David Davis
MP for Goole and Pocklington · Conservative · United Kingdom
“On a point of order, Madam Deputy Speaker. May I start by congratulating my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) on putting a Bill in front of the House that has support from literally everybody in the Chamber?”
“The Post Office Horizon scandal highlighted the institutional instinct to find a convenient scapegoat. Innocent people paid the price, while the institution sought to protect itself. If the Thirlwall inquiry asks too narrow a set of questions, systemic NHS failures will go unexamined.”
“Last month’s sentencing of Nicola Sturgeon’s husband exposed the real reasons behind the Scottish Government’s persecution of Alex Salmond. From 2010 to 2022, Peter Murrell abused his position to embezzle almost £500,000 from the SNP to buy luxury items. He used SNP money to buy a £33,000 Volkswagen Golf.”
“The consultants also reported that in the two months since the change infants have been sick but recovered as expected.” The report highlighted deficiencies in staffing levels, leadership and communication, but, in the trial, it was not shown to the jury—they knew nothing of it.”
“One of the nurses let go later described it as “the decimation of the Nursing and Midwifery service”, adding that “eight registered nurses...were replaced with nursery nurses...unqualified staff are replacing qualified staff”.”
“There was little space, cots and incubators were stored in corridors, and mothers struggled to find somewhere to breastfeed their babies. Susan Gilby, the hospital’s chief executive between 2018 and 2022, later described the unit as “dark, dingy and cramped”, providing a “less than ideal” environment to work in.”
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“Indeed, the French, German and Japanese authorities never considered trader requests a crime, and even refused British requests to extradite traders. These miscarriages of justice are scandalous, but perhaps just as serious was the attempt by the British and American establishments to hide their involvement in similar behaviour and their failure to apply the law equally and fairly. At its worst, it involved potential perjury in key trials. At other points, it involved possibly misleading a Committee of this House. In 2012, the then deputy governor of the Bank of England told the Treasury Committee he had learned of lowballing only in “the last few weeks”, yet there appears to be damning evidence that that was untrue, including meetings, phone calls and sworn testimony to US authorities.”
“A recent judgment in America casts doubt on every conviction that relied on sweeping rulings about commercial influence. In January 2022 a US Appeal Court ruled, in US v. Connolly and Black, that trader requests—the basis for every single conviction—were not illegal. That shatters the foundations underpinning the ruling by the UK Court of Appeal. The ruling was made by the Appeal Court for the Second Circuit, the circuit that includes New York and that would have judged an enormous volume of alleged financial crime. That court had a very high degree of financial expertise and we should place significant weight on its expertise. The ruling makes Britain a global anomaly—the only place where traders were locked up for something wrongly and retrospectively declared illegal.”
“An abundance of evidence that would have shown that what Hayes was doing was normal, and permitted by regulators and central banks, was either suppressed or not disclosed. The theme repeated itself throughout the trials: important evidence was withheld, and the evidence offered came from non-experts or people who knew about or had condoned the behaviour. The same would happen in trials relating to Euribor—the Euro equivalent of LIBOR. The founders of Euribor had written rules for submissions when they launched the benchmark, and were willing to testify that commercial influence was welcome, expected and allowed for, but the judge refused to hear the evidence and ruled it was impermissible for submissions to be influenced by trading positions. Not everyone faced that kind of trial.”
“Instead, Hayes got a 14-year sentence—more than an average manslaughter sentence—for something previously considered normal practice. The SFO approached other traders for testimony to buttress its case, but everyone had engaged in the same behaviour that Hayes was accused of, because they said it was normal commercial practice. But the SFO saw no reason to stop. Instead, it found John Ewan from the BBA and Saul Haydon Rowe to act as expert witnesses. They testified that derivatives traders could never request changes to LIBOR submissions. Yet, as the SFO knew, Rowe was not an expert on LIBOR. In another trial, Ewan would contradict himself by saying it was permissible to submit LIBORs within the market range for commercial reasons. That is not to mention the fact the BBA itself had encouraged banks to adjust LIBORs in the past.”
