Thank God, King’s reign is over

09 Mar 2016

The UK government and regulators have been attempting to put right the wrongs of a system in which King and others were overseeing.

History is constantly being rewritten and we are regularly asked to question our view of history as further research, accounts and interpretations are brought to the fore. For recent history, the testimony of those who were involved in historical events is often illuminating, however, this first-person narrative can often be skewed, especially if the individual concerned is attempting to either cover themselves in glory or suggest that failings (sometimes catastrophic) were not their fault but came from wider issues beyond their control.

I couldn’t help think of this as I recently read the words of Mervyn King, the former Governor of the Bank of England, who – with the added impetus of having a book to sell – has been holding court on the issues of financial crises and whether we can expect ones of the magnitude of the credit crunch and the subsequent recession again, and if so, when?

Perhaps, unsurprisingly, King has an opinion on this; indeed, he suggests that future crises along these lines are pretty much inevitable. Or at least they will be if we do not “…tackle the disequilibrium in the world economy” – failure will mean that future crises will happen “sooner rather than later”.

Now, I’m not suggesting that King may not be right in his thinking but isn’t he rather late to the party in this regard? Perhaps we’ve been living on different planets for the last eight or nine years, but didn’t this rethink and, a tackling of the ‘disequilibrium’, start many years ago? Admittedly we are not in a perfect position, but as a financial system and a country surely as a consequence of all the hard work, not least the regulatory change, we are far better prepared to swerve or cope rather better with a future crisis.

Let’s not forget that King himself had a pivotal role in the lead-up to the credit crunch and, one can’t help but wonder, how he “tackled the disequilibrium” back then? After all, he was at the Bank of England for 22 years, 10 as Governor, and can perhaps therefore be held somewhat responsible (along with Alan Greenspan in the US) for failing to tackle the ‘bubble’ in the housing market, despite repeated warnings that catastrophic failure was coming. Also, and again one from the history books, King – even as late as the summer of 2008 – was not exactly at one with the situation or acting decisively. And this was after the run on Northern Rock and various other bank failures.

Here is another titbit from King: “The crisis was a failure of a system, and the ideas that underpinned it, not of individual policymakers or bankers, incompetent and greedy though some of them undoubtedly were.” Again, if the system was failing why did those, such as King, who were in positions to change that system, prior to crises, effectively do nothing? Were their hands tied? Did they want to make the changes but not have the tools to make it happen? Or did they actually not perceive a problem with the system at all and allowed it to run unhindered until a point where the whole sorry mess came crashing down?

I’ll leave you to guess which angle I’m favouring.

Now King is advocating further change to a system which has been changing for the better part of almost a decade. Yes, further change is necessary but the world has not waited all this time and suddenly woken up to this need. In short, the world – particularly the UK government and regulators have been attempting to put right the wrongs of a system in which King and others were overseeing.

As with so many protagonists, the clamour to absolve themselves of any guilt is seemingly all-encompassing. The decision to ‘go public’ now and effectively say, ‘It happened but it was nothing to do with me,’ makes you further question the wisdom of a man who fiddled not just while Rome burned, but most of the Western world.

We are mercifully a long way down the road from the days of King and let’s hope all the powers that be acknowledge that we have some way to travel and we should do all we can to ensure it’s not a case of history repeating itself.

Bob Hunt

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