Mark Carney has much going for him. He combines in-depth experience of modern financial markets with first class economics credentials (Harvard and Oxford) and unrivalled inside knowledge of international bank regulation. If he does as well as his former Goldman Sachs colleague Mario Draghi has done in his first year at the ECB, he will be able to dispel doubts about the wisdom of Chancellor Osborne’s selection.
But doubts there are. Will Carney be able to communicate effectively with British public opinion? Some will see the appointment of a long-time Goldman Sachs official as a sign that Osborne still does not ‘get it’ -and do we need somebody imbued with American investment bank culture when that is blamed by many as one of the roots of the crisis?
The appointment will be seen by many as a slight to the Bank of England. Perhaps this was politically necessary. It would have been remarkable if after the worst financial and macro-economic crisis for 70 years the No 2 man at the Bank succeeded the governor as if nothing had happened. Some will see it as a “punishment” for letting the asset price boom get out of hand in the run up to the crisis, taking its eye off the ball, and then for mis-steps in its management of the initial stages of that crisis. Appointing an internal candidate might have been seen as accepting the Bank’s version of those events. Carney has clean hands – as well as (Osborne will fervently hope) safe hands.
But much more important is the need to have somebody who is able to take a new look at way the Bank of England is run and bring in new people as necessary.
He will have to oversee the implementation of the government legislation giving effect to the Vickers report on ring-fencing, and help to restore the reputation of the City of London, at the same time as huge challenges in reforming the Bank of England, including its governance, and the integration of financial supervision, the development of the macro-prudential toolkit and bank resolution regimes as chair of the Financial Policy Committee.
George Osborne needs to support this appointment by a strengthening of the Court to help provide proper channels of oversight and accountability, along with a strengthening of its parliamentary accountability through bodies such as the Treasury Select Committee.