget may yet prove to be the last bastion of old style “hole-in-the-corner” British political decision-making. “Market sensitive, old chap”, was the old cry. Yet right now, we are told that there has been considerable pre-Budget activity in the pensions arena against much discussed Budget changes to the pensions tax regime.

Budget life is unlikely ever to be the same again. But the wider question is perhaps whether government life itself will ever be the same again.

Once upon a recent time, a U-turn was seen as a damnable ministerial failure. But the coalition government has suddenly sprung a succession of U-turns on an unsuspecting populace. Is the U-turn itself is suddenly transmogrifying into a positive concept: a “listening government” even?

Many news outlets are still obsessed with argument and fall-out between ministers and MPs within the coalition. But then individual governing parties of the past have themselves been argumentative coalitions – it’s just that we less often got a full read out of what was going on.

Despite failure after failure at political reform, it seems the electorate may accidentally have brought it about without a single new law being passed. Is it too optimistic to suggest that the Budget leak, and the more commonplace U-turn, have ushered in a new age of ‘open government’, without any of us noticing?

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Dateline Brussels: Strip out the British veto on a new full EU Treaty, and you are left with what appears to have been a pretty successful night of negotiations here. That is, if success is measured in terms of a middle to long- term commitment to secure and enhance the euro and the eurozone itself.

From the vantage point of my 11^th floor hotel room window I was able to gaze down on what I estimate to be the seventh floor in the commission building in which the eurocrats toiled away during the night hours – they were clustered in shirt and blouse sleeves at round tables, six or seven to a table. At times somnolent, at other moments animated, as the discussions behind closed doors ebbed and flowed.

At 5am David Cameron did not disguise the progress toward saving the euro. His emphasis on his own veto did not obscure the reality that 17 euro members plus some half a dozen aspirant members have agreed a much tighter fiscal regime, trading significant areas of sovereignty to achieve it. They also agreed an immediate infusion of some €200bn for short-term bailouts.

That UK veto is designed to protect the huge financial service industry centred in the City of London – a sector that accounts for a significant proportion of UK GDP. The very sector that precipitated the 2008 crisis has not however derailed attempts to save the euro. Britain’s withdrawal from the process may indeed render it easier, because without having to battle for a new EU wide treaty (process that could have taken years) a much speedier solution can be triggered.

The sense here is that Britain has finally left the top table, that a two-speed Europe  is under way – the UK, Czech Republic, Hungary, and Sweden in Division Two, the rest in Division One – or trying to get into it.

From the British perspective, Europe is likely now to become a far bigger issue. No one knows how damaging isolation may prove. Nor how advantageous.

Politically, euro-sceptics may sense the whiff of victory in their nostrils. My own idiosyncratic sense is that there could be a backlash particularly from new businesses, big businesses and the younger generation who, in a globalise world, may wish to explore the option of belonging to a wider, deeper, more fiscally responsible union, who knows.

But looking at David Cameron this morning, sitting 10ft from him, I wondered how comfortable he felt in his newly defined position.

A devastating article in the FT by the former chief restructuring officer in the US Treasury, Jim Millstein, provides a nasty wake-up. He suggests that the “symbiosis” between government debt and bank assets is so great that Europe’s banks have become too big to fail. “Insolvency of one threatens insolvency of the other”, he writes.

Millstein warns that ultimately, European governments will have to abandon their implicit guarantees to the banks in order to protect their own solvency.

‘Death spiral of interdependency’

This is the vast spectre that we are finding it so hard to quantify and hence report.  Millstein warns that European banks are now ‘too big to save’, and that in order to escape what he calls this “death spiral of interdependency”, the bank/government interdependency will either fracture, or be fractured by events.

Into this morass comes Angela Merkel, speaking yesterday at her CDU party conference in Leipzig. The German Chancellor has jumped. Her jump is toward deeper political union. This is the perhaps first step in persuading her people that they will have to play their part in the costly re-structuring of Europe.