“Hayes changed his mind and decided to fight the charge, only after realising how much he would need to falsely implicate others, and when the sheer absurdity of the charges against him became clear. But Hayes’ judge, who described the case as open and shut before the trial began, ruled that no commercial interest could ever be legally considered by submitters. The Court of Appeal upheld that absurd ruling, providing the legal underpinnings for later convictions. If applied consistently, Barclays directors, Bank of England officials and the British Bankers Association would all have been implicated. They had all effectively instructed lowballing or misreporting. But the ruling has never been applied to those at the top.”
“In the US, white collar criminals who pleaded not guilty were threatened with up to 30 years in jail without early release or any other arrangement, alongside violent criminals and drug lords and in unpleasant conditions. A plea bargain that guarantees a reduced sentence to a couple of years in an open prison is irresistible by comparison. It was a form of judicial blackmail that forced defendants to admit to things that they had not done. British defendants such as Tom Hayes wanted to avoid that at all costs, and the only way was to be prosecuted in Britain instead, which necessitated telling the SFO one crucial lie: he pleaded guilty to acting dishonestly.”
“But the SFO preferred bending the law to prosecute low-ranking employees rather than pursuing top-level executives. It had access to all the material that Mr Verity has obtained, which points to the top, but it did not pursue it. For years, it failed even to interview the key executives. Many traders initially admitted wrongdoing to prosecutors—admissions that later hurt them at trial. Tom Hayes initially admitted dishonesty to the SFO, but that is no real indictment on his cause. A shadow hung over the proceedings that motivated many who co-operated: the prospect of extradition to the United States. If they were extradited, acquittal was near impossible. More than 90% of prosecutions in the US end in a plea bargain. Most of the rest are found guilty.”
“Indeed, the Serious Fraud Office initially struggled to find any plausible legal basis on which to prosecute. The submitters could not be prosecuted under laws such as the Fraud Act 2006—that required victims, false statements such as inaccurate LIBORs and potential gains for the perpetrators. None of those existed, at least not for the trader requests. The SFO instead chose the vaguer common law offence of conspiracy to defraud. That required proving only two things: there was “dishonesty” and an agreement had taken place. However, the lowballing ordered by bank executives seemed to meet all the requirements under the Fraud Act, as well as conspiracy to defraud. It seemed a clear instance of commercial influence over LIBOR submissions, and far larger in scale.”
“With no rules about selecting from that range, submitters quite reasonably chose the accurate rates that helped their banks’ trading positions. This was not considered improper at the time, either by the submitters and the traders, or by the regulators and the central banks. It was normal trading practice that the LIBOR system was designed to accommodate. However, the British courts later prosecuted low-ranking traders based on a sweeping ruling by the Court of Appeal that no commercial interest could ever be considered in LIBOR setting. The actions of those traders were then retrospectively declared illegal. Lives were destroyed because of the total misunderstanding of how LIBOR and business worked. The ruling was thoroughly and unambiguously contradicted by a ruling in the US appeal courts last year.”
“But while submissions only changed by one or two basis points in response to trader requests, state-sponsored lowballing often meant understating LIBOR by 50, 100 or 150 basis points—comparatively enormous. That reflected a difference between the two practices that many failed to understand. Lowballing involved setting unambiguously and hugely inaccurate rates, but the so-called skewing only involved accommodating trader requests by selecting high or low rates from the tiny range of interest rates that banks were actually offering. Prosecutors mistakenly persuaded themselves there was only one accurate LIBOR rate each day, from which submitters should never deviate. No such single rate existed. Banks could borrow at a small range of different rates, any of which could be described as accurate.”
“Most notably, for Barclays and UBS, they did not examine crucial documents, including the emails of senior executives—the real bosses. This was the first instance of a common theme: the scapegoating of low-ranking bankers by prosecutors, courts, directors and executives. Once the scandal became a news item, Barclays sacked low and middle-ranking employees like PJ who were involved. Their legal support was sharply cut off. But not all faced the same treatment. Dearlove, for example, heavily supported by lawyers paid for by Barclays, pointed out that the instruction to lowball had come from the Bank of England and Whitehall. His case was immediately dropped like a dangerous hot potato, which it was. People at the top were attempting to shift the focus from lowballing to those skewing the rate to protect trading positions.”
