Banking (S.I., 2008, No. 432)

Interestingly, the experience on the other side of the Atlantic has shown that banks across the world are facing serious pressures as a result of global economic and financial market turbulence. In many ways the situation with Bear Stearns was very different from that with Northern Rock. Bear Stearns is not a retail bank and does not have retail deposits, and so the implications for depositors as opposed to creditors were very different. There is a different legal framework and the situation was different as there were viable private sector offers on the table. Clearly, decisions have to be made about what is the best alternative in the circumstances faced in particular financial markets at particular times. Equally, it is important that we do not simply pretend that there are alternatives when they do not exist. That is why Opposition Members need to take a bit of responsibility. The decision was taken last autumn to support Northern Rock, through the Bank of England's loans and through Government guarantees. I reiterate my view that that was the right decision to take at the time, and it was supported in all parts of the House. Once it was taken, there were knock-on consequences that had to be faced up to. Opposition Members have repeatedly refused to do so. The hon. Member for Fareham repeatedly raised his concern that it was the decision to take Northern Rock into temporary public ownership that created exposure for the taxpayer. That is not the case. The taxpayer's exposure was created by the decisions that were taken in the autumn on both the Bank of England loan and the guarantees that were put in place. Having done that, and been clear that that was the right decision in the interests of protecting the financial stability of the banking system, it was then important that we ensured that the taxpayer's interest was protected. The options of insolvency, administration, Bank of England-led administration and wind-down, which were put forward by Opposition Members, would all have been a worse deal for the taxpayer than temporary public ownership and the business plan that we have now set out.