By Edward Stourton
Analysis, BBC Radio 4
Stock markets fell after the President set out his banking proposals
Reaction to the recent decision by Goldman Sachs to put a £1m cap on the salary and bonus packages paid to its UK partners illustrates what a bind our bankers now find themselves in.
To the individuals concerned, this figure represents a huge cut. To most of the general public, the idea that a £1m cap could be regarded as a sacrifice is risible.
Bankers' bonuses are the natural target for the public anger provoked by the banking crisis. The more complex issue of banking regulation does not so readily stir political passions.
But Barack Obama's recent proposals for banking reform are likely to force the issue on to the mainstream agenda - in both the United States and Britain.
If his ideas are to be adopted on Capitol Hill, Mr Obama will have to use the bully-pulpit of the presidency to ram home the principles behind what can often seem an intimidating technical debate.
That may not be quite as daunting a task as it sounds. The history certainly helps.
Prime Minister Gordon Brown and President Obama are trying to mop up the mess left by the banks
Mr Obama's proposals are sometimes described as "Glass-Steagall style".
The Glass-Steagall Act was introduced in 1933 to curb the banking excesses that contributed to the Wall Street crash.
It was repealed in 1999 under pressure from Wall Street bankers, who argued they needed more freedom to face foreign competition, especially from London.
So Mr Obama can point to more than six decades of relative banking stability under a Glass-Steagall regime, as against a decade of greed and catastrophic collapse since the Act's repeal.
And the principles underlying the Glass-Steagall Act can, if they are properly explained, be made to chime harmoniously with the current anti-banker public mood.
Glass-Steagall threw up a firewall between the retail or commercial banks - which take deposits in the high street - and the investment banks that play the markets, or "casino banks" as they are now sometimes called.
It was designed to stop investment bankers taking risks with the money of ordinary depositors.
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And under a Glass-Steagall arrangement, taxpayer liability can be limited to the retail banks where ordinary depositors place their savings, leaving investment banks to sink or swim by the laws of the market.
"I have nothing against gambling," says Nigel Lawson, one of the most prominent champions of a new Glass-Steagall. "But when you are gambling, you should be taking the risk yourself, you should not be bailed out by the taxpayer."
Lord Lawson's presence in the ranks of the pro-Glass-Steagall campaigners reflects the intellectual and political clout of those who support President Obama's ideas on both sides of the Atlantic.
The former Tory Chancellor was one of the main architects of the modern financial services industry, and can scarcely be dismissed as a trouble-making Leftie.
The Governor of the Bank of England, Mervyn King, whose role as a regulator will become even more critical if the Conservatives win the next election, has also given a strong indication that he favours a Glass-Steagall approach.
In the US, Glass-Steagall supporters include Paul Volcker, the former chairman of the Federal Reserve, and John Reed, a former head of the giant universal bank Citigroup.
The British Bankers' Association warns many banks may simply leave the UK
The bankers accept the need for a new banking regime in which banks can be allowed to fail without threatening the system, but they argue it can be achieved without a return to the Glass-Steagall era.
Angela Knight, chief executive of the British Bankers' Association, cites a list of what she describes as "boring technical steps" - such as increasing the level of capital banks must hold and forcing them to be more transparent about their operations - which she argues will bring stability to the banking world.
She also makes the case that if Britain were to introduce a Glass-Steagall style rule on its own, many banks would simply move elsewhere.
And the banks will certainly put up a fight.
The economist Liam Halligan, another pro-Glass Steagall advocate, argues that "the big universal banks in the UK and the US have become so powerfully financially and politically that they've captured our political class".
He cites the example of "some former prime ministers who have gone on to extremely well-paid jobs with investment banks" to illustrate the way he thinks the relationship between banking and politics works.
His fellow economist Professor John Kay states baldly that "the financial services industry is actually the most powerful political force in Britain and the United States".
But then Barack Obama is extremely effective at the politics of the bully-pulpit. It should be a battle worth watching.
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