Former UK chancelor Darling: Mervy King is clueless central banker

Alistair Darling has launched a stinging attack on Sir Mervyn King, claiming the Bank of England governor did not understand the unfolding financial crisis in 2007, took the wrong policy action and ended up undermining the Bank’s independence by endorsing Conservative banking reforms.

The former Labour chancellor says the Bank of England’s poor handling of the crisis cast serious doubt on whether it should be given new regulatory powers, with even more responsibility put in the hands of the governor.

Mr Darling’s memoirs of his time at the Treasury give a chilling account of the “permanent air of chaos and crisis” at the top of the Labour government, claiming that Gordon Brown was deluded and thought the economic downturn would last only six months.

While most coverage of his book has been on his “deeply unpleasant” experiences at Mr Brown’s hands, Mr Darling’s version of events calls into serious question whether the Bank of England is equipped to take on new roles.

Mr Darling says Sir Mervyn allowed the Bank to become obsessively focused on its monetary policy role, so that when Northern Rock emerged as a harbinger of financial disaster the governor had little idea how to respond.

“I don’t think the Bank had an adequate or anywhere near adequate understanding of what was going on in the banking system, despite the fact it had responsibility for the financial stability of the system since 1997,” Mr Darling told the BBC’s Andrew Marr programme.

[]The former chancellor says the “stubborn” Sir Mervyn refused for months to pump liquidity into the banking system[/b] – fearing it would create “moral hazard” – leading to increasing anxiety at the Treasury about the imminent risk to the sector.

“I was so desperate that I asked the Treasury to advise me as to whether we could order the Bank to take action,” Mr Darling wrote in his book. The advice was that while it was possible, it would undermine the Bank’s independence.

http://www.ft.com/intl/cms/s/0/b0e10ad8-d703-11e0-bc73-00144feabdc0.html#axzz1X1GLoxcX

 

He's got an axe to grind, so I would treat what he says with a large pinch of salt.

 

no i would think darling is spot on here...they need to expand their mandate or fast become obsolete as the frequency of financial crisis is only going up

 

Darling was just as clueless as the BOE. What better thing to do than blame his own incompetence on the incompetence of others?

 

I think he is selling a book...