I have not heard a speech like that in this place since the 1980s, so I am feeling quite nostalgic. Mr. Meacher was making the same speech back then, when I first came to this place. The difference is that there were then about 350 Labour MPs making that sort of speech, whereas now he is the lone and authentic voice of those days. I shall not follow him in all the issues that he raised, but I do want to talk about Northern Rock. In fact, I shall talk only about Northern Rock.
To provide some credentials for this debate, I was a junior Minister at the Treasury when BCCI—the Bank of Credit and Commerce International—was closed and went under and when we had a banking crisis. I am very glad that I did not have to take the decisions. The Chancellor's decisions then—I assume that that is so of decisions taken in the past month—were some of the most difficult that a Chancellor ever has to make. I had a front-row seat, as I was at all the meetings with the Chancellor and the Bank of England—and they often took place daily. I think that Normal Lamont would say that those were the most difficult decisions that he ever had to take. At the risk of incurring some displeasure in my good friend the shadow Chancellor—perhaps the Financial Secretary will convey this sentiment—I expect that the Chancellor's recent decisions were the most difficult that he will ever have to make as Chancellor, unless he has another banking crisis on his hands in the near future, which we all seriously hope he does not.
There has been a lot of criticism of what various people have done, but it has to be placed in the context of having a bull market for about 15 years, in which there has been easy credit and easy monetary conditions. Those things always end in a credit crunch of one sort or another, and the marginal players go to the wall. They find that they are either not making money and are insolvent—that was not the case in this instance—or become illiquid and cannot raise the funds to replace their debt as it rolls over. That always happens and it was to be expected that it would happen. One can never predict exactly where and how the impact will occur, but it is one of the inbuilt weaknesses of our very sophisticated and developed financial markets. It would be interesting to debate whether that is a good or bad thing. Most free-market economists would, I think, say that it was a good thing—a self-correcting mechanism—but one of the unfortunate by-products is an occasional banking crisis.
Let me deal with the Bank of England first. It has been criticised on two counts. One is that it should have injected liquidity into the market earlier; the second is that it should have been much quicker in making a loan to Northern Rock. It would have liked to have been able to do that covertly rather than overtly, and it blamed the regulations. I am not sure that it would have made any difference if it could have done that covertly, as it would have become known very quickly.
The Governor of the Bank of England gave an eloquent exposition of the moral hazard of injecting liquidity into the market. My understanding of the moral hazard is that bailing people out from their mistakes just encourages them to make more. I think that it was Burke who said that protecting people from the consequences of their folly just populates the world with fools. There is a fine and difficult line to be drawn between where we should bail people out because we are worried about the system going under, and where we should stop bailing them out because we are worried about provoking more of the foolish behaviour that created the problem in the first place. The Bank of England is not open to the kind of blame that has been attributed to it. The Financial Services Authority certainly looked a bit slow—
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