COMMENT: Osborne banks on Carney

The Chancellor's coup in bagging Canadian Mark Carney for the BoE may be his sharpest move yet - not that that is saying all that much...

by Andrew Saunders
Last Updated: 07 Dec 2012

George Osborne pulled off the biggest coup de theatre of his admittedly bumpy number 11 career yesterday. Everyone - journalists, city types, even bookies - had decided that Paul Tucker’s elevation to the job was a done deal, so the news that the darkest of dark horses Mark Carney was not only back in the race but had actually won it caused quite a stir. And is there anything a beleaguered politician likes more than seeing the attack dogs of the media pack roll over and let their tummies be tickled for a change?  

The overwhelming response so far has been positive, not least because Carney is widely regarded as being the best central banker of his generation, and also perhaps because of his initial refusal to take the role. Such reluctance is vanishingly rare these days, when jobseekers at all levels must show themselves willing to walk over broken glass in their ‘passion’ to take on whatever task is on offer. But it is actually a very desirable quality in a Bank of England governor-designate.  

But how is Carney’s appointment likely to be viewed in, say, two years time? And what will his new colleagues on Threadneedle Street make of the new boss in town? That is harder to call. 

The fact that he is a complete outsider, and an alumnus of the ‘Vampire Squid’ Goldman Sachs to boot, may set some hackles rising. It also suggests that the Bank of England is in for quite a shake up, a rough ride which its staff - some of the smartest to people any UK institution - may feel they don’t entirely deserve.  

But on the other hand it does send a powerful message about London as a truly international financial centre, run on merit alone. It’s hard to imagine The Bundesbank, or The Fed, ever being run by a foreigner. (Although of course, Canada is in the Commonwealth and so conveniently not entirely foreign).  

His technical credentials too are unimpeachable - unlike any of the other candidates he has actually run a central bank for starters. As head of the Bank of Canada he is regarded with something close to awe in his native land for helping it dodge almost entirely the fallout from the 2008 crash, despite the proximity of its US epicentre. The similarities of this situation to the one which pertains here vis a vis sterling and the Eurozone will not have been lost on Osborne. Oh, and he is chairman of the G20 Financial Stability Board, too. What’s not to like about that lot? 

He’s proved himself to be no pushover when it comes to regulating banks, having held his own in a famous scrap over regulations with JP Morgan’s redoubtable boss Jamie Dimon. He’s even got the global financial protest lobby covered off - his wife Diana (who he met while studying at Oxford) is VP of eco thinktank Canada 2020, and a fan of the Occupy movement. The Telegraph today describes her unkindly as an ‘eco-warrior’ who wears ‘vegan shoes’ so she already seems to have got the traditionalists rattled. Good work.  

He could hardly have got a better reception, let’s hope he can live up to it. The job he faces at the Bank when he moves in next year is a toughie, make no mistake. The UK economy is bigger, and in a much worse state, than that of Canada. British banks are bigger, and in a much worse state, then those in Canada. And at the BoE itself, he will have to oversee the assimilation of all those former FSA people who will be moving shortly, as well as setting up an entirely new bubble-deflating mechanism.  

All these factors make for a formidable technical and management challenge, but one that he is as at least as well qualified as anyone to take on. There is one other thing he will have to deal with which he may not be quite so well prepared for - politics, and politicians. For the governor’s job, especially in times of Austerity, is highly political. How well he will cope with this aspect of British public life remains to be seen… 

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