Ben Chu: There are worse crimes than exasperating the Treasury

Can the Governor be exasperating? Certainly. Worse, he can also be wrong

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The Independent Online

Is Sir Mervyn King a closet Conservative? Many Labour figures believe so. They cite the Bank of England Governor's support for the Coalition's deficit reduction policy and contrast it with the fractious relationship between Sir Mervyn and the previous government.

But these critics ignore the WikiLeaks revelation that Sir Mervyn warned the US ambassador to London of the "lack of experience" of George Osborne and David Cameron before the last election. It would be odd for a partisan Conservative to brief secretly in this way.

Can the Governor be "stubborn and exasperating" to politicians, as Alistair Darling complains in his memoirs? Certainly. Worse, he can also be wrong. Sir Mervyn's repeated warnings about "moral hazard" during the financial crisis were unhelpful. What was needed was action to stem the panic, not lectures about dangerous incentives. The Governor's preoccupation with the inflation threat in 2008, when the real danger was a severe recession, was also a mistake.

But he can also be right. The Governor has been a powerful advocate of breaking up the "too-big-to-fail" banks. And his dovish stance on interest rates this year has been vindicated by the sharp slowdown in recent months.

The job of the Governor is not to ingratiate himself with ministers, but to be independent. If he gets this crucial responsibility right, he can be as stubborn and exasperating as he pleases.