The Bank of England Governor appeared before the Treasury Select Committee in London this morning, just 24 hours after being forced into an embarrassing U-turn. After refusing to lend additional cash to the banks last week, a hard-line stance that clearly lost the Governor a few friends, yesterday the Bank suddenly changed its mind and injected an extra £10bn into the system. With the financial community on the lookout for a scapegoat, King seemed the most likely target.
What’s more, the otherwise obscure backbenchers of the Select Committee seem to revel in the ‘attack dog’ role, judging by its private equity enquiry earlier this year. Just ask the BVCA – the industry’s trade body got such a kicking from the committee that its chief executive was out on his ear within a week.
But if King was anxious about today’s very public grilling (the proceedings were broadcast live on the internet) he didn’t look it. The Governor was calmness personified, despite the occasionally hostile questioning, and put up a forceful defence of his actions (or lack of them).
He denied he had had his arm twisted, suggesting that ‘the interaction between different pieces of unconnected legislation made it impossible for us to conduct the lender of last resort in the way that we’d prefer’. The Bank’s preference was for a covert operation to rescue Northern Rock, he said (conjuring up images of black ops and dead letter boxes). But the rules on market abuse prevented that, while the Takeover Code ruled out a swift sale to a third party.
Now King wants both of these laws amended, along with the deposit insurance rules for savers – which he reckons are ‘markedly inferior to other countries’.
King is not quite out of the woods yet, but his assured performance today has probably bought him enough time to ride out the current storm. Either way, he’ll probably be glad to see the back of the Select Committee.