There are large numbers of City firms and individuals doing good for Britain by doing well for themselves; providing internationally competitive financial services; and never dreaming of expecting the taxpayer to pick up their bills and pay their bonuses.
Much of the City is not in crisis and deserves the description of a world-class industry. The Stock Exchange itself has been battered by the economic storm but is critical to the efficient use of risk capital and raising new capital for quoted British companies; as we have recently seen with some impressive rights issues.
Twelve days ago, the Chancellor unveiled his plans for banking and financial services regulation. Some of you may have seen my comments – green paper to white paper to blank paper. Harsh? Perhaps. But it was frustrating to sit on those green benches and hear the Chancellor miss a golden opportunity.
I stand here to outline the Liberal Democrat proposals for significant changes to the regulatory structure of the City and its future direction. These proposals build on ideas we set out over a year ago in our New Deal for the City. Some of those ideas – macroprudential regulation of bank capital; linking bonuses to long-term stock performance; reform of rating agencies – have become part of the conventional wisdom and I don't need to rehearse them.
Since then, the banking system has had a massive heart attack which calls for a more radical response. Some banks appear not to realise that they had a near-death experience. I have said some harsh things about the banks in the past – going back a decade or more – warning that their lifestyle was dangerously unhealthy: misguided demutualisation; irresponsible mortgage and consumer lending; and the failure by the Government and the industry to grasp the central logic of the Cruickshank Report – that banks cannot expect to preserve unfettered profit maximisation and growth when they depend on a taxpayers' guarantee of liquidity and solvency.
This is an extract from a speech given yesterday to the London Stock Exchange by the Liberal Democrat Treasury spokesman