Bank of England wins victory - but for what?
Macro-prudential policy is supposed to be what will prevent future bubbles in credit and asset prices from being pumped up to lethal size.
According to Andy Haldane of the Bank of England (him again) it's a "new ideology and a big idea" that will "shape the intellectual and public policy debate over the next several decades, just as the Great Depression shaped the macroeconomic policy debate from the 1940s to the early 1970s."
And there will be a bit about it in this week's paper on financial regulation from the Treasury.
Also, I can say with near certainty that it will be "done" or "managed" by a new committee attached to the Bank of England - and that the composition of this committee will probably be as set out recently by Lord Turner, chairman of the Financial Services Authority.
In other words the committee would be chaired by the Governor of the Bank of England, Mervyn King, and would contain perhaps eight other members, drawn 50:50 from the Bank of England and the FSA. You'll note however that the Bank would have the majority and would be deemed to be in the driving seat.
So King can put up the bunting in the magisterial parlours of the Bank of England. He appears to have won the argument that macro-prudential policy is something that the Bank of England should do.
But the sharp-witted among you will have noticed that I haven't spelled out what the Bank of England will be doing as and when it actually does macro-prudential policy.
And that's not because the practicalities of macro-economic policy are obvious and boring.
Quite the reverse: as Mervyn King pointed out in a recent speech, macro-prudential would "contain a number of instruments to reduce risk, both across the system and over time" but "we are a long way from identifying precise regulatory interventions that would improve the functioning of markets".
In other words, we know what we want macro-prudential policy to do: we want it to prevent banks and other credit institutions from lending too much for the health of the economy during the boom years, and also - which is the more immediate problem - to discourage them from lending too little during a recession.
But we don't really know how that should be done, what the levers would be to regulate credit at the level both of national economies and of the global economy.
There are plenty of jolly good ideas.
A ceiling could be imposed on all banks in respect of how much they could lend relative to their equity resources, a so-called leverage multiple, which would be raised or lowered according to whether credit markets were over-heating or freezing over.
Or there could be a variable regulatory tax on incremental lending, which would increase the cost for banks of making new loans during a boom period by forcing them to hold more capital relative to those additional loans (and would reduce the cost when the economy slows down).
Which may all sound straightforward. Except that the financial economy is like a great blancmange, and if you squeeze it in one place there's always a risk that it will splurge out where you least expect or want.
So, for example, the Macro-Prudential Committee would have to be constantly watchful to make sure that newfangled credit institutions weren't being created to avoid the new fetters.
There's also a conviction on the part of the Treasury - which some would say is misplaced - that it would be inappropriate to impose these constraints just on banks and institutions operating in Britain, that there would be damaging ramifications for the competitiveness of our economy and of the City if there weren't an international agreement that macro-prudential policy is the future.
And you won't be the least surprised to know that securing such international agreement is proving rather more challenging than herding cats.
Two final points.
First, how will we know when banks are lending too much and that asset prices are rising to unsustainable levels? It's blindingly obvious with 20:20 hindsight vision that this is what happened from 2005-7. But alarm bells were not ringing sufficiently loudly for the super-brains at the Bank of Engand, the Treasury and the FSA at the time.
Second, are we absolutely sure we need a new Macro-Prudential committee armed with new tools and levers, as opposed to giving the Bank of England's Monetary Policy Committee a new and second target - to curb systemically excessive lending - to add to its anti-inflation mandate?
As Howard Davies, director of the London School of Economics and former Deputy Governor of the Bank of England, has pointed out, there is an interesting logical issue here.
As and when a new Macro-Prudential Committee instructs banks that they must lend less, credit will became scarcer. That will have the effect of making loans more expensive, which is another way of saying that interest rates will go up.
But isn't varying interest rates what the Bank of England's Monetary Policy Committee is supposed to do, in order to fulfil its mission of keeping inflation in check.
Of course, we've all discovered in the past couple of years that the MPC's powers to fine tune interest rates in their many and varied forms throughout the economy are more feeble than it believed.
Even so, will the economy really become a safer place if we have one body - the MPC - using its interest-rate tool to achieve one outcome (controlling consumer-price inflation) and another body - the Macro-Prudential Committee - using another interest-rate tool (variable leverage multiples or capital ratios) to achieve a different but related outcome (preventing dangerous asset price inflation).
That said, both committees would - as I've said - be sitting under the expansive roof of the Bank of England. But some may nonetheless fear that their separation would lead to muddle and confusion that could damage the economy.