The chairman resigns to save the CEO. The CEO makes a public threat to drag the central bank into the mire. And the previous government. And the Treasury.

Next morning, the CEO resigns and the chairman re-installs himself to "oversee transition". The police, who said they could not prosecute, now say they might.

You have just seen the British establishment operating at a level of panic and indecision on a par with the Norway disaster in 1940. And it is not over.

These are people whose job is to speak to each other on a daily basis. But trust is shattered at the very top of the financial system.

Consider this: Barclays is the biggest lender to small and medium-sized businesses in Britain.

Right now its regional offices will be making decisions that can kill or cure the companies that form the backbone of the UK economy.

Yet its management is in shreds - not just the push-me-pull-you fiasco between Diamond and Agius, but the board - whose non-execs decided to sacrifice Agius and save Diamond.

Here is the central problem with Barclays. Its business model has become heavily reliant on the kind of investment banking Bob Diamond pioneered at Barcap, a division he created and was determined to lead to global dominance until Alistair Darling impolitely stopped his acquisition of Lehman Brothers in September 2008.

Since 2008 the Barclays story has been less about global domination but survival. It refused to take money from the British state. Bob Diamond was central to that resistance.

Instead it took money from the Gulf monarchies of Abu Dhabi and Qatar, diluting the value of existing shares. Then, as new regulatory and capital adequacy demands were stacked up, by politicians desperate to close the stable door after the horse had bolted, Barclays became an outlier among large British banks. It lacked the global reach of HSBC and Standard Chartered. It lacked the state backing of RBS, HBOS and Lloyds.

The results have been felt in every community in Britain. Four years ago, Barclays was lending £52bn to non-finance, non-property businesses in the UK, 27% of all loans.

Now the figure is £38bn, and just 16% of business loans. In the process the bank - single handedly - has taken £3bn of capital out of manufacturing, more than £3bn out of retail/wholesale, while ploughing an extra £10bn into home loans and £6bn into property.

This flight to (relative) "safety" in the real economy was however not mirrored in Barclays' operational priorities at the sharp, investment end.

As I have described before: Diamond shifted £7bn of toxic debt off the books, and was then forced to take it back again, in the form of the Protium fiasco - a Cayman Islands adventure which cost the bank half a billion pounds.

As a result of its recapitalisation in 2008, by 2011 the bank's return on equity stood at 6%, compared to a 13% target and its pre-crisis 14%.

It had been saved by external capital but its business model remained reliant on high returns from investment banking, which were no longer there.

Three-quarters of Barclays assets - £1.2tn - are clustered inside Barcap, the investment arm, producing a pre-tax profit of £3bn, half of Barclays plc profits.

Yet that £3bn represents a wafer-thin 0.3% return on assets held. (Source Johal S and Williams K, "The Madness of Barclays" CRESC Paper 2011)

For the shareholders, everything would go right as long as the world economy did not collapse again - as long as the eurozone remained stable.

While small, UK-based investment trusts eventually rebelled against Diamond this year, the big, Gulf-based investors seemed to show little interest in corporate governance. For them Barclays was a long-term hold, a foothold in London and a bet that Diamond, with his legendary wheeler-dealing, could hike the return on that £1.2tn once the global recovery was under way. But the recovery is a long way off.

This is how researchers at Manchester Business School pose the problem Barclays presents to the British economy.

It has reduced its exposure to British business, carries a £700bn net credit risk that is only possible because of the implicit guarantee the October 2008 bailout gave to all banks. And it is:

"(a) a machine for enriching investment bankers … with £1.5 billion in staff bonuses last year versus a pre tax profit of £3billion (b) the risks to the tax payer are not offset by corporation tax, because Barclays has used losses to minimise its payments; [paying] just £113 million in UK corporation tax in 2009."

Last week's Financial Services Authority (FSA) / Securities and Exchange Commission (Sec) findings against Barclays were designed to put a lid on the crisis: a small fine in return for early admission of guilt. No resignations. No criminal case possible.

But the crisis threatens to escalate in three directions. First to the 20 other global banks who stand accused of manipulating Libor.

The scale of class-action lawsuits being readied in the United States is, say some, big enough to sink certain of these banks. We will soon hear the results of the other - regulatory and criminal - investigations into the City of London.

Second, to the City of London itself.

The FSA/SEC findings deliberately refrained from pinning direct culpability on Barclays management - ie both findings said, in terms, Diamond did not know of the manipulation of Libor for commercial gain.

But the management of the bank: its board, its chairman and its CEO stood accused, effectively, of negligence. Yet again London turned out to be the dodgiest place to do business, and that was why the original slap on the wrist did not work.

So now we have a third direction of escalation. Both the SEC and FSA left unanswered questions about the manipulation of Libor for "survival" reasons.

Barclays, between 2007 and 2009, manipulated Libor to avoid the impression that it was in trouble.

It had numerous contacts with regulators and politicians both sides of the Atlantic, who were pursuing the perfectly reasonable goal of getting the Libor rate - a barometer of the credit crisis - down.

On a crucial day (29 October 2008) the Bank of England's Paul Tucker had a conversation with Bob Diamond, as a result of which, more junior Barclays employees came away with the impression that they had been instructed by the central bank to manipulate Libor down.

By last night, that meant the Bank of England - an institution created in the Christopher Wren era - was getting calls from financial journalists of the type normally aimed at, well, people like Bob Diamond. In short order he was gone.

Such is the power of the British establishment. But its problems are not over.