Yes, of course I understand that. It may be possible, if market circumstances change, to refinance those vehicles and the other mortgages that are not within them. However, I still think that the securest way of the taxpayer getting their money back is for the company to stop doing new business, stop making new loans and just collect the cash flow as it comes in. That would pay off the securitised creditors and the taxpayer.
I have not been a Member of this House for as long as some of the people sitting in here—actually, that does not apply to many; I think that Frank Dobson is one. There has been a banking crisis every 10 years since I came here, and there was one in the 10 years before that. They come along at fairly regular intervals. They take different forms, but they are usually the result of over-exuberance on the part of the management, and the Government end up having to do something to bail those companies out. In the case of this crisis, we have found that the Bank of England cannot organise a rescue for a modest-sized mortgage bank. In the past, that has not been the case. With Johnson Matthey and with County bank, the Bank of England was able to organise a rescue.
We must face the fact that in future even such modest-sized institutions will have an implicit Government guarantee. That encourages irresponsible behaviour. If someone can get 6.6 per cent. from an institution that is taking greater risks than one that will pay 5.5 per cent. but also has a Government guarantee, why should they worry? That is bad business for the Government, because it will encourage people to save with the marginal and more risky operators. That is not only unfair on the people who operate in a safer environment but stores up trouble for the Government in future, because banking crises may come along more frequently than once every 10 years. That is one of the aspects of moral hazard, which gets discussed every so often. If we are, in effect, standing behind the liabilities of the British banking system, then we as the taxpayer need to know that the Financial Services Authority is regulating banks much more closely, and particularly watching those that are paying high rates of interest and making risky loans.
I end by referring to a point that I made in a previous speech on this subject. When the Bank of England was given independence to set interest rates, the Government made a mistake with regard to the regulatory system. I understand why they did it, but taking bank regulation away from the Bank and giving it to the Financial Services Authority was a mistake. First, as lender of last resort, the Bank needed to know, and did know, a huge amount about different banks. I experienced that myself when I was a Treasury Minister in a very junior capacity when the Bank of Credit and Commerce International was in trouble. The Bank of England's intimate knowledge of the banking system was extraordinarily valuable in that situation. At that point, we also had two people talking to each other: the Governor of the Bank of England and the Chancellor of the Exchequer. We now have three, and I think that having three makes things twice as complicated as they used to be. I urge the Government to look again at how the system is regulated because giving bank regulation back to the Bank of England would be a better way of doing things.
In future, once we have given an implicit guarantee on the liabilities of all the banks, we will be in a different ball game from the one we were in before—one where we cannot organise rescues. We will have to take banks into public ownership, make loans and give guarantees. In the past, we were able to organise rescues, but if that is not possible, we will be in a different ball game. There will be a different attitude to regulation, which demands a greater level of risk-averseness on the part of the Government.