Labour and the Conservatives are blaming each other for the failings at the Co-operative Bank in a bitter round of recriminations.
The daily stream of shocking allegations against former chair Reverend Paul Flowers has thrust the bank’s problems to the top of the political agenda.
It’s an irresistible story. He is a Reverend, former Labour councillor and former chairman of a distressed bank who has reportedly been caught buying drugs and fiddling £75,000 in expenses from a charity.
But Flowers is a bit of a sideshow. The bank needed a capital injection after it discovered a £1.5bn black hole in March, leading to the collapse of its bid for 632 Lloyds Banking Group branches.
It is worth noting the Flowers allegations have no impact on the financial strength of the Co-op Bank and very little impact on concerned bondholders.
Much less impact than the rescue plan, unveiled earlier this month, which would give bondholders 70 per cent control of the firm, cut thousands of jobs and more than 50 bank branches. But it was barely noticed by politicians.
There has been the inevitable rush of inquiries. An imminent independent inquiry into the Co-op, an FCA investigation into Co-op directors, an internal Co-op review of Flowers’ allegations, a police inquiry into Flowers and the ongoing Treasury select committee inquiry into its failed bid to buy the Lloyds branches.
The shocking allegations has brought in politicians. The Conservatives want to taint Labour through their close financial and political relationship with the Co-op group.
The group provides loans to the party, it has donated millions of pounds over 20 years and 32 Labour MPs are on a joint Co-operative Party ticket. Flowers was also a Labour member, now suspended, and sat on a business advisory group but the links to the party leadership are tenuous at best.
For its part Labour is trying to taint the Government over the failed bid for 632 Lloyds Banking Group branches.
It is asking if the Government applied any pressure over the bid and whether it pushed for better capital rules for mutuals, which would benefit Co-op, in the EU. Labour raised few concerns over these issues at the time and has regularly championed mutuals while there is no evidence the Government intervened in the Lloyds branch bids.
There are some serious questions to be asked about the Co-operative Bank.
The inquiries are a useful exercise but if the current political knockabout is anything to go by they may not be worthwhile. They should be asking meaningful questions.
How could someone with no banking experience, such as Flowers, become a bank chairman? Does it further the case for the abolition of the approved persons regime? How can mutual and co-operatives improve corporate governance?
Most importantly, what will the rescue plan mean for thousands of pensioners with Co-op Bank bonds? Are bail-ins the future shape of bank failure and is it preferable to Government bailouts? Has the PRA been too aggressive over capital requirements in the aftermath of the crisis?
Problems at the Co-op Bank spanned two Governments under three parties and two financial regulatory regimes. The solutions and recriminations should not be party political.
The inquiries will seek to answer lots fascinating and crucial questions about the future of financial services in the UK.
It’s hard not to be fascinated by the so-called “crystal Methodist” but political debate can do better this.
Samuel Dale is politics reporter at Money Marketing – follow him on Twitter here