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September 20, 2007

The Independent Bank of England

Isn't independent:

If Alistair Darling really did force King's hand, he will have at a single panicky stroke undermined the whole regulatory structure put in place to such fanfare by the new Labour Government in 1997. He will have confirmed former governor Eddie George's fears that emasculating the Bank by handing part of its oversight function to the new FSA was a calamitous error.

Not a huge surprise. No one really thought that politicians would give up such power, did they?

September 20, 2007 | Permalink

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Comments

Agreed. Damned if you do, damned if you don't.

Posted by: Mark Wadsworth | Sep 20, 2007 9:48:55 AM

There's a simpler reason for Darling forcing the Governor to act against his instinct; i.e. we're having a snap election in the autumn or early spring, and Gordo doesn't want to risk recent memories of little old ladies queueing for their money, or worse, newspaper articles about how savers losing out and how that heartless Gordo sat tight and did nothing to save them.

Posted by: Mark C | Sep 20, 2007 10:14:27 AM

Mark C,

Whilst I entirely agree with your analysis, I'm not that any of it contradicts Tims' statement that

" No one really thought that politicians would give up such power, did they?"

Posted by: Cleanthes | Sep 20, 2007 10:24:45 AM

this is wildly mindless. Anyone who bothered to check the 1998 Act would know that "independence" refers to monetary policy and the Bank of England's role in providing loans to the money market was always to be carried out under the direction of the Treasury (as it always was, as it always has to be, because the Bank of England can't take that much risk onto its balance sheet without the Treasury's guarantee).

It's a reserved power of the Treasury. In any case, since the Northern Rock operation has visibly been an outstanding success of the Tripartite Committee arrangement (as in, it's over in less than a week with no public funds drawn down), it is hard to argue that this success "undermines" anything.

Posted by: dsquared | Sep 20, 2007 12:45:11 PM