Has Carney really got the golden touch?

The new Governor of the Bank of England has been universally welcomed – but not by Ben Chu

As a political conjuring trick, George Osborne’s unexpected announcement this week that Mark Carney will replace Sir Mervyn King as the Governor of the Bank of England next year was an unmitigated triumph. The Fleet Street  pundits and the City wallahs were united in agreement that the Chancellor had pulled of a coup by persuading Mr Carney, the 47-year-old Governor of Canada’s central bank, to apply for the job.

Here, we were told, was a trained economist, a respected regulator and a new broom to sweep the dusty corridors of Threadneedle Street clean. But the most attractive part of the CV was Canada’s impressive economic record in recent years, attributed to Mr Carney’s skills at the central bank.

The country waltzed through the thickets of the global economic crisis of 2008-09 with barely a scratch. Its banks, which were also under the supervision of the monetary authority, did not need bailouts. Not since General Wolfe captured the Heights of Abraham from the French in Quebec have Canadian feats so gripped the British imagination. But as any sensible investor knows, one should never buy at the top of the market. And Mr Carney’s reputation now seems to reside on a vertiginous precipice.

Canada indeed coped well with the 2009 global bust, experiencing the shallowest recession of any G8 country thanks to conservative macroeconomic policies in the preceding boom. But that was more due to the traumatic debt crisis of the 1990s than any inspired monetary activism by Mr Carney. A natural resources boom, which lifted Canadian commodity exports, has helped the country recover strongly this time around, too.

As for the robustness of Canada’s banks, that also owes more to the 1990s crisis than anything that Mr Carney can claim credit for. Politicians put shackles on lenders after they went bust two decades ago after making bad loans. This ensured domestic banks could not join the irresponsible financial party that kicked off on both sides of the Atlantic in the 2000s.

And what of Mr Carney himself? Like the present governor he has made supportive noises about the global “Occupy” protests suggesting a social conscience. Yet that did not stop him holding out for a hefty pay rise on his present salary for accepting the Bank of England job. His remuneration will be £624,000 a year, against Sir Mervyn King’s £305,000. Even allowing for the fact that Mr Carney’s pension is less generous, that still amounts to a significant payday. Mr Carney will take British citizenship to show his commitment to Britain. Yet he still insisted on a five-year term, rather than the eight that the successful candidate was supposed to serve. Mr Carney will also be keeping his position as chairman of the G20’s Financial Stability Board (FSB), which co-ordinates global banking reform.

The Governor’s chair – already seen as too big for one person to handle –will thus be filled by a part-timer. And when it comes to banking reform Mr Carney looks like the status quo man. Much has been made of an attack he attracted last year from Jamie Dimon, the boss of JP Morgan, for his attempts, as FSB chairman, to force banks to hold larger capital buffers under the new “Basel III” capital rules.

This, some suggested, shows Mr Carney’s steadfastness in the face of a hectoring financial lobby. Yet the arguments about Basel are really a banking establishment civil war. Even under its toughest interpretation, Basel allows the banks to run with extremely modest capital buffers. It is telling that Carney’s former employer, Goldman Sachs, leapt to Mr Carney’s defence when he was savaged by Mr Dimon.

When the Bank of England financial stability director, Andy Haldane, argued in September for a truly radical new approach to banking reform, he received a petulant rebuke from Mr Carney. The Canadian has also aggressively attacked the US “Volcker Rule”, which will prevent American investment banks playing the global capital market casino, in strikingly similar terms to the banking lobby.

Sir Mervyn has been a powerful advocate of splitting up lenders into their retail and investment arms to protect taxpayers from future bailout costs. Mr Carney, by contrast, is intensely relaxed with the so-called universal banking model.

The Canadian Mounties always get their man. Yet we will now have to wait seven months to find out whether the man Mr Osborne delivered is the governor the country needs.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
Campbell: ‘Sometimes you have to be economical with the truth’
newsFormer spin doctor says MPs should study tactics of leading sports figures like José Mourinho
Sport
football
News
Kelly Osbourne will play a flight attendant in Sharknado 2
people
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
Alexander McQueen's AW 2009/10 collection during Paris Fashion Week
fashionMeet the collaborators who helped create the late designer’s notorious spectacles
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
The dress can be seen in different colours
i100
Life and Style
Agretti is often compared to its relative, samphire, though is closer in taste to spinach
food + drink
Sport
Wes Brown is sent-off
football
Voices
Lance Corporal Joshua Leakey VC
voicesBeware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Bookkeeper / Office Co-ordinator

£9 per hour: Recruitment Genius: This role is based within a small family run ...

Recruitment Genius: Designer - Print & Digital

£28000 - £32000 per annum: Recruitment Genius: This Design and marketing agenc...

Recruitment Genius: Quantity Surveyor

£46000 per annum: Recruitment Genius: This property investment firm are lookin...

Recruitment Genius: Telesales / Telemarketing Executive - OTE £30k / £35k plus

£18000 - £35000 per annum: Recruitment Genius: This company specialises provid...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?