Role model no more
Any Conservatives listening to Ben Bernanke's confirmation hearing in the US Senate will have enjoyed what he has just said about Gordon Brown's tripartite system of financial regulation.
Though the Obama administration would like to beef up the Federal Reserve's regulatory powers, some powerful Senators want to strip the Fed of its power to monitor and supervise US financial institutions. Bernanke, predictably enough, would rather they didn't.
If you want to see why it's dangerous to take that kind of authority away from the central bank, he said, you only need to look at the experience of the UK:
"[O]ver the past few years the government of Britain removed from the Bank of England most of its supervisory authorities. When the crisis hit - for example when the Northern Rock bank came under stress - the Bank of England was completely in the dark and unable to deal effectively with what turned out to be a destructive run and a major problem for the British economy.
So currently the trend in UK and elsewhere is quite the opposite of taking away those authorities - it is to give the central bank the authority and information it needs to know what's going on in the banking system... for financial stability maintenance I think it's very very important for the Fed to have that kind of information and insight into the banking system"
Mervyn King will not take kindly to the idea that he was ever "completely in the dark" - about anything. He might also point out that the Fed didn't do such a great job handling Lehman Brothers. But you get the point.
The senator questioning Bernanke noted that more than half of the G20 economies do not give supervisory authority to their central bank, and some of them had come through the crisis rather better than the US. He also said he thought the fault of the British system had been the FSA's "light-touch" regulation and the lack of more comprehensive deposit insurance (apparently, some US senators take a keen interest in Britain's travails).
Nonetheless, it's striking to hear the world's most important central banker citing the UK as an example of what not to do. Time was when the UK tripartite system of financial regulation was a role model for the world. Not any more.