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Bank of England Governor faces grilling
By Paula John Mervyn King, the Governor of the Bank of England will be quizzed by MPs today over whether he was leaned on by the Treasury to pump
Prior to Tuesday’s announcement, the Bank of England had remained insistent that extending liquidity to the market would create a ‘moral hazard’ which would allow banks to act with impunity, knowing they could ultimately rely on taxpayers money to bail them out.
In an embarrassing climbdown, the Bank said it is now acting ‘to alleviate the strains in the longer-maturity money markets’ and that eligible collateral for the new credit line would include mortgage debt.
Observers note that, had this facility been made available when liquidity in the markets first started to freeze up, the run on Northern Rock may well have been avoided altogether.
