Well, my last post was overtaken by events in a couple of hours, so just a quick update.
I think the biggest issue sitting behind this is the question of who holds power. When you boil down most of the arguments against the Government taking action on Hester's bonus they seem to reduce to "we can't act" or "we shouldn't act".
In the first case, we can't act because even a small 'win' will inevitably be offset by a large 'loss' - notice the desperation to see some share price impact this morning. More generally I'm starting to think a few people on the Left have developed a sort of Stockholm Syndrome in relation to the City. They are so used to being battered down by the argument that you take the City on at your peril - that the precious talent cannot be challenged or it will leave - that they can't believe that you can actually win a battle of wills. I think some people might even be relieved to see Stephen Hester go, just to confirm their belief that you can't really win.
In the second case ("we shouldn't act"), it's more political. A view held (predominantly) by the right-of-centre is that we have no business meddling in any case. If you want the proceeds of wealth generation by the private sector then business must be left unfettered. At the extreme end intervening to block the award will be characterised as an affront to liberty, a small step on the path to totalitarianism.
The thing is, the politicians clearly believe that the public don't have time for either of those arguments at present. There is a sense that the public want to see the bankers put in their place, they do not want to see the Government give in to threats. In the case of RBS, overlapping both the City and politics, this pressure is particularly sharp. The implicit question is 'who is in charge here?'. And the Government, belatedly and reluctantly, has given an answer.