Two decades ago, I attended one of the most gripping press conferences of my life. It was called by Andrew Buxton, Barclays' then-chairman, to apologise for the bank's £141 milllion loss, mainly on reckless property lending, and to announce that he would be halving his job by resigning as its chief executive.
Mr Buxton, an upright, uptight member of one of the posh families that formed Barclays in 1896, was nonetheless pilloried by the Fleet Street tabloids for closing branches and denying small businesses loans. I recall his ashen expression as a man from the Mirror boomed at him from the back.
Here we are again. Barclays is back on the front of the tabloids and its chief executive has resigned. The difference is that Bob Diamond is about as far removed in skills and demeanour from Mr Buxton as it is possible to be. Then, Barclays was honourable but incompetent; now it appears to be the opposite.
"Goodness was not taken into account on the trading floor. It just was. Or it wasn't," wrote Michael Lewis in Liar's Poker of Salomon Brothers, the pioneering bond trading firm of the 1980s. "The place was governed by the simple understanding that the unbridled pursuit of self-interest was healthy."
Such cheerful amorality used to be confined to banks of which most people had never heard – places such as Salomon or Lehman Brothers. They tussled daily with the "big boys" – investors, insurance companies and corporate treasuries that were supposed to be able to handle themselves – even if they could not. The behaviour of Barclays' swaps desk shows it is not any more.
For now, the firestorm is already moving to the other form of lying uncovered in the Libor affair – the nods, winks and coded hints given by the Bank of England and "senior Whitehall officials" for banks to "lowball" Libor estimates in October 2008. The powers-that-be wanted to prevent investors and depositors getting frightened.
In the longer-term, the question is how to reform high street banks that now employ financial traders who exclaim: "Dude, I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger," to a colleague who distorts a quasi-official index for profit.
An obvious start would be to clear out the investment bankers who now run universal banks – Stuart Gulliver at HSBC, Brady Dougan at Credit Suisse, Stephen Hester at RBS – and return to high street banks being run by high street bankers. They may be honourable individuals but, as a group, they symbolise the relentless ascendancy of the securities trading floor.
"It would be a very good thing if an awful lot of people lost their jobs in a lot of banks," says one former bank executive. "Not because I wish them ill but because only by making many examples will you get through to people that this is a very important business."
Boards are unlikely to do that until banks are broken up. This generation got to the top by being clever and worldly enough to understand institutions that are very complex and opaque. The late Sir Brian Pittman of Lloyds, exemplar of the astute high street banker, carefully avoided "merchant banking", as it was then known, as being too much trouble.
Reinstating the barrier would be a sound idea in itself – it would create more manageable institutions. The argument that the City of London would lose its global competitiveness ignores the fact that Goldman Sachs and other Wall Street firms swept through the City while Glass-Steagall was still firmly in place.
But even if this scandal gives such reform momentum, we would still be left with a set of too-big-to-fail investment banks in which amoral behaviour is deeply embedded. In the decade when Mr Lewis joined Salomon in London, that wasn't too big a problem. Now it is.
Mr Diamond half-acknowledged this failure of legitimacy in a lecture last year, saying that banks "have done a very poor job of explaining what we contribute to society". He listed a set of primary activities such as mortgage lending – the things that economies clearly require – before venturing into a wider defence of market-making and trading.
"[Banks] put capital at risk in order to discover what the market is willing to pay. When [they] do this well, interest rates are lower," he said. In theory, Mr Diamond might have been right. In practice, his own swaps desk spent years distorting interest rates in whichever direction happened to be profitable.
The Libor scandal is still spreading and could yet become the banking version of the Milly Dowler and Stephen Lawrence scandals for Fleet Street and the Metropolitan police: an incident that makes unacceptable an old-established newsroom, locker room, or trading floor ethos.
I would not count on it, though. This is not the first time that traders' embarrassing emails and conversations have been made public – remember Goldman's "Fabulous Fab" Tourre and his ruminations on the social worthlessness of mortgage-backed derivatives? The culture of the trading floor is remarkably immune to shame.
It would take a fierce assault by a new set of leaders and by regulators to have much impact. As Adair Turner, chairman of the Financial Services Authority, remarked this week of the FSA's light-touch regulation of investment banks that operate by caveat emptor: "Shoddy wholesale practice is not a victimless act, even in those cases where it is not defined as a crime."
Trading is now being subjected to higher capital standards. If the long-term reputational risks were fully accounted for, banks would be less eager to promote it. As entertaining as Mr Lewis made it sound in Liar's Poker, the trading floor has lost its amusement value.
Copyright The Financial Times Limited 2012.
Shutting down banking's amusement park
Patience is finally wearing thin with the banking sector's shamless trading floor culture. It's time to clear out the investment bankers who run universal banks and return to high street banks being run by high street bankers.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free