James Moore: The danger of an over-mighty Bank
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Adam Posen, a former member of the Bank of England's Monetary Policy Committee (MPC), today said the Old Lady of Threadneadle Street was a case in point.
Appearing before the Parliamentary Commission on Banking Standards, he presented a picture of Sir Mervyn King as an over-mighty Governor who reigned unchallenged due to a serious lack of oversight.
If the bank's executives had settled on a course, he claimed, external members of the MPC basically had to lump it, which has had important implications for the Bank's programme of quantitative easing, designed to stimulate the economy.
Economists are a prickly lot at the best of times, so it's not impossible that Mr Posen used the hearing to settle a few old scores. But he's the second ex-MPC member to make this sort of criticism. His fellow "dove", David Blanchflower, has made a rather similar case.
Given that the Bank's powers are set to increase still further with it taking over the supervision of the financial soundness of banks, his criticism ought to be heard, particularly with a new Governor, Mark Carney, preparing to take charge.
An over-mighty, hubris-driven central Bank is a dangerous thing. Just ask those people around during the collapses of BCCI and Barings, when the Bank was also in charge of banking regulation.
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