Oh dear. The Governor of the Bank of England does love his “moral hazard” sermon so. It was only two years ago that he was trumpeting about it as the reason not to intervene with Northern Rock and the banks at the beginning of this crisis. Financial institutions have to be let go as a lesson to themselves and others. Thank God he was over-ruled or the financial crisis would have been far worse.

It obviously still rankles with him because he’s fighting the battle all over again, only with the anger that they got away with it last time. Logically he’s right: the final discipline on risk taking is the fear of failure. Substitute that fear with the knowledge that the government will always bail you out and anything goes. In reality it’s not as grim as that. No company wants to bring about its own collapse even if the government will step in, particularly those who pay by bonuses. The problem of the whole casino operation behind the banking collapse was that the players all thought they were reducing risk with exotic instruments, not increasing them.

There is a real debate to be had. Indeed it must be had, about the size of banks, the nature of bonuses, the separation of function between deposit taking and dealing. And at the core of this has to be a discussion as to the rise of global financing and wholesale markets of the last twenty years. Does Britain want still to be at the centre of wholesale finance or revert to largely domestic banking, as one suspects is Mervyn King’s instinctive preference? It would be so much simpler for him if we reverted to the pre-Big Bang era.

But then that’s the trouble with the Governor, a domestic economist by training and nature. He didn’t understand what was happening when this crisis first blew up and, one suspects, he still doesn’t understand it now.