You have to admire Mervyn King's nerve. The governor of the Bank of England has been speaking lately with customary self-confidence about Britain's economic challenges. His prescription is simple - we should all agree that the Bank knows best.
Alistair Darling, it is fair to assume, is less than thrilled. The chancellor has only recently seen off Gordon Brown's attempt to shuffle him out of the Treasury. Secure until the election, he might have seen a chance to set out his own stall.
Instead Darling put on his best bib and tucker for the Mansion House dinner, only to be upstaged by King's demand that the Bank take full control of financial regulation. Then came the governor's broadside on the chancellor's alleged failure to get a grip on the fiscal deficit.
The governor's hesitant fumbling of the early stages of the financial crisis seems to have slipped his mind. The amnesia, colleagues say, is calculated. King frets about his place in the history books. Autumn 2007 was not his finest hour.
The Bank had been mesmerised by inflation even as the economy headed towards recession. Then King overruled senior colleagues and refused to pump sufficient liquidity into credit markets.
Everyone made mistakes during this period, including commentators. King's, though, were compounded by an autocratic style. His impatience with contrary opinion does not recommend the transfer of still more authority to the Bank.
Inconvenient history aside, King's interventions include one quite strong point, an omission and a political miscalculation. The good point was that the Bank needs new powers to call time on institutions that threaten financial stability. The Treasury might retort that not so long ago King was downgrading the Bank's role in financial regulation, cutting staff and focusing on monetary policy. Yet it seems reasonable that in the new order the Bank should have the capacity to act decisively if it identifies systemic risk.
King's public assertions, though, look too much like a crude power grab calculated to pre-empt the wider debate foreshadowed by the Treasury's promised consultation paper.
Lord Turner, the chairman of the Financial Services Authority, is surely right when he says the authorities would do better to agree the overall design before settling who gets pole position on the regulatory grid. Two arguments collide here. The first says that unless the authorities act swiftly, the moment will be lost.
On the other hand, rushing things without first fully understanding the complexities of systemic risk is not sensible either. Life is more complicated than glib statements that if a bank is too big to fail then it must be too big. As Lord Turner points out, there may be other ways to mitigate the risks.
King's omission has been in the domain of monetary policy. It is now clear that the Bank's Monetary Policy Committee (MPC) misjudged things badly during the first half of 2007. King insists that nothing should change. The contrary case has been put by Sir John Gieve, one of the Bank's former deputy governors.
The MPC, Sir John says, has proved its worth in fighting the last war - preventing 1970s-style inflationary booms. But the economic model used by the Bank to guide the MPC's deliberations is out of date. It failed to predict the impact of what was happening in financial markets. The MPC's narrow remit does not recognise the links between interest rates, regulation and fiscal policy.
King's miscalculation came in his scarcely veiled warning to Darling to do more to bring down the government's deficit. This has put the governor on the side of the Conservatives, stirring suspicions that he is taking political sides ahead of the general election.
Odd though it seems to say it, behind the public spats there is a fair measure of agreement between the Treasury, Bank and Financial Services Authority on how to create a durable framework for financial institutions and markets. But no one has a monopoly of wisdom and those who want their sermons to be heard would do better to display a touch of humility.
Alistair Darling, it is fair to assume, is less than thrilled. The chancellor has only recently seen off Gordon Brown's attempt to shuffle him out of the Treasury. Secure until the election, he might have seen a chance to set out his own stall.
Instead Darling put on his best bib and tucker for the Mansion House dinner, only to be upstaged by King's demand that the Bank take full control of financial regulation. Then came the governor's broadside on the chancellor's alleged failure to get a grip on the fiscal deficit.
The governor's hesitant fumbling of the early stages of the financial crisis seems to have slipped his mind. The amnesia, colleagues say, is calculated. King frets about his place in the history books. Autumn 2007 was not his finest hour.
The Bank had been mesmerised by inflation even as the economy headed towards recession. Then King overruled senior colleagues and refused to pump sufficient liquidity into credit markets.
Everyone made mistakes during this period, including commentators. King's, though, were compounded by an autocratic style. His impatience with contrary opinion does not recommend the transfer of still more authority to the Bank.
Inconvenient history aside, King's interventions include one quite strong point, an omission and a political miscalculation. The good point was that the Bank needs new powers to call time on institutions that threaten financial stability. The Treasury might retort that not so long ago King was downgrading the Bank's role in financial regulation, cutting staff and focusing on monetary policy. Yet it seems reasonable that in the new order the Bank should have the capacity to act decisively if it identifies systemic risk.
King's public assertions, though, look too much like a crude power grab calculated to pre-empt the wider debate foreshadowed by the Treasury's promised consultation paper.
Lord Turner, the chairman of the Financial Services Authority, is surely right when he says the authorities would do better to agree the overall design before settling who gets pole position on the regulatory grid. Two arguments collide here. The first says that unless the authorities act swiftly, the moment will be lost.
On the other hand, rushing things without first fully understanding the complexities of systemic risk is not sensible either. Life is more complicated than glib statements that if a bank is too big to fail then it must be too big. As Lord Turner points out, there may be other ways to mitigate the risks.
King's omission has been in the domain of monetary policy. It is now clear that the Bank's Monetary Policy Committee (MPC) misjudged things badly during the first half of 2007. King insists that nothing should change. The contrary case has been put by Sir John Gieve, one of the Bank's former deputy governors.
The MPC, Sir John says, has proved its worth in fighting the last war - preventing 1970s-style inflationary booms. But the economic model used by the Bank to guide the MPC's deliberations is out of date. It failed to predict the impact of what was happening in financial markets. The MPC's narrow remit does not recognise the links between interest rates, regulation and fiscal policy.
King's miscalculation came in his scarcely veiled warning to Darling to do more to bring down the government's deficit. This has put the governor on the side of the Conservatives, stirring suspicions that he is taking political sides ahead of the general election.
Odd though it seems to say it, behind the public spats there is a fair measure of agreement between the Treasury, Bank and Financial Services Authority on how to create a durable framework for financial institutions and markets. But no one has a monopoly of wisdom and those who want their sermons to be heard would do better to display a touch of humility.
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