On cue, Britain’s Prime Minister, David Cameron has jumped. He has jumped the other way. Speaking at precisely the same moment as Mrs. Merkel, he tells the City that this is the time for EU powers to go the other way – back to constituent governments.

EU tug-of-war

This dangerous tug-of-war is now in play in earnest. Perhaps the crashing of banks is what we can now see on our Christmas horizons; perhaps a Federal Union that lashes Germany to filling the rest of the eurozone’s coffers.

Who can tell in this moment? But I sat next to a prominent banker at dinner last night. He’s a man I trust. His bank may not be in the line of fire - but he knows an awful lot which are.

Hang onto the railings, the winds out there are mighty strong. Does Chancellor Merkel mis-speak when she tells her party: “this is the worst crisis since 1945″?

Stumbling out into the cold Brussels night air after a surprisingly upbeat summit outcome, I continue to wrestle mentally with what it all means. Profligate, even corrupt, activity in the capitalist system has cost us dear indeed. We can whinge about European institutions but in the end Europe is only attempting to do what Britain had to do – use taxpayers’ money to make good the consequences of market madness, mortgage absurdity, criminality, and greed.

But Europe lacks the tools that the British have – a Treasury, the capacity to print money and the rest.

In America they have more weapons, or perhaps a greater preparedness to use them. Wednesday saw the arrest of yet another high profile Wall Street financier. Rajat Gupta has been charged with insider dealing. Gupta was the boss the McKinsey management consultancy for a decade and is a former board member of Goldman Sachs. In terms of Wall Street seniority, he is by far the most senior operative to have been charged.

Such a move here in London’s Square Mile is all but unthinkable. For months at Channel 4 News we have been asking both the Serious Fraud Office and the Financial Services Authority when, or if, anyone is ever going to be charged with wrongdoing before, during, or since the 2008 financial meltdown. We have drawn a complete blank.

Yet prosecutors in Manhattan are sweeping through Wall Street in a kind of neo-reign of terror. Gupta is out on $10m bail. He faces 20 years in jail if found guilty. Another former McKinsey operative, Anil Kumar has already pleaded guilty to insider dealing. And of course the billionaire hedge fundista Raj Rajaratnam enters jail tomorrow for 11 years, for a similar crime. The district attorney has told us he has dozens more cases in the pipeline dealing with similar corruption.

So dear old London, now eclipsing New York as the world’s financial capital, is somehow squeaky-clean by comparison? It seems improbable. Is there not a danger that London’s supremacy will soon come to be seen as a tribute to its very soft touch when it come to the law?

If we cannot police the bankers any better than we did in 2008, what chance do last night’s delicately engineered structures of the eurozone have in shoring up the capacity to bale them out when they go wrong?

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A police helicopter hovering over the tented Occupy London protest group outside St Paul’s Cathedral has detected with infra-red cameras that in the early hours of the morning, only one in 10 of the tents had anyone inside. I’m indebted to the Daily Telegraph for this information.

If true, it certainly casts a new light on the nature of protest in the year 2011.

Clearly there is something somehow not quite right about a protest that gives the appearance of 24 hour dedication, but which in reality finds only 20 of the 200 tents actually occupied at 3.00 am. The whole issue somehow feels a little less urgent, a little less committed, than it seemed to boast.

But I’m more intrigued by the position of the church in the matter. The once permissive Dean and Chapter claim it is costing them tens of thousand of pounds a week to keep the place shut for “health and safety” reasons.

Attending a remote village church last Sunday, I heard the presiding cleric expressing her dismay at the attitude of the St Paul’s authorities in shutting the cathedral doors against the protest. She conjured the commandment “Love thy Neighbour”. Indeed the Dean’s initial reaction was to do just that and to tolerate the protest on his forecourt. Later, other counsels prevailed and he had the doors locked.

It begs the question: which neighbour to love? Should it be the banker, the financier, the hedge fundista, down the road in the Square Mile, or the neighbour on your forecourt ?

