There was pretty stunning revelation in the House of Lords last night. Lord Myners, a former member of the Court of Directors of the Bank of England, told the House:
In the light of what we now know about the Bank of England, I think we have to ask whether it is still right to be putting as much authority in the hands of the Bank without appropriate accountability.
When I was a member of the court, I sat in on a meeting of the financial stability committee – it would have been 2006 or 2007. One of the governors at that meeting proposed that as a mechanism to cope with crisis, the Bank should buy half a dozen or a dozen bicycles in order that members of the Bank could move swiftly and anonymously around the City.
That tells us a huge amount about where the Bank sits in terms of its understanding of the complexity of financial markets. Some of the things that we have seen over the past few weeks have simply raised more questions about the wisdom of putting so much power in the hands of the Bank.
We already know of Alistair Darling's fear that he would wake up one day to find the ATMs had stopped working, but this shows that in some areas of our financial system, the fear was much greater.
Myners seems to think that this precaution shows that the bank was run by a bunch of panicky blowhards who didn't really understand how financial markets work. But the idea that total financial collapse WASN'T a possible outcome of the largest crisis in 80 years seems risk-blindness of the highest order.