SIR MERVYN KING, outgoing governor of the Bank of England, believed Britain could "easily weather" a banking crisis as the storm gathered in the summer of 2007, according to a new book cited in the Daily Telegraph.
Author and Washington Post columnist Neil Irwin writes that, on the day panic broke out in August of that year, Sir Mervyn was watching the England cricket team play at the Oval and was initially "dismissive" of concerns.
"Later on, King would put himself as close to the front lines of the battle against panic as anyone. But on day one, his arrogance left him in the grandstands," Irwin says in The Alchemists: Three Central Bankers and a World on Fire.
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According to the book, which details how Sir Mervyn, the chairman of America's Federal Reserve Ben Bernanke and the then-European Central Bank president Jean-Claude Trichet reacted when the crisis struck, the Bank of England governor initially doubted the severity of the crunch. Irwin claims Sir Mervyn was the "sceptic" among the trio and remained so almost until the collapse of investment bank Lehman Brothers in 2008.
However, the Bank of England has contested Irwin's account, saying it contained "inaccuracies, unsubstantiated claims and misunderstandings". The Bank also defended Sir Mervyn, who steps down from his post in June, saying he had been at the Oval as it was the first day of his annual leave: "During the day he was informed of events and abandoned his holiday," a spokesperson said.
Sir Mervyn is certainly far from dismissive about the severity of the financial crisis now. He warned an audience at the LSE last month: "There will surely be many unexpected twists and turns before we can truly say that the crisis is indeed over." ·