Christ, we are told, “cast out the money changers”. Have the Dean and his Chapter chosen the “money changer”, over the “common protester”?

On the other hand, when I “sat in” with hundreds of others, in a student protest in 1970, we never left, even for a shower, for six long and increasingly odour strewn weeks.

Now that it seems the protesters are not quite what they seem, is a blur developing with the bankers who claimed to be “doing God’s work?”

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It is extraordinary to be sitting in the United States in amidst these cathartic shenanigans on Capitol Hill.

(The figures Grief and History on the Peace Monument, near the US Capitol building, Washington. Image: Getty)

They talk about it on the beach here, in the supermarket and in Moby Dick’s seafood restaurant.

For whilst it is about debt, finance and economics…it is actually about none of them. It is about America. It is also, in a strange way, about us.

The US is vastly over spent, and over spending: hundreds of billions of dollars on the longest wars in modern history; a manufacturing base that has been exported to Asia, and a tax system that enables the rich to get richer, whilst more or less everyone else gets poorer.

It has always been easy for a Brit to sneer at America. We have needed to, to offset our own decline. But now we need to grow up and recognise that our “closest ally”, from whom we remain distanced by our common tongue, is in the deepest trouble most of us alive have ever known.

When I lived and reported from here in 1980′s, I sensed America had reached its Reaganesque peak.

Today, despite being the world’s largest economy, she is in decline. A decline accentuated by China and Asia
Sure, there is growth here – better than ours – but there is a withering too.

It is a withering of hope and aspiration – the very ideals Obama came to power espousing.  To read the papers, to watch the telly, this magnificent, accomplished – if sometimes misled nation – is psychologically on the floor.

Of course if you wander down Fifth Avenue in New York, it is buzzing.

The little village store here on Cape Cod is buzzing every evening, heaving with families buying for today. The morrow is another place.

High economic crisis, low politics. The immigration officer at Logan airport told me, as he inspected my finger prints – “Those guys in Washington? Scum!”.

So you get the Tea Party that doesn’t believe in tax and much else. Life does not divide into Republicans and Democrats. Just as it has long since ceased to divide into Tory and Labour.

Political tribal loyalty is all but dead. Individuals want individual answers to individual problems. God, political or otherwise, will not provide – even if some in the Tea Party think he/she will. Communities want community answers to community problems.

We landed up with a Coalition. But we are stuck with a Westminster which hasn’t seen radical reform in more than a century. Despite its enviable Constitution, “we the People”, presents a fossilised Congress that we have seen ‘in action’ in these present days.

We worry about democracy-free China. Shall we start worrying about democracy itself?

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Be afraid. Be very afraid. No, not of Murdoch, but of the looming financial crisis from which the phone hacking vortex shields our eyes.

The serendipitous daily drip drip of revelation has so consumed our naive appetites that our eye is as far off the financial ball as it has ever been. I know very little about high finance, but I know enough to know that when the price of gold assumes a level never seen before by mankind, there is something very ugly in the woodshed. The price per ounce of the stuff – $1,600 – is some record.

On any other day, a collapse in the share price of Lloyds and Barclays by a staggering 7% would have led every news bulletin in the land. RBS shed 6%. Need I say more?

Disparate Europe cannot see a way forward in the Greek debt crisis. The catastrophic fallout from allowing Lehman Brothers to go bust in 2008 has made cowards of us all when contemplating doing the same for a national entity like Greece. In short, no one knows where it would end… Dublin? Madrid? Lisbon? Rome? Shiver our timbers… London?

And I haven’t mentioned the madness on the Hill. The unending playing of politics with the American economy on Capitol Hill. Deadlock sustains as deadline looms.

Another test I understand is that of the Swiss franc. You have guessed it – yesterday it hit a record 1.1397 against the Euro.

Do not therefore spare a thought for the mere $1 billion that Mr Murdoch’s news Corp has lost in value since the hacking rumpus exploded on 4 July. It won’t stop us watching his Parliamentary grilling today. One suspects the old boy won’t know much detail, Rebekah Brooks will try to say little, on legal advice – leaving the focus on James Murdoch.

