Financial crisis 2008, under the nose of London journos

Bladdy 'ell! We never seen it comin'

Of course you didn't. You were too close to the epicentre
of this financial explosion. And you believe British
politicians.
It seems that it's not just crises that get flubbed, but
also the choosing of the Bank of England boss.

checkit: The Observer

Knives out at the Bank of England as race for top job hots up

Sir Mervyn King will not step down until next summer, but speculation over his successor has been bubbling on for months. It's a far cry from the discreet successions of a previous era
       William Keegan
        Sunday 25 November 2012

Seldom has the appointment of a governor of the Bank of England been the object of so much speculation, and for so long before the actual event. Even now the incumbent, Sir Mervyn King, governor since the late "Steady Eddie" George stepped down in 2003, has seven months to run before his second term expires on 30 June 2013.

King's gubernatorial stewardship has been divided into two distinct periods: a happy one and a not so happy one. After the early glory days, both as deputy governor and later in the hotter seat, King basked in the reflected acclaim for what was considered, for a time, to be one of Gordon Brown's greatest historic contributions to the British polity: the granting of operational independence in monetary policy to the Bank of England – that is, the power to determine the official short-term rate of interest.

In its early days, the monetary policy committee, which the governor chairs, was widely considered a huge success, and it was King who coined the acronym "Nice" (standing for non-inflationary continuous expansion) and applied it to that pre-crisis "nice decade".

However, King was always too much of a student of economic history to believe things could go on like that, and began to downplay expectations well before the onset of the 2007 financial crisis. Nevertheless, neither he nor the rest of the economic establishment was prepared for the magnitude of the crisis that was to hit them and the rest of us – a crisis during which the Bank can no longer boast about "achieving" the inflation target, because it has not done so for several years.

There have also been some little local difficulties with the Bank's analysis and forecasts of recovery – or non-recovery. King has recognised that there are limits to the degree to which monetary policy can offset the impact of the fiscal squeeze and other unfortunate developments.

During the Northern Rock crisis of 2007, relations between the Treasury and the Bank became very bad. The former chancellor, Alistair Darling, has already vented his wrath in an instant memoir, in which he castigated what he regards as King's slowness to grasp the extent of the problem. In turn, King was no fan of Darling's.

The Bank has also been widely criticised for its putative laxity in performing the role allocated to it by Brown of guardian of financial stability. Formal supervision of banking had been transferred to the Financial Services Authority, but the Bank should have been a lot more alert, as King has admitted.

......

Some months ago, the Financial Times ran a story suggesting that the governor of the Bank of Canada, Mark Carney, was in the running for the job. This was vehemently denied all round. Carney's present contract runs to 2015 and he is rumoured after that to want to go into Canadian politics. But this might have been a case of no smoke without fire, or at least without a brief flame. Osborne knows Carney on the international circuit; Carney is chairman of the Financial Stability Board, the G20's key committee on reforming the financial sector; and, as Carney once proudly told me, Canada did not have a banking crisis.

It is perfectly possible to reconcile the denials with the theory that Osborne in some way sounded Carney out. But that is all water under the bridge now, and, unless some deus (or dea) ex machina appears, the appointment will almost certainly go to one of the British candidates.