MPC was in dark over secret bank bailout, says Blanchflower
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The Monetary Policy Committee was not told about the secret £60bn bailout handed to HBOS and RBS last year.
In his column in the New Statesman, former MPC member David Blanchflower says Bank of England governor Mervyn King did not make his other MPC members aware of the £36.6bn given to RBS and £25.4bn handed to HBOS by the Bank at the time when both banks were seeking a state bailout.
He says: “Even though I was an external member of the MPC at the time, nobody told me about these loans or how bad things were in the financial markets.
“We were also kept in the dark about what was happening with Northern Rock. The extent to which the external members of the MPC were not provided with basic information on the crisis is only now coming out. Surely such information was relevant to our decisions on setting interest rates?
“If we had been told what was going on, we may have started quantitative easing sooner and cut rates faster.”
Blanchflower agrees that the governor and the Chancellor Alistair Darling were right to keep the loans from the public so as to avoid unnecessary wide-spread panic, but says keeping it from MPC members was “questionable at best”.
He says: “There is no point in having an MPC unless all members, and not just some, are given full access to vital information.”
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