Financial Services Bill

Let me begin by apologising to the Chair for my not being here for the winding-up speeches. I have let the Chancellor and the Liberal Democrat spokesman know about that. In fact, I suspect that not many Members will be here, because although this Bill is supposed to be the centrepiece of the Queen's Speech, it has not exactly grabbed the attention of Parliament. That does not mean, however, that these issues are not very important. In the past two years, we have witnessed a catastrophic failure of bank regulation—arguably the greatest failure of financial regulation that this country has ever seen—which has contributed to the longest and deepest recession in this country since the 1930s and a huge loss of national wealth. The exposure of taxpayers to £1 trillion of guarantees and capital support has required them to undertake the largest bank bail-out of any country in the world. If we want to understand how completely ignorant the regulatory system was of the problems brewing in the financial system that were about to explode, I suggest that we remind ourselves of the Mansion House speech that the then Chancellor gave on 20 June 2007—just a few days before he became Prime Minister and just a few weeks before the credit crunch began in earnest. I was there; I sat, as I remember, alongside the Financial Secretary to the Treasury, who was here earlier in the debate. We heard the then Chancellor lavish praise on the assembled financiers, making the portentous claim that we were entering what he predicted was""an era that history will record as the beginnings of a new golden age of the City"." That turned out to be about as sensible as his golden rule and his gold sales. I think that from the country's point of view, the less the Prime Minister uses the word "gold" the better. Of course, the so-called beginnings of a new golden age were in fact the very end of a huge financial bubble. The regulatory system did not understand what was going on. It believed its own propaganda about a new age of stability that it had created. It did not understand the fragility of the funding models of our major banks, it was completely ignorant of the risks being run with leverage, and it was drastically ill prepared for what was about to happen.