Just as Mervyn King, as Isabel flags in her blog, is being dragged into the Libor scandal, comes a truly remarkable article from the FT headlined ‘The bank that roared’.

This bank, in case you are wondering, refers to the Bank of England. The FT says the central bank – led by the good ol’ Governor – is ‘back in charge’ and showing that ‘it means business’. The Old Lady of Threadneedle Street, which in past years had been taking a more ‘laissez-faire’ approach to bank funding and lending, is firmly in the saddle once again. The BoE has a ‘new attitude’ and is now ‘more muscular’. By way of illustrating this, the FT describes how Mervyn on 2 July called in Barclays chairman Marcus Agius and ‘handed him the regulatory equivalent of a loaded revolver’. It was clear, says the article, that Bob Diamond ‘was the intended victim’. 

Woo-ha! Cowboy Merv’s back in town. The Gov is kicking open the saloon door, guns a-blazin’, and all banker baddies had better duck behind the bar. There’s only one problem with this picture – if the Gov is now ‘back in charge’, doesn’t that mean he wasn’t in charge before? What exactly was happening during all those years of Libor manipulation? If the New York Fed’s Timothy Geithner had worries about the interbank rates, and intimated as such to King, did the Governor at least raise his eyebrow or did he choose to shut his eyes altogether? 

We really don’t want a central bank that roars – however loudly and impressively – only when the stallion’s bolted.

Tags: Bank of England, Mervyn King, UK politics