Neil Collins

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Brown’s bombshell for the Bank of England

June 16, 2009

You may not have heard of Adam Posen, but you hadn’t heard of David “Danny” Blanchflower before the banking crisis. Posen is Blanchflower’s replacement on the Bank of England’s Monetary Policy Committee and, boy, does he have some strong views. Here he is before the US Congress three months ago, with some modest proposals.

The rest of us may struggle to come up with remedies for the current malaise, but Posen has no doubts. He calls his address “a proven framework to end the US banking crisis”. His framework looks more like a cross to nail up bankers, owners and regulators, since he suggests firing the lot of them, wiping out the shareholders, and wholesale nationalisation. He is wonderfully free of self-doubt:

“Making the right choices now will require money upfront, large amounts of taxpayer money, and thus it is necessary as well as right for Congress to lead on this issue. But making the right policy choices now will restore US economic growth much sooner, at much lower cost, and on a sounder basis than trying to kick the trouble down the road or waiting for events to force the issue.”

There’s much more in similar vein, but the real poser is why Gordon Brown has picked Posen for the MPC. Brown, as he’d rather we didn’t keep reminding him, is the architect of the “tri-partite authority” which allowed Northern Rock to fall so disastrously through the regulatory cracks. The then Governor of the Bank almost quit on the spot when Brown sprang it on him, because it effectively blinded the Bank to spotting trouble before it was too late.

Posen’s post on the MPC has nothing to do with regulation, but is it too much to see it as a hint that he-who-never-errs has finally seen his mistake?