At a fringe event at the LibDem conference in Bournemouth last week, Cable said if the City was allowed to operate as an unfettered global industry, then the banks would allocate resources on a global basis and act purely in their commercial interest but taxpayer ownership changes this dynamic.
He said: “One has to ask the question that, because they were rescued by the British taxpayer, is it not then reasonable to ask that their lending behaviour be directed in the British public interest?
“I feel uncomfortable with that argument myself because I am a free trader. I am against protectionism. But when you have a system whereby it is national governments that underpin banks and which are called upon to guarantee and rescue them, those governments can quite reasonably say those institutions have to act in our national interest.”
Cable said if a bank is operating purely commercially, it may well be in its interests to be the biggest in the world but if the bank depends on the taxpayer to bail it out, then perhaps it should not be allowed to grow that big.
He also likened the impact of the credit crunch on the reputation of bankers to the impact that the expenses’ scandal had on MPs. He said: “I do take the point that it does not help anybody to stigmatise, to stereotype large sections of the business community.
“I probably have been guilty in the past of referring to bankers as if they are some discrete group of people and it is hurtful for people serving in the branches of some of the banks to be described in precisely the same way as Mr Bob Diamond of Barclays Capital, who is in a different world.”