"If we'd used interest rates to try and address this asset-price credit growth, we would have been holding down the level of activity elsewhere in the economy, in manufacturing, in other services, holding down the level of employment at a time when consumer price inflation and earnings were stable and reasonably low. And people would have said, you know, 'this is a wilful reduction in the prosperity of the country'."In other words, they feared the political reaction to what they knew was the right thing to do, so they didn't do it.
So much for the political independence of the BoE, for which Chancellor Brown was given so much credit, and which seems to have left him with the power while passing the responsibility to the BoE.
And the kindest expression for the BoE personnel involved would be that they "fell below the level of events".
It's not "that the Bank of England does not possess the proper tools for dealing with incipient booms in assets and lending". It's that it doesn't possess the proper bankers. John Gieve sounds like one of those chaps who would have trundled through less interesting times without trace. Instead he seems to have a CV covered in red ink and blots.
BoE website :
Sir John Gieve was appointed Deputy Governor in January 2006. In addition to his membership of the Monetary Policy Committee, he has specific responsibility for the Bank's Financial Stability work ..That's unfortunate. Financial stability seems in short supply ...
He oversaw one Home Office shambles :
Sir John Bourn, the Comptroller and Auditor General wroteTo inform Parliament that the Home Office has not met the statutory reporting timetable in respect of its 2004-05 resource accounts;
I cannot form an opinion on the truth and fairness of the Home Office financial statements for 2004-05
That is as strong a condemnation of incompetent financial management as any auditor is likely to utter.
It is as astonishing as it is unacceptable, that a major Central Government Department like the Home Office cannot be trusted to account for the money it spends on our behalf.
If a private sector organisation had mismanged its financial affairs as badly as this, then the people in charge would be out of a job forthwith.
Will the Home Secretary Charles Clarke, whom in theory bears resposibility for this David Blunkett legacy, have the honour to resign ?
What about the "Sir Humphrey" , the Permanent Secretary and therfore the Accounting Officer of the Home Department at the time. i.e. Sir John Gieve.
Sir John is now the Deputy Governor of the Bank of England, with a vote on the level of the Bank of England's official Interest Rates, which affect the entire UK economy !
And another :
Last week the 56-year-old career civil servant returned to Westminster for a grilling by the Home Affairs Select Committee about why more than 1,000 prisoners were not even considered for deportation after serving their jail sentences. "There were failings in the handling of foreign prisoners which I regret," Gieve told the committee. "I am not trying to excuse the inexcusable."
Gieve has also been criticised over the running of the Immigration and Nationality Directorate and his failure to give a full account of how the nanny of Kimberly Quinn, David Blunkett's former lover, was given a visa.
In recent weeks, the Home Office has come under fire from several corners. Charles Clarke, the former home secretary, called the department "dysfunctional", while Clarke's successor, John Reid, recently judged it "not fit for purpose".
You have to be impressed with a chap who can preside over so much disaster and is still prepared to share his wisdom with us on prime time TV (tonight's Panorama). What's Hebrew for 'chutzpah' again ?
To be fair to Gieve and his colleagues, house prices were roaring ahead long before 2006. It was around 2005 that I started to get unsolicited invites to buy-to-let seminars at snazzy hotels, one of the signs that the market is heading for a peak. And doing the right thing would probably have cost the members of the Monetary Policy Committee their jobs. Instead it'll cost ours.