“The LIBOR investigation began once Gensler at the CFTC heard that recording. He had a crime on his hands, as it were, but it was not bank directors and executives, or senior Bank of England and Whitehall officials who would be pursued. Prosecutors increasingly switched their focus away from the state-sponsored lowballing it discussed and towards something wholly different: requests from traders to LIBOR submitters for high or low settings that would protect their trading positions. The regulators had outsourced their investigations to external lawyers hired by the banks themselves. Most of their evidence was collected by the bank investigators, particularly evidence passed from Barclays’ investigators to the CFTC, but those lawyers made fundamental errors.”
“The first voice on the tape was Dearlove’s rather cut-glass diction. He said: “The bottom line is you’re going to absolutely hate this...but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our LIBORs lower.” Johnson protested: “So I’ll push them below a realistic level of where I think I can get money?” Dearlove came back: “PJ, I’m on your side, 100 per cent…These guys don’t see it. They’re bent out of shape. They’re calling everyone from Diamond to Varley.”— the senior directors— “You and I agree it’s the wrong thing to do…These guys have just turned around and said, ‘Just do it’.” What the whole recording revealed was two Barclays employees agreeing to rig LIBOR, albeit reluctantly and albeit instructed by the British state, through the top leadership of Barclays.”
“Many knew it was happening, but few could, at least publicly, say why. Then, in early 2010, Gary Gensler, head of the US Commodity Futures Trading Commission, was played a recording of a conversation between two London employees of Barclays bank, Peter Johnson and his boss Mark Dearlove. Johnson was responsible for Barclays’ dollar LIBOR submissions. The conversation Gensler was hearing followed several others in which Johnson, known as PJ, complained that other banks’ submissions were way below the conceivable market rate. PJ had been resisting senior level instructions to lower Barclays’ rate to stay “in the pack” of other banks. Indeed, his honest submissions—honest submissions—sometimes embarrassed Barclays by making others think they were paying unusually high rates.”
“After the credit crunch, there were persistent rumours of banks submitting estimates below available market rates—the nickname for it is “lowballing”—and there is no doubt that that was happening. In late October 2008, not long after Lehman Brothers collapsed, Chase New York had been pressured by the Fed to offer loans at a time when no banks wanted to. The actual rate it offered was 4.68%, but on that day its dollar LIBOR submission was 3.25%. That was an enormous difference of 143 basis points—a basis point is one hundredth of 1%—but 3.25% was typical of the LIBOR submissions that day. Now, 1.43 percentage points, or 143 basis points, may seem tiny, but for a bank loan of £100 million such a difference means nearly £1.5 million less in interest—a serious market distortion, undoubtedly harmful, particularly to small banks.”
“Many leading banks were implicated, including Deutsche Bank, Barclays, Citigroup, JPMorgan Chase, and the Royal Bank of Scotland. LIBOR is an index designed to measure the interest rate at which major banks are lending money to each other, covering 10 currencies and over several different terms. It is calculated daily using estimates submitted by major banks of the rate at which they could borrow money at approximately 11 am. LIBOR was used worldwide as a reference for financial instruments including commercial loans, mortgages and student loans. At its peak, it underpinned $350 trillion of financial instruments. Now, its reputation is shot, and it will be replaced next month by the secured overnight financing rate, which is calculated instead by the Federal Reserve—notably, not in London.”
“In British courts, critical evidence was concealed. In America, the DOJ used tactics that amounted to judicial blackmail. The result was serial miscarriage of justice: 37 people were prosecuted, 19 convicted and nine jailed simply for doing their jobs. Their prosecutions were prompted not by complaints from victims but by a political and tabloid firestorm. How did this happen? Most of the critical data and facts that I will cite come from a seven-year evidence-gathering exercise by Andrew Verity, the BBC’s economics correspondent, who will be publishing a book on the subject shortly. I am grateful to Mr Verity for sight of his work and data. In 2010 to 2012, the LIBOR scandal first came to light. It was reported that bankers at major financial institutions had colluded to manipulate the London interbank offered rate—LIBOR.”
