Diamond - what next?

Image copyright Reuters
Image caption Bob Diamond is out of the hot seat, but politicians are divided over how to investigate bankers

Update 3.48pm: The government are planning two votes on an inquiry into banking and thus a way out for Labour - if Ed Miliband wants to take it. The Commons will vote first this Thursday on whether to establish a Leveson style public inquiry. Labour will vote Yes but will lose unless the Lib Dems change their minds. Then the Commons will vote on the idea of a parliamentary committee chaired by Andrew Tyrie. Ed Miliband must decide whether to vote no to that - killing it off - or whether to abstain which, provided Mr Tyrie can live with acquiescence rather than endorsement, will allow the committee to be formed

Update 12.14pm: Turns out that the hints (see below) I was getting about why Bob Diamond resigned were not suggesting that he'd been pushed by the chancellor but, instead, by the governor of the Bank of England and the Chairman of the Financial Services Authority. Robert Peston has more.

Posted at 9.45am: The public fury with the banks has been brewing for four years.

Who would have guessed that - after all the billions of taxpayers' money spent on recapitalisation, after all the anger about bonuses, and after the failure of RBS, NatWest and Ulster Bank to provide a basic level of service to its customers - it would have been a scandal over the setting of an interest rate which few beyond the City had ever heard of which would be the catalyst for the downfall of one of the City's leading figures.

Libor is to banking what the Millie Dowler case was to phone hacking.

Ed Miliband will feel vindicated by Bob Diamond's statement that "the external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen".

He will use those words to suggest, as with resignation of Rebekah Brooks from News International, that it was "Labour wot won it".

Government insiders suggest that when the events of recent days are examined a rather different story will emerge. They seem to be hinting that ministers have been pointing Diamond towards the door marked "exit", even though the chancellor has always said it was not his job to pick the leadership of a bank.

The question is where does this story go next?

The government is clear. What's needed now, it says, is a short, sharp, parliamentary examination of the lessons to be learned. Labour is equally clear that a much wider, judge-led, public inquiry is the only answer. It will push that call to a vote in the Lords today and in the Commons later this week.

Labour is likely to lose those votes and go along with the government's proposed inquiry rather than boycotting it. Likely but not certain.

Andrew Tyrie, the Tory MP asked to chair the parliamentary inquiry, has handed Labour a veto over it by insisting that he would not be involved in anything the party doesn't ultimately support.

I sense that he took some persuading over the weekend to do what the prime minister and the chancellor wanted.

Neither the government nor the banks are in control of where this story will go next.

Ministers have been desperate not to appear behind the curve of public anger on banking. Labour is equally desperate to show that that is precisely where they are. The resignation of Bob Diamond is just the start of something and not the end.