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King denies criticising Treasury King denies criticising Treasury
(20 minutes later)
The governor of the Bank of England, Mervyn King, has denied that he criticised the Treasury for its handling of the Northern Rock crisis.The governor of the Bank of England, Mervyn King, has denied that he criticised the Treasury for its handling of the Northern Rock crisis.
Mr King told MPs he had not said that the department was "unable to focus because morale throughout the government is so low".Mr King told MPs he had not said that the department was "unable to focus because morale throughout the government is so low".
The comments had been attributed by economist Irwin Stelzer to a senior Bank of England official.The comments had been attributed by economist Irwin Stelzer to a senior Bank of England official.
Mr King said he had met Mr Stelzer but insisted the comments were not his.Mr King said he had met Mr Stelzer but insisted the comments were not his.
"None of the comments in the article I recognise and they're certainly not my views," he said."None of the comments in the article I recognise and they're certainly not my views," he said.
"I don't believe that anyone in the Bank would make comments like that"."I don't believe that anyone in the Bank would make comments like that".
There are things going on in the markets that require immediate attention rather than sitting around waiting for a select committee to make a