Margareta Pagano: He's no messiah, but can Mark Carney lead us to growth?
He's been hailed as the banker who saved Canada from the Great Crash, but the UK is a far tougher hand for the new Bank of England Governor
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Sunday 02 December 2012
It was an extraordinary moment, Kennedyesque in its drama – where were you when George Osborne appointed Mark Carney to be the next Governor of the Bank of England? In the Commons, the Chancellor looked as happy as if he had wiped out the entire deficit with one stroke, while Ed Balls was so gutted he could barely string two words together. One MP admitted to jumping up and down on the spot on hearing the news; unless you're on I'm a Celebrity, that's a Westminster record.
As manoeuvres go, this was Osborne at his most brilliantly political. Even the media swooned, almost unanimously hailing the arrival of this dashing Canadian banker as the messiah who will pull the UK out of its dalliance with a triple-dip recession.
By all accounts, Carney is bright, personable and driven – there's chatter that the 47-year-old has ambitions to lead Canada's Liberal Party when he's done fixing Britain.
He's got soul too, even if he did work as an investment banker for Goldman Sachs, having praised the Occupy movement and shown worry about how widening income inequalities are leading to distortions in society.
As Canada's central banker, he's proved technically sound as well as creative, such as with his decision to give interest-rate guidance; a move he may consider here. He's credited with having kept Canada safer than most from the Great Crash, and his work at the G20's Financial Stability Board has focused on making banks safer with calls for higher capital ratios and increased risk weighting.
Yet it's disingenuous to give Carney all the credit; much of the work clearing up Canada's earlier crisis was done before his arrival at the country's central bank as Govenor in 2008. Canada's banks escaped the more egregious excesses of their US and UK peers because they were regulated by its Ministry of Finance on a tight rein. Indeed, Canadian bankers have a culture of risk aversion and have high leverage ratios as well as a maximum 20-times assets-to-capital multiple. It's correct that Canada missed out on the big storm but it did suffer squalls: many of its banks were bailed out more quietly. That's not to knock Carney – being dealt a good hand doesn't necessarily mean you play it well.
The hand Carney has been dealt in the UK just got a lot tougher. As the Governor, Sir Mervyn King, warned last Thursday, the UK's big four banks face a black hole of up to £60bn in hidden losses or new regulatory demands. In a bold move that should be welcomed, Sir Mervyn told the banks to clean up their act, by raising new capital or selling off non-core assets.
As he rightly said, recovery is being held back because no one believes in or trusts the banks: it's why there is such a paralysis in lending. Carney would agree as he's been calling for higher leverage ratios; though it will be interesting to know his view on the Government's surprise decision to accept a leverage target of 3 per cent in the new ring fencing reforms and not the Vickers one of 4 per cent.
But to expect Carney to mend the UK single-handed is misguided and, by implication, ridiculously unfair to the old regime at the Bank which is now being blamed for all the failings of the past. This is rewriting history and patently fatuous. Human beings have a great tendency to deviate towards the mean where mood is concerned. Thus awful events are never quite as ghastly as you'd imagine but nor are the great events quite as glorious. Carney is undoubtedly "wicked smart", as Time magazine put it, but he's most definitely not the messiah. We can only hope he's not Father Christmas either – a fantastic creation but with feet of clay.
Farewell to the share-picker with the best nose in the business
The last time I spoke to my dear friend Peter Meinertzhagen, who so sadly died last week, he was as sharp and lively as ever.
It was the Friday before last and we had one of our more robust debates about the state of the nation – in his view miserable – and his favourite pastime, picking out winners and losers on the stock market.
BP had just settled its legal claims in the US and he thought the shares cheap; they are up 16p to 430p. Invensys was another he said the market had undervalued – last week it sold its rail division to Siemens and shares have soared nearly 25 per cent to 315p on bid fever. It's this sort of native market intelligence that made Meinertzhagen one of the best corporate brokers of his generation, and at one time consigliere to more than a third of all blue chips on the FTSE 100.
Joining Hoare Govett as a sales trader when he was 19, the Old Etonian went on to build the broker into one of the UK's top firms, helping Lord Hanson to break up Hanson, Rolls-Royce in its expansion and Glaxo Wellcome on its merger with Smith Kline Beecham to create GSK – but also told it not to buy Astra Zeneca.
As Sir Chris Gent, the outgoing chair of GSK, once said, he had the best nose in the business.
Meinertzhagen adored the City but detested what it had become after the Americans invaded post-Big Bang.
For years he had been warning that the US investment banking model is tainted, and would lead to huge conflicts of interest. In an interview with me a few years ago, he said: "There are times I feel like one of the Pilgrim Fathers, persecuted for my views. But I do have freedom here with ABN (which took over Hoare Govett.) "How many people working for the Americans can say that?"
He's been proved right.
One newspaper, reporting his death last week, described him as an investment banker. If Peter had been alive to read that, he would have been outraged at the inaccuracy: he was an independent adviser through and through.
He will be sorely missed and our thoughts are with his lovely family.
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