He who pays the piper

Tweet Peter Black draws attention to a story in the Observer yesterday, "How short-selling profited the Tories". The Observer is not always the biggest friend of the Tory Party, of course. However, the Sunday Times, which is much more well-disposed towards them, also carried much the same story, under the heading "Short-sellers bankroll Conservatives". They both list a number of managers of hedge funds who have donated handsomely to the Conservatives, although they both appear to have missed our friends Christofferson, Robb from the list, despite their kind contribution of £181,000.

I suspect that that is because the stories were based on the information about the membership of the "Leader's Group", which is for personal rather than corporate donors. Most of the other hedge fund donors appear to have donated from their own personal share of the profits from their 'work', rather than that of their companies, it seems. The Observer claims that the information about membership of the Leader's Group has been placed on the Conservative Party's website, "in an attempt to quell a mounting row over the party's finances". I have to say that if it has, then I can't find it.

On Saturday, Tomos Livingstone in the Western Mail said that Cameron faced a difficult choice in his address to his party's conference about how far he should go in responding to what Gordon Brown said last week. Amongst his comments, he suggested that Cameron might want to try and distance himself from the 'share-dealing bogeyman'. He reports today that Cameron has duly obliged by stating clearly that bankers and financiers had "no influence over my policy at all".

So, that's alright then? Not exactly, no.

While his party is being bankrolled by these people, stating that their financial support has no effect on his policies is about as convincing as Labour's first reaction some years ago when they received £1million from the boss of Formula 1, and claimed that it had had no effect on their decisions. It didn't wash – and they eventually had to give the money back.

The precedent is a clear one; if the Tories want us to believe that they are not in hock to the bankers and hedge funds who have come so close to bringing down the entire financial markets, there is an obvious step that they can take - count up all the donations from those concerned, and return them, with a polite note. I won't hold my breath waiting.

It's interesting that it's a Spanish bank which is buying some of the assets of B&B, following the collapse of B&B. Spain seems to have been largely unaffected by the effects of the 'global' crisis in the markets. So too does France, and Canada, and a number of other countries. That raises an interesting question. If this is a 'global' crisis, outside the control of any particular government, how come it only affects part of the 'globe' so badly?

The answer is in the regulatory regimes applying to banks in different countries. In Spain (and other countries) much of the activity which has caused the financial crisis would be illegal, so that they are largely insulated from the worst effects. So why are UK banks so exposed? Because the Tories (who claim not to be in any way influenced by the donors who benefitted from their decision) de-regulated the financial markets, and Labour have done little or nothing to re-regulate them.