There was much resentment among Labour at how Mervyn King leant greater credibility to the coalition’s austerity programme by publicly endorsing it after the election. So when Mark Carney told the Treasury select committee on Wednesday that he was opposed to a “crude bonus cap” (as supported by Labour) and warned that caps on banks’ market share (the policy announced by Ed Miliband in his speech today) in the US failed to prevent, and may have even encouraged, the financial crisis, some in the party worried that history was repeating itself.
Asked about this on The World At One, Ed Balls began by demonstrating his experience, revealing that he had known the Bank of England governor for “many years” (their paths will have crossed during Balls’s time as Gordon Brown’s chief adviser) and that he “spoke to him yesterday”. He added: “I don’t think he’s suggesting that the thing that caused the subprime banking crisis, or the irresponsible lending to homeowners in southern America was too much competition and too much diversity in the US banking system. There was a massive regulatory failure in America, and in Britain too, and we need tougher regulation…we want more competition.”
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