Sean O'Grady: The truth is that Mervyn King is the leader of the Bank of England Party

Economic Life: The Governor did cross an important line in May. If he agrees with the Coalition, as he has said, then he necessarily disagrees with Labour

Praise from the wrong source can do you more harm than good. If Nelson Mandela calls you a visionary global statesman that is one thing; if George W Bush does the same, it has a different effect. Tony Blair had both, which maybe explains why we're still a bit confused about him.

Mervyn King might also feel a certain ambiguity about receiving support from the Chancellor, George Osborne. At the Treasury committee this week the Chancellor was pressed on the increasingly vexed question of Mr King's political neutrality by the Labour MP Chuka Umunna. Mr Osborne, who enjoys an entertainingly chippy relationship with Mr Umunna, tried to help Mr King by declaring: "It's not as if he's a Conservative or Liberal Democrat appointment to the Bank, so the idea that he's somehow partisan is wrong."

Actually, that just makes things worse, because it reminds us that Mr King was very nearly not re-appointed by the last Labour prime minister. Gordon Brown left Mr King twisting in the wind in 2008 in the months before Mr King's term was renewed, repeatedly failing to endorse him. The impression was that if Brown could have found someone else, and if he thought Mr King's departure wouldn't do his government lasting damage, he would have sacked Mr King. It was an open secret.

After all, a few years ago Mr King and Mr Brown apparently clashed over whether to release some arcane information about tracking terrorist funds, a G7 initiative, or at least so the rumours go. Mr King wanted to; Mr Brown did not. Mr Brown flew into one of his famous tantrums, telling Mr King: "You are doing this because of your fucking ego, that's why. You are talking fucking bullshit." This, remember, was a discourse taking place between the two men, or rather the two egos, running the world's fourth largest economy. Not a meeting of minds.

Then again, we also know, thanks to WikiLeaks, that the Governor of the Bank of England has also made disobliging comments about the Conservative Party leadership, to the American ambassador a year or two ago. Mr King thought the then leader of the opposition and shadow chancellor behaved like politicians (not such a grave charge in the circumstances of a looming election) and lacked experience (again not maybe so terrifying a verdict given that neither had been in government). It could have been a lot worse. Still, it sounded a bit rude to the Tory twins.

But wait if you think Mr King is anti-Osborne. At the Treasury Select Committee a fortnight ago we were treated to the spectacle of one of the Bank's most senior policymakers sharing with MPs his distress, and that of at least one colleague, that Mr King was indeed being overly political in his endorsement of the Mr Osborne's policies shortly after the formation of the Coalition Government.

Adam Posen, an American academic on the Monetary Policy Committee agreed with the charge put to him by the Select committee chairman Andrew Tyrie, that the Governor had thereby compromised the political neutrality of the Bank. Sitting a couple of places along, Mr King might have reflected that his previous tormentor, David Blanchflower, had the good grace to wait until he left the MPC to lay into him.

There is other corroborative evidence. Recent accounts of the formation of the coalition, not least an eye-witness memoir by the former Chief Secretary to the Treasury, David Laws, portray Mr King as being lined up by Mr Osborne almost as a "phone-a-friend" nominee on Who Wants to be a Millionaire?

Mr King was apparently ready to persuade the Liberal Democrats of the case for early budget cuts, a distinctively Tory policy. Mr Osborne, writes Mr Laws, told the Lib Dems: "If we can deliver the £6bn of in-year cuts, that will send out a very powerful message. I will get the figures to Vince for him to look at, and he will find that Mervyn and Nick [Sir Nick Macpherson, permanent secretary to the Treasury] are very supportive of what we want to do."

So does all that make Mr King a Tory, after all? The truth is that Mervyn King is the leader of the Bank of England Party. His surname is apt, for Bank officials view transient politicians with much the same mixture of indulgence and barely concealed disdain as their cousins in the civil service proper and Buckingham Palace. In fact, Mr King's judgements on Mr Osborne were no more than the conventional wisdom of the time.

Before his arrival in government Mr Osborne was regarded as the Conservatives' weakest link. Poor George was routinely ranked last in polls of business leaders or the public, behind Vince Cable and Alistair Darling. Since the election we know different, and Mr Brown, Lord Mandelson and Vince Cable have suffered through underestimating Mr Osborne.

Older and wiser he may be, but Mr King would also be wise to be careful of Mr Osborne's ego: Likely as not Mr Osborne will have the option of re-appointing Mr King in 2013. It is not inconceivable that the pair may yet clash over "breaking up the banks".

All said, though, Mr Posen and Mr Umunna are right: the Governor did cross an important line in May, whether he is a secret Tory or not. If he agrees with the Coalition, as he said, then he necessarily disagrees with Labour, and that is not where the Bank ought to be.

In making any pronouncement on fiscal policy a Governor is making a deeply political statement. If they are requested to by ministers, they should resist. They should do so too even if their sense of public duty impels them to speak out about a dangerous situation. They should take whatever budget strategy a government has, mad or not, and work monetary policy around it. They did that when they were forced to print money in the 1970s, for example. The convention should be, as it always has been in the past, that a troubled Governor takes his worries to No 10 privately. It is what Lord Cromer did with the Wilson government in the 1960s and what Gordon Richardson had to with Margaret Thatcher. (Cromer really was a Tory, but that's another tale.)

Even that type of private diplomacy can be hazardous. To go even further back, the Bank was viewed with lasting suspicion by the British left when it was suspected that its powerful governor, Montagu Norman, had helped conspire in the formation of, ahem, a Tory-dominated coalition in the crisis of 1931, the so-called "bankers' ramp". The Bank found itself nationalised and neutered after Labour returned to office in 1945.

So powerful now, Mr King should recall when his Bank was little more than a Treasury cipher. A little humility might not go amiss.