Oh, and while you worry about your bank, and your hacked/unhacked phone, do spare a final thought for the badger. It is to be officially announced today that he and she badger are for the chop, or rather the gas and the bullet. Rustic, rural, green-field England is going for the cull… maybe…

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I have been working in these last few days and weeks on a couple of documentaries. The most important of which is a shocking film showing alleged war crimes in the Sri Lankan civil war.

It will be going out at 11pm on 14th June on Channel 4, and was shown to the UN Human Rights Commission on Friday.

So I wake up this morning ready to focus on another news day and suddenly think what  a strange mix of matter swirls around our world.

On Saturday I had to dash to the Hay Festival – not an easy dash as anyone who has been will know. I did an onstage interview with Mohammed El Baradei on a video link from Cairo – he ran the IAEA nuclear watchdog in Vienna during the build up to the Iraq War – and he talked about endless US interference with his work. I also interviewed Rolf Heuer – an inspirational German particle physicist who runs the Large Hadron Collider at CERN on the Swiss/French border near Geneva.

He never let on, in our fascinating dialogue, that he would today announce that the collider has scored a huge success in capturing and holding “anti-matter” for some sixteen minutes. I’m not even going to try to begin to talk about it here, but I concluded when I spoke to him, that the work of his team at CERN in unravelling the history of the universe will have a profound impact on the future survival of us all. So today’s breakthrough is positive and significant. So that’s the good news.

The bad news is more or  less everywhere else. Gathering storm clouds over the UK economy. The appalling killing of Syrian demonstrators on the Israeli border on the disputed Golan Heights. The continuing slaughter of protesters inside Syria and the chaos in Yemen.

And the strange manoeuvrings of the Chinese navy in the South China Sea. Actually it may be worse than that. China’s Defence Minister says his country is pursuing “peaceful development”. But protesters in two Vietnamese cities this weekend argued otherwise. They accuse the Chinese of attacking a Vietnamese oil exploration boat. And China and the Philippines are at loggerheads over an atoll upon whose beaches both nations have been trying to unload oil drilling materials.

It won’t be the lead story tonight, but I’m beginning to think that this year in our world is one of the most challenging and potentially unstable in many years. So much happening – so little time to report it!

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It’s hard to imagine a more respected operative to answer the question – “what’s to be done about the banks?” Sir John Vickers is the Master of All Souls College Oxford, a former Chief Economist at the Bank of England, a former regulator, and a man whose academic research focuses on the economics of competition and regulation.

But is his report, in a sense, an Inside Job (see my blog on the Oscar winning documentary that spells out who got us into the banking meltdown and who is still in the system pulling the levers). Inside Job in the sense that the changes will take place inside the institution, there will be no external sign for wider society to see. Vickers’ interim report is no revolutionary manual. His rejection of a complete separation between “casino” banking and “retail” banking calms City nerves. Firewalls between these activities are his solution.

When you talk to senior City operatives, the banks they talk about are surprisingly not the state owned ones, but the PLC operations like Barclays who, whilst never bailed out, did take up taxpayer-provided funding to secure their activities. It’s hard to see how, if a big name bank failed in one sector, it would not inflict irreparable reputational damage on the whole bank. And we shall once again depend on regulators who have failed in the past, to detect and move on what is going on.

In short, banks in the UK, despite Vickers, most experts say, will stay more or less as they are now – unprosecuted. And the tax payer will still pay.

Cross the Atlantic to today’s news – US regulators to prosecute or sue the executives and directors in more than 100 lawsuits. The Federal Deposit Insurance Corporation is to make an example of “over aggressive executives or inattentive directors of the 348 banks that failed in 2008 and after.” $80bn is estimated to be at stake.

How many British banks and bankers have been prosecuted or sued by our own regulatory authorities? How many are to be prosecuted?

Banking? Still an Inside Job?