“I have not been consulted on what will be in the white paper and I have not seen a draft copy of it”
— Mervyn King in a speech admonishing the Treasury Select Committee – June 2009.
His clashes with Alistair Darling, the Finance Minister, U.K., have made entertaining reading while his uncommon gall and candid statements make headlines at a healthy frequency. Mervyn King, the Governor of the Bank of England, is one of the more colorful personalities in the world of finance and one who believes that the Bank knows best. So, it is no surprise that King was elated when the U.K. government said it was contemplating to strengthen the powers of the Bank of England.
The forthright Governor has been the recipient of both scorching criticism as well as unreserved admiration. He has received considerable flak for his handling of the credit crunch, but Prime Minister Gordon Brown has openly admitted that King, “has been a brilliant Governor of the Bank of England,” who has guided the economy as well as possible. And guidance has come naturally to a man who taught at some of the preeminent educational institutions in the world, including the University of Cambridge, Harvard University and the London School of Economics. King made his jump from academia to politics when he became the Chief Economist and Executive Director of the Bank of England in 1991. He was appointed Deputy Governor in 1998 and became the Governor in 2003. But King is not all work and no play. He is at equal ease discussing monetary policies as well as the football tactics of his favorite football club Aston Villa.
King is not just forthright in his talk but also in his thinking. With the U.K. economy fractured by inflation for the second time in two years, King wanted to keep inflation low at a target rate of 2%. He announced that wages must be restrained so that interest rates would not climb further. And in a bold statement of commitment, he chose to forgo his very own pay raise of more than £100,000 ($164,860) when he was re-appointed as Governor in 2008, deeming the hike “inappropriate.”
His focus is to restore financial stability in every way possible. Even if it means telling Gordon Brown flatly that government borrowing has far vaulted its limits and that “the scale of the deficit has become truly extraordinary.” King’s abrasive manner might make political diplomacy seem superfluous but his messages are clear and resounding.
Yet, it is King’s open warfare with Alistair Darling that has most exposed his disdain of polite façades. Darling was forced to delay the release of a proposed list of banking reforms when King shocked the Treasury Select Committee with his candid admonition that he had not been told of any reform changes being planned by the government. Darling’s long-awaited reform of banking regulation was widely seen as likely to enervate the Bank of England while strengthening the role of the Financial Services Authority (FSA) in ensuring financial stability. In what has since evolved into a bitter public spat between Darling and King, the Governor of the Bank of England has made it clear that he “can do no more than issue sermons or organize burials” unless he is given more authority.
King now is desperate for action. One of the biggest criticisms against the Bank of England was that it was unsteady and slow to react to the credit crisis. But King reversed these pronouncements with a few swift moves including the decision to print up to £150 billion ($245.4 billion) to increase the money supply. He might be pleased to know that the Bank and the FSA are in line to be bestowed with additional powers to help prevent future crises. Their new responsibilities will be outlined in a White Paper expected later in July.
Mervyn King once famously said his ambition as Governor of the Bank of England was to be “boring.” But with his blunt language and no-nonsense demeanor attracting headlines like a magnet, it appears that King’s wish will be far from realized.
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