Why King changed his mind
George Osborne is rather enjoying the spectacle of the chancellor being periodically duffed up - on the risks associated with the increase in public-sector borrowing; on reform of financial regulation - by the governor of the Bank of England.
If Mervyn King's waspish remarks damage the economic reputation of the government, surely that must be good for the Tories.
But the shadow chancellor probably shouldn't cheer too loudly as Alistair Darling squirms: a governor who has a licence to attack a Labour chancellor would have exactly the same licence to muller a Tory one; the forthright independence of Mervyn King might not seem so attractive to Osborne if he achieves his dream of taking up occupancy in Number 11.
As for the meat of what King said last night at the Mansion House: in calling for more authority to boss banks around, he has support from the Liberal Democrats and - although less publicly as yet - also from the Tories.
So King's argument about how to promote the stability of the financial system has been turned into something more political.
Because up to now, the government has been defending the structure of regulation - what's called the tripartite system - that was created by Gordon Brown in 1997.
The governor's argument is that analysing threats to financial stability - a legal duty given to the Bank only in the past year - isn't enough.
If the Bank of England can't instruct a bank to mend its ways when that bank is doing something perceived to be too risky, then what chance is there that the bank would cease and desist?
Well, the obvious answer is that the Bank of England would presumably ask the Financial Services Authority to intercede with the miscreant bank on its behalf.
After all, it is the FSA's primary responsibility to curb the dangerous enthusiasm of banks.
But, for whatever reason, the governor plainly doesn't trust that this separation of powers between the Bank of England and the FSA would work well enough.
Is he right?
It's certainly the case that today's banks are much less in awe of the Financial Services Authority than they were of the Bank of England 15 years ago, when the Bank of England had formal responsibility for supervising banks.
But that was probably as much to do with the more inward-looking, domestic structure of the City back then, as with the intrinsic authority of the Bank of England that was built up over the 300 years of its history.
And, for the avoidance of doubt, the Bank's record as a supervisor and regulator of banks wasn't unblemished (a big hello to BCCI).
Today's unavoidable truth is that banks the size of Barclays, Royal Bank of Scotland and HSBC - with balance sheets rather bigger than decent-size economies like the UK - aren't much in awe of anyone or anything.
Which, of course, is part of the problem.
And that is probably the best argument for giving the Bank of England much greater sway over big banks, in partnership with the FSA.
Normally duplicating the activities of regulators is a recipe for waste and even possibly for confusion.
But maybe in this case, it would be better to have two sets of big boots wielded by two regulatory bodies delivering swift blows to the tender parts of a mega-bank, to keep that mega-bank in line.
That said, it wouldn't be easy to establish a modus operandi between the FSA and the Bank of England, if they were to have more overlapping responsibilities: Bank of England officials speak with wounded pride about how the FSA has warned them off visiting financial institutions in the past.
Finally, and for those who care about these things, Mervyn King has somewhat changed his mind about all this.
Just a few years ago, he was clear that Gordon Brown was right to de-merge from the Bank of England its substantial banking supervisory department.
Like Brown, King believed that effective regulation required the creation of a super-regulator, which would bring together the hotchpotch of different regulators with responsibility for securities firms, insurers, banks and so on.
And he felt that the Bank of England could not be that super-regulator, because as an institution it would have become unmanageably complex and large - and also too powerful.
So it was better for the super-regulator to be outside the Bank of England, in the form of the FSA. And the FSA, of course, couldn't be a super-regulator if it didn't absorb the Bank of England's supervision department.
Since then he - and quite a lot of others - have spotted that it's tricky for a central bank to deliver economic stability if it has no role in promoting financial stability.
And, as he's made clear, King's view today is that it's pretty tricky for the Bank to deliver financial stability if it has no power to tell an HBOS or a Royal Bank of Scotland that it doesn't like the risks they're running.
Perhaps King would say that his views have evolved, rather than changed. But what is crystal clear is that he didn't spot how the growing size and increasing connectedness of financial institutions was making the Bank of England's sterling work in controlling inflation the equivalent of re-arranging deckchairs on the Titanic.