“The story that I will tell this evening starts with understandable public anger at the failure of both business and state during the 2008 financial crisis and the massive institutional failures to bring real villains to justice. The regulators, the US Department of Justice and the Serious Fraud Office rushed to assuage that anger and deliver convictions but failed to do the work necessary to properly fulfil their task. Instead, they effectively delegated investigation to the banks, allowing them to offer up middle-ranking scapegoats so that they could avoid prosecuting the directors of disaster who actually ran the banks. While the real villains got off scot-free, the scapegoats, including some whistleblowers, faced coercion and injustice. Their lives were destroyed by a totally inadequate regulatory and judicial system.”
“Nine people were jailed for LIBOR rigging, and each one of those cases is a potential miscarriage of justice. Those people lost their careers, their reputations, their savings and their marriages. Their families’ lives were destroyed. Their cases demand a proper re-examination, preferably by the Supreme Court. The only other solution, as the right hon. Member for Hayes and Harlington (John McDonnell) said, is a fresh look at the entire affair. A fresh parliamentary inquiry, with the protection of parliamentary privilege, would help to ensure that the truth comes out and that British justice is finally applied equally to all.”
“This is not the first time that the right hon. Gentleman and I have worked together on a miscarriage of justice, and I will defer to his wisdom on this. Given that it has been a decade, I do not think that a three-month or six-month delay in writing to the Metropolitan police would necessarily be a bad thing. I am happy to wait until the conclusion of any Select Committee hearing and any report that might be produced. I will no doubt hear from the Select Committee Chairman in the coming weeks. The former Lord Chancellor, Lord Mackay, who has seen this, has said that the whole affair presents a “serious challenge” to the “fairness of our system”, and that the question of law after the US judgment is more than worthy of consideration by the UK Supreme Court.”
“I will write to the Metropolitan police asking them to investigate any potential perjury, but, more importantly in this context, I am also greatly concerned that the Treasury Committee may have been misled by state agencies about the knowledge and involvement of the state in setting false rates. This is a big and complex issue with hundreds of pages of evidence. I have written to the Chair of the Treasury Committee suggesting that the Committee might want to look into the issue. Can you confirm that that is the appropriate mechanism to deal with this serious matter, Mr Deputy Speaker?”
“On a point of order, Mr Deputy Speaker. Next week, the BBC’s economics correspondent will publish a book and release whistleblower testimony, telephone recordings, emails and documentary data on a number of serious miscarriages of justice in the LIBOR scandal that emerged in 2012. It will show that British and US authorities covered up state involvement in LIBOR rigging, and the scapegoating of 37 low and middle-ranking bankers, some of whom spent years in jail. In this evidence, there is a prima facie case to believe that state agencies coerced individuals into perjury that led to false evictions.”
“I will remind the Lord Chancellor that we have debated this matter a number of times in this House over more than the last year, so I do encourage haste. On scope, SLAPPs encourage a lot of other bad practices. For example, we are now the global centre of illegal hacking in this country. We have a very bad record for poorly regulated private investigation, so can he make sure his review covers that as well?”
“Nobody should question that it was a difficult time and a difficult task for the Metropolitan police. Nobody should question that, to a large extent, they carried it out brilliantly and gave us a marvellous occasion this weekend. That being said, within one week of the Public Order Act entering the law, and in its first serious use, we end up with the head of the Met having to apologise to people who were wrongfully arrested. In the event that the Home Affairs Committee reviews this matter and comes back with recommendations on how to change guidelines and perhaps laws, will the Home Office take that on board?”
“I must tell the Minister that I am very uncomfortable with this policy. She is right to say that Tower Hamlets and other parts of the country are having problems, but they are principally about postal votes rather than personation. We have had one conviction in a decade in this context. The Electoral Commission said that the pilot was not big enough for conclusions to be drawn, although there was a reduction of up to 6% in turnout. In Northern Ireland, which the Minister cited, there was, according to the Public Administration and Constitutional Affairs Committee, a 2.3% reduction. I am afraid the hon. Member for Sheffield South East (Mr Betts) had a valid point. Will the Minister please write to everyone, not just the hon. Gentleman, giving proper answers to his questions?”
“Yesterday, when the Prime Minister met business, the huge value of the NHS database was highlighted. Unfortunately, the previous occasions on which the NHS has tried to open its database have been unmitigated disasters. Will the Secretary of State give an undertaking to stick closely to the recommendations of the Goldacre report so that we can deliver the database while protecting the privacy of patients?”
“On a point of order, Mr Deputy Speaker. A little while ago, when Peter Tatchell came to visit me, he had a badge confiscated from him—a campaigning badge against homophobia. I subsequently received a letter of apology from the Serjeant at Arms saying that he would look at that practice. Yesterday, some other people came to visit me. They had a series of leaflets about the Chinese Government’s treatment of Jimmy Lai, and those were confiscated too. There may well be a well-intentioned purpose behind this, but will the House authorities look at the operation of these rules, because it seems very odd that it is illegal to bring political material into the House of Commons.”
“As has been said, I think it is very much in line with the Casey report, and we as a Government have to set our minds to ensuring that every recommendation of the Casey report is put in place and to returning the Metropolitan police and other police forces to the level of public respect that we wish they had now.”
“I am a great believer in the right of demonstration, but I do not think it should go beyond a certain level. That is why I support the Lords amendment to put this provision on the face of the Bill. To respond to the Minister’s question to the Opposition spokeswoman, we should turn the question on its head: why should it not be on the face of the Bill? After all, that would broadcast in clear terms what we want to happen. We want the police to behave in a respectful and careful manner when they use this power. Indeed, I am slightly surprised that the Lords amendments did not also include making sure that video footage from the body cameras was available, including to the lawyers of the people who were stopped and searched after the event, if need be. I think this is a worthwhile amendment.”
“She did so because, at that point in time, stop and search was being used in such a way that it caused serious race relations problems in several parts of the country. That was because stop and search was largely targeted at stopping violence, and at that point—it may well still be true today—the perpetrators of knife crime and the victims of knife crime mostly came from minority communities. Although minority communities themselves were not happy about the operation of the system, they understood why it was there. That was a different order of magnitude from using suspicionless stop and search to control demonstrations. Don’t get me wrong: I think that we should have some fairly fierce legislation—which we do have now—for dealing with people who deliberately destroy the lives of the public, or uproot and disrupt the lives of the public.”
“I find myself, I am afraid, in agreement with the Opposition spokesperson. I also support the Casey recommendations, based as they were on a horrifying report about the behaviour of the Met over the years. Let us be clear: no Government of any persuasion have managed to get the Met to behave—and not just the Met; other police forces, too—in a manner that is acceptable to the public, bearing in mind that there have been Governments of both orientations since Stephen Lawrence. The second point I would make very quickly is that when the Home Secretary in 2010—my right hon. Friend the Member for Maidenhead (Mrs May), for those who do not remember—limited stop and search, she did not do so out of an excess of liberal sympathy.”
“Q8. It seems clear that the junior doctors’ strike is causing a serious risk of loss of life, and certainly causing harm and pain to thousands of our constituents. The first line of the Hippocratic oath is “First, do no harm”. When does the Prime Minister think the British Medical Association abandoned this central tenet of its profession?”
“T3. The Department for Education has announced that it intends to subsidise the so-called Oak National Academy by £43 million in the coming years, much to the dismay of some of the educational software sector. Did the Department carry out a full assessment of the impact of that subsidy on competition and innovation in the sector before it made the decision, and if it did so, will it publish that study?”
“My right hon. Friend talks about seeking out and sanctioning the individual officials, but this is an action of the Russian state, not of individuals. Since the Ukraine war, just the major countries in Europe have expelled between 27 and 45 diplomats each. Is that not a measure that we should look at?”
“The recent investigation into lawfare by the Bureau of Investigative Journalism and The Sunday Times revealed how witnesses can be paid vast sums of money—up to £1 million—to appear in British courts. That is illegal in America. Does the Government agree that the payment of such a huge amount of money has the potential to sway witnesses and should be outlawed?”
“I agree with my hon. Friend. In fact, that was demonstrated when we had the case of prisoner votes and Jack Straw, who took through the Human Rights Act, supported my motion to give instruction to the Government to get by exactly that issue.”
“At last. I remind the House that 27 people have died in the wait for justice. That said, I commend the Minister and his processor for their fabulous compassion, energy and drive in delivering what we are seeing today. However, there are people I represent among the 555 who have still not received any compensation for a variety of reasons, so can the Minister tell the House whether the scheme, under its brilliant advisory board—some of whom are in the Chamber—will cover all 555 claimants?”
“I will be brief because much of what I have to say agrees with the Opposition spokesperson, the hon. Member for Croydon Central (Sarah Jones). I remind the House that the biggest curtailment of stop and search in modern times was in 2010, when my right hon. Friend the Member for Maidenhead (Mrs May) was Home Secretary. The reason she did it, in large part, was the feeling that nearly all the stop and searches were in the Met—there were only about 50 in Scotland one year, but thousands down here—and ethnic minorities felt that they were targeted at them. The way they were pursued made race relations in the capital worse.”
“It means the right to stop and search innocent people who have no reason to be stopped and searched whatsoever. We are handing the discretion to a police force that has been called upon to reset its approach to stop and search. The Government are doing almost precisely the opposite of what Casey is calling for. The final amendment states: “The chief superintendent must take reasonable steps to inform the public when the powers conferred by this section are in active use.” Those are all practical changes. The smart action of the Government is to accept them, carry on and try to improve on the Metropolitan police that we have today.”
“The Lords amendments will change the level of seniority required to designate an area for suspicionless search from inspector to chief superintendent or above. Whatever Lord Hogan-Howe says, that is not a crippling amendment. Changing the maximum amount of time for which an area can be designated from 24 hours to 12 hours is not crippling but practical. While my right hon. Friend the Member for North West Hampshire was doing his job in London, I was on the Opposition Benches as shadow Home Secretary, dealing with a number of Metropolitan Police Commissioners. That is a perfectly practical change. Changing the level of seniority required to extend the authorisation by a further 24 hours to chief superintendent is, again, a practical change. We talk about suspicionless stop and search. What does that mean?”
“There were examples where officers “Had been rude or uncivil while carrying out a search” and “had used excessive force, leaving people (often young people) humiliated, distressed, and this damaged trust in the Met”. Those are all bad things from our point of view. We all want—I include the Opposition—the disgraceful trend in modern demonstrations brought to an end. It is designed not to demonstrate but to inconvenience—there is a distinction. But the Bill is a heavy-handed way of doing that. The Minister tried to say that the Lords had accepted the principle. They had not. What they have sought to do with these amendments is leave the tool in the hands of the police but constrain it in such a way that it is used more responsibility.”
“I have allowed my right hon. Friend to make his point, but the simple truth was that the reason for the Home Secretary of the day curbing stop and search was concern about its impact on ethnic minorities. He is also right that the biggest number of victims of knife crime came from ethnic minorities, so I take his point. My answer to him—and the general concern here—is that bad policing is not improved by bad law, which is what I think this is. That brings me to the Casey report. The hon. Member for Croydon Central was right to cite the criticism of the Metropolitan police. The report said that there were numerous examples of stop and search being carried out badly. There were examples where officers “justified carrying out a search based on a person’s ethnicity alone”. That should not apply under any circumstance.”
“I agree with everything that has been said so far, but it is not just about preserving productive land; it is also about preserving amenity. This 3,000-acre proposal will surround a number of villages in what is currently a beautiful piece of rural English countryside, and the proposal is essentially anti-democratic because it will not be decided by the local council—it will eventually go to the chief inspector. I have asked for the views of all the residents of those villages, and so far 50% have come back, with 78% of them wanting the proposal stopped. However, as it stands, there is no mechanism to do so.”
“My hon. Friend used the phrase “if designed carefully”. It is not possible to design carefully a 3,000-acre site that surrounds four or five villages. By definition, that will cause a massive assault on the amenity of individuals living in that area.”
“If that happens, I would ask the Chancellor, “Could you please look again at bringing back your super-deduction?” That will attract investment here in a way that will not happen with the 25% rate. I would ask, “Will you look at doing away with IR35 and at other concerns that will improve prospects for small businesses?” In my view, it will be incredibly difficult for the banks to get right the balance between inflation and growth now that their hands are tied by the instability of the banking sector. My one line to the Chancellor is this: please look, for the next Budget, at much more growth.”
“I draw people’s minds back to Lloyds taking over HBOS, which was done under pressure from the Government of the day—from Gordon Brown—and Lloyds itself nearly collapsing the very next year. I hope that UBS will not do the same. The point of this story is that we are in a period of extraordinary global financial instability. I am a low-tax Tory—I would have loved the Chancellor to have had a lower-tax strategy—but I have to say that the events of the past week have demonstrated that a very small-c conservative strategy is wise under these circumstances. The more confident the markets in the Government, the better our prospects for the future. That said, I would be completely unsurprised if we had to have another Budget in the autumn owing to the nature of the transitions and changes that are now happening.”
“Chancellors, central bank governors, financial secretaries in the States and regulators have no chance but to claim that the system is robust. I am not so sure. We will not know for a while whether it is actually robust, because of the complexity of the system. Of the three major banks that have failed so far, each has failed for different reasons, and we have no clear insight into what risks other banks have taken, partly because of the deregulation under Trump and his predecessors. In that respect, we in this country are probably in a better place than either the Americans or the Europeans, but I am keeping my fingers crossed as I say that so as not to tempt fate. There is one lesson that we should learn. A big issue on which the world is hanging at the moment is whether the takeover of Credit Suisse by UBS is a success.”
“In 2009, because of the crash, America passed Dodd-Frank, which required banks with more than $50 billion in assets to be subject to tight regulation. Again, under pressure from Wall Street, President Trump relaxed those regulations in 2019. I talk about Wall Street, but the whole world followed. Of course, after that relaxation, banks assumed that they had an infinite period of low interest rates and that they could borrow ad nauseam. When global interest rates sharply increased by three, four or five times, the shock destabilised a number of those banks. One such bank was Silicon Valley Bank, which had been taken out of regulation by the Trump changes. There is a lesson for us in all that. It has caused an instability in the financial system.”
“One of the characteristic problems of the banking sector is its short memory, particularly when it is Wall Street that we are talking about. I hope that the House will indulge me if I remind it of the lessons of the major banking crashes of the past half century. Back in 1933, after the great depression, the Americans passed the Glass-Steagall Act, which separated banks out into risky investment banks and straightforward commercial banks. That gave us about seven decades of stability until 1999, when President Clinton—under pressure from unwise and greedy Wall Street lobbyists—essentially removed Glass-Steagall. What followed was the collapse of several banks, including Lehman Brothers—probably precipitated by the new mark-to-market rules—in the great crisis that we saw in 2008.”
“I draw the attention of the House to my entry in the Register of Members’ Financial Interests. Like two of the previous speakers, I am also a science graduate, although I do not compare myself with the Conservative party’s most famous science graduate. I had intended to make my speech essentially about science and technology, because they are massively important and, as the hon. Member for Manchester Central (Lucy Powell) pointed out, we have fantastic competitive advantages in those fields. That will be a major part of growth. Since last Tuesday, however, dramatic events have unfolded in the banking sector—particularly over the weekend. Back in 2009-10, the then Chair of the Treasury Committee, Lord McFall, asked me to chair the Future of Banking Commission. The last week has, unfortunately, brought back some memories.”