When John McFall was offered the chairmanship of the Treasury select committee in 2001, a well-meaning colleague advised against acceptance. “He told me the committee dealt with a lot of macro-economic stuff that people found boring. He warned me if I took the job, I’d disappear from view,” says McFall.

The two bumped into each other last week, just as McFall’s committee was about to grill the bankers who have brought the economy near to collapse. “I reminded him . . . he did admit that it had been a pretty inaccurate assessment.”

In the past six months, with the country in recession and the banking industry in turmoil, the chairman of the Treasury select committee has become one of the most prominent and powerful politicians in Britain. McFall, 64, has the authority to summon anyone from the prime minister to the governor of the Bank of England and subject them to a rigorous interrogation.

In his chamber, the Thatcher Room of the House of Commons, the Labour MP for West Dunbartonshire has adopted a pugnacious approach to those brought before him, lacing his remarks with withering put-downs. Nobody is too rich or too powerful to escape his caustic Glaswegian wit.

Adam Applegarth, the former chief executive of Northern Rock, was accused of “being asleep at the wheel”, Sir John Gieve, deputy governor of the Bank of England was told in relation to Northern Rock that he was “asleep in the back shop while there was a mugging out front” and Sir David Walker, former chairman of Morgan Stanley International, had his report on private equity dismissed as “vague, silent and watered-down”.

On Tuesday it was the turn of Sir Fred Goodwin and Sir Tom McKillop, formerly chief executive and chairman of the Royal Bank of Scotland respectively, and Andy Hornby and Lord Stevenson, who held the same positions at Halifax Bank of Scotland. McFall’s first question was: were they sorry for the destruction of once-venerable institutions now partly owned by the government and costing taxpayers millions? All four apologised but even after a three-hour grilling, McFall wasn’t convinced.

“There was no sense of real contrition,” he says. “They didn’t seem to think they were personally culpable. It’s not part of their culture. They have a sense of entitlement. Getting bonuses is in their DNA and risk taking is at their core — until the extent of their cavalier risk taking is uncovered and the whole thing implodes.”

The next day, addressing the current chief executives of the banks, McFall asked them why they thought they were hated. “I don’t know what they thought of that but John Varley, of Barclays, did admit that trust in the industry had been lost. I think it will take years to recover. This is a difficult time to rebuild confidence.”

McFall is unimpressed by the former masters of the universe. He is scathing about bankers’ belief that they will always be bailed out. “When Woolworths collapsed, the branches all closed and 27,000 people were out of a job,” he says. “These bankers expected the government to step in. I’m not talking about staff in the branches. I mean the executive level who behave like they’re in a casino and take risks with other people’s money. There is no punishment for them when things go wrong.

“What came out of last week’s hearing was the extent to which the banks over-extended themselves. For RBS it was the ABN Amro deal that brought them to their knees. HBOS was over-stretched and effectively a failed bank. Now the people responsible for that are either pretty dim or there is a systematic problem in the way they were allowed to operate. Well, they ain’t dim. Banking needs fundamental reform.”

Legislation, he says, isn’t the answer. Instead he would like to see the Financial Services Authority given more powers to curtail banking excesses. “The FSA should have the power to change the culture of banking and control things like bankers’ bonuses. It’s a big, big task but banking practice needs to be changed,” he says.

McFall accepts that there are legal restraints making it impossible to force high-level bankers to hand back their bonuses this year, but he believes it is morally wrong for them to accept the money. “They should reflect on the damage they have done to society. They have threatened the economy and destroyed people’s lives.”

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