30 MAY 2011
Unreported outside the business pages, a remarkable hearing took place last week – one which may well culminate in the Commons Treasury Select Committee demanding a full independent inquiry into the Bank of England's handling of the financial crisis.
By Jeremy Warner | The Telegraph (The Bank of England`s astonishing escape from the financial crisis
The reason such an inquiry might seem appropriate is that over the next few years the Bank acquires new powers and responsibilities that will make this 317-year-old institution arguably the most powerful authority in the land – more powerful in terms of its influence over the economy than the Chancellor himself.
It's a grand experiment in macroeconomic management the like of which has never been tried before. In addition to its existing powers to set interest rates and manage the money markets, the Bank of England will acquire responsibility not just for banking supervision but for controlling the credit cycle in the round – a function known as "macroprudential regulation".
Bankers will once more be forced to jump to attention before the Old Lady's command, while with a nod of the head the Bank's newly formed Financial Policy Committee – which meets for the first time on June 24 – will be able to adjust the supply of credit like water through a sluice. After 30 years in which the collective will of financial markets has dominated the commanding heights of the economy, the Bank is being put firmly back in the driving seat.
Given the calamities of the past four years, can the Bank be trusted with such all-embracing power? On the face of it, the record does not inspire confidence. Does it really make sense to be placing so much faith in an institution which many accuse of being asleep at the wheel as the biggest financial crisis in 100 years came crashing down on the economy?
Worried by the apparent lack of accountability, MPs on the Treasury Committee are belatedly holding a series of hearings into this central plank of the Coalition's financial reform agenda. The Bank's refusal to accept any degree of culpability in the crisis is already well known. But to general astonishment, it has emerged that there hasn't even been so much as an internal inquiry at the Bank as to what went wrong.
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