The finger pointing has started. In a self-serving interview with the BBC, Mervyn King tried to evade responsbility for the Northern Rock crisis. He argued that it was the hapless Chancellor who should carry the can for this fiasco.
Unfortunately for King, facts are stubborn things. It is the Bank of England who is responsible for monetary policy and not the Treasury. Through years of reckless monetary growth, it created the housing bubble. It created the environment for Northern Rock to grow from a modest regional building society into one of the largest housing speculators in history. The FSA also bears some responsibility. It should have voiced concerns about Northern Rock earlier.
Darling, on the other hand, was suddenly confronted with a financial mess, just weeks after taking office. With an eye to protecting tax payers money, he tried to limit the cost of this disaster. In retrospect, it proved impossible once there was a run on the Northern Rock.
King blaming Darling is nothing short of offensive. King should resign now.
Rift with Darling puts King's job on the line
The future of Mervyn King, the Governor of the Bank of England, was under threat last night following a public split over the Northern Rock crisis with Alistair Darling, the Chancellor. Mr King used a wide-ranging interview to suggest that the Chancellor could have prevented the run on the bank had he acted on options presented to him in the week leading up to the crisis.
Some say that Mervyn King's position as Bank Governor is now under threat He said offering savers a guarantee that their money was safe had been discussed with the Treasury in the week before the Northern Rock crisis became public.
"There were a range of possibilities [which] were on the table,' he said. "They were all being examined." Mr King also claimed that while giving public assurances on savers' money, Mr Darling actually "didn't know how far he could go in giving a government guarantee".
Mr King used the BBC interview to allege that Mr Darling had effectively blocked a takeover of Northern Rock by another bank. Mr Darling has denied the accusation that he could have done more to avert the crisis.
But critics yesterday claimed the row risked undermining efforts by the Government to handle the effects of the global credit crisis. Tomorrow, the Bank of England will announce whether it will cut interest rates and Mr King may well have the casting vote on the decision.