Mervyn in the Lion's den

The Manager wanted no trouble, And took out his purse right away: And said, 'How much to settle the matter?'
And Pa said, 'What do you usually pay?'

Mervyn King's "grilling" by the Commons Treasury Committee turned out to be a light toasting (which Malcolm watched, courtesy of BBC24). He was on the spot because he was scheduled to report on the August inflation statement (which, inevitably, went by the board).

King's "get out of gaol card" was played early and, in effect, was predicted by Malcolm just yesterday: the need to reconcile four separate pieces of legislation. Those four pieces turn out to be the Takeover Code, the Market Abuse Directive of 2005, the freezing of a bank's deposits once it goes into liquidation, and the lack of a guarantee once deposits fall below 100% of commitments. At least, that's how Malcolm heard it.

The members of the Committee seemed non-plussed by the tri-partite control of the market, with the Bank, the Financial Services Agency, and the Treasury all involved, and apparently largely overlapping. King was effective in sloughing the Bank's responsibilities off onto the other two, and (again as Malcolm heard it) onto the FSA.

King seemed almost anxious to maintain that division of labour and responsibility: “The Bank of England is not responsible for individual institutions: we act when the FSA come to us.” And that was King's other trump: the FSA had not come to the Bank, so the first King knew of the Northern Rock problem was a regular meeting on 14th August.

So, as in the previous and celebrated case of Mr and Mrs Ramsbottom and the Blackpool Zoo:

The Magistrate gave his o-pinion
That no-one was really to blame
He said that he hoped the Ramsbottoms
Would have further sons to their name.

Two conclusions fall out of all this:

• it really is time for a new Banking Act, to sort out Who? What? Where? When? Why? and How? That should occupy the time of the Commons for several months.
• the public have a right to know.

In particular, King's declaration that he would have wanted everything done in secret is not good enough. If it were applied to any business other than banking, any trading other than money, someone would properly be done for insider trading. For weeks Mr and Mrs Ramsbottom were being invited to place their savings in the Northern Rock, which those in the know (notably the TSB, which was being inveigled to take the Rock over) wouldn't touch with a barge-pole.

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