As credit issues rumble on in the UK and the eurozone, the Governor of the Old Lady of Threadneedle Street continues to come under the critical gaze of many
Governor of the Bank of England, Sir Mervyn King, has been the focus of heavy criticism since markets crashed. He has been in his post during some of the most difficult economic times in the UK, but some financiers believe that his actions worsened the crisis. Still others claim that King’s monetary policy may have been a factor in causing the crisis in the first place.
Many industry analysts have said that King’s initial reluctance to take decisive action precipitated the credit crisis in the UK. Others have claimed that he followed the example of former US Fed Res Chairman, Alan Greenspan, by agreeing to slash interest rates, which eventually led to the housing and credit bubbles in their respective countries. Late last year, King was under fire again, as some financiers claimed that his economic forecast remarks were unnecessarily pessimistic and may have contained exaggerated concerns about the markets.
In late 2011, following King’s remarks that the world was facing “an exceptionally threatening environment” and that the UK was still experiencing a “deep financial crisis”, PwC financier, Andrew Sentence, decried the governor’s comments. He commented, “The pronouncements of the Bank of England have done little to reassure the public of business. It could do more to instil confidence. We all recognise there is genuine uncertainty about the Euro, but it is not necessary for the bank governor to exaggerate and overplay these factors.”
Dan Conaghan, author of, The Bank – Inside the Bank of England, claims that King’s unwillingness to accept the gravity of the worldwide financial crisis caused him to make several unwise decisions in the days immediately following the meltdown. Speaking about his overall record, Conaghan said, “Sir Mervyn has been a brilliant economist, but he hasn’t been a brilliant central banker.”
Even stronger criticism has come from other experts who say that King should be stripped of his knighthood for his role in the economic collapse. “If knighthoods are being removed for those held primarily responsible for the debacle, shouldn’t Sir Alan Greenspan and Sir Mervyn King, like the ex-CEO of RBS Fred Goodwin, be stripped of their honours too?” asked Societe Generale global strategist, Albert Edwards. Interestingly, King received his knighthood in June of 2011, years after making the economic decisions that many believe worsened the impact of the crisis on the UK.
Edwards went on to place the bulk of the blame for the economic crisis squarely on the shoulders of King and other central bankers. He claimed, “It is the monetary authorities in both the US and UK who are almost wholly responsible for allowing this lax monetary environment and the boom and bust in their respective economies, not the over-exuberant actions of lenders and borrowers.”
Sir Mervyn King’s term as Bank of England Governor will end in 2013.