Bank of England governor Sir Mervyn King, due to be replaced by Canada’s Mark Carney on Monday 1 July, made his final appearance in front of the Treasury Select Committee this week. King spent 22 years at the Bank, starting as its chief economist and becoming deputy governor before his ten-year stint in the top job began. He noted that five years on from the global financial crisis, the British economy’s recovery was still “too weak to be satisfactory” and took a final potshot at Britain’s banks. He said that they were putting undue pressure on regulators to water down demands to raise capital.
What the commentators said
King has “cleverly positioned himself as on the side of the little guy against the vested interest of the big, bad bankers”, said The Daily Telegraph, thus helping to deflect blame for the crisis from the Bank. It wasn’t hard: “his contempt for bankers is genuinely felt”. But he paid little attention to the financial system in the run-up to the crash, as The Guardian pointed out. “Before the collapse of Northern Rock, [his] lack of interest in regulating financial markets was legendary.” Staff “presenting updates on [financial stability] recall the governor falling asleep in briefings”.
The same goes for the housing bubble. “It should have been clear to King”, said the Centre for Economic and Policy Research, “that this asset bubble would burst at some point and that it would have severe consequences for the UK economy. However, he took no measures to rein it in, apparently oblivious to the dangers.” Now we are grappling with a downturn “more severe than the Great Depression”.
The trouble was the Bank’s “monomaniacal obsession” with targeting inflation, a policy originally suggested by King, noted Iain Martin in The Daily Telegraph. This didn’t include asset inflation, however. So the housing and credit bubbles were overlooked. The bottom line: King was not solely to blame for the crash. “But he was up there on the bridge throughout, while Gordon Brown strode up and down the decks assuring the passengers that all was well.”