Bank job is always political
PHILIP Hammond has found a new lever in his battle to end Brexit uncertainty. He argues that it is ‘ blindingly obvious’ that candidates to be next governor of the Bank of England might be deterred by the politics of Brexit.
The Chancellor was not talking abstractly. After two unplanned extensions, as a result of the fog of Brexit, current incumbent as governor, Mark Carney, is due to leave in January 2020.
With due respect to Hammond, his suggestion that Brexit-politics might put off candidates for governor is a fairy tale. Being a central bank governor is one of the jobs most economic policymakers aspire to.
The idea that any person can be responsible for setting interest rates, fighting inflation and keeping the financial system safe without making decisions with political repercussions is naïve. Indeed, the reputations of central bankers are built in the furnace heat of financial crisis. In the UK, Carney’s finest hour was in the immediate aftermath of the referendum nearly three years ago when he took decisive steps to steady confidence when the whole balloon could have burst. Mario Draghi ended the euro crisis when, as president of the European Central Bank, he promised to save the euro and unleashed €4.65trillion of quantitative easing. In the US, President Carter turned to Paul Volcker to dig him out of a prolonged political malaise in the summer of 1979. Ben Bernanke at the Fed and Mervyn King at the Bank of England, both distinguished academics, played a big role in rescuing the banking system and saving capitalism at the time of the financial crisis a decade ago. Politics is what makes central banking a fascinating challenge.
AS governor, while Carney has faced challenges and criticism from Brexiteers, he has stood above the fray, continued to do the job and understood what needs to be done to keep Britain safe post-Brexit. This is in sharp contrast to most of the politicians flailing around in the Commons cauldron.
Which brings us back to the question of who might apply for the job? It was previously the view that global status was important for the next governor, which is why big international names, notably former Reserve Bank of India governor Raghuram Rajan, has been bruited. A lack of tactile knowledge of British politics may make him less of an attractive candidate now.
If the pendulum swings back to internal candidates, then chief economist Andy Haldane would be a smart choice. In his semigovernment role of creating and measuring Britain’s industrial strategy post-Brexit he could be a person whose time has come. Deputy governor Jon Cunliffe has supporters because of his deep understanding of how Europe works and a safe pair of hands as the Brexit knots are untied.
Ante-post favourite Andrew Bailey may have been undone by the Financial Conduct Authority and in particular the London Capital & Finance scandal on his watch. Santander UK chairman Shriti Vadera has political experience from her years advising Gordon Brown.
The idea that any of these potential candidates would lack the political fortitude and judgement to do the right thing for the Bank and country is a misreading of the power of ambition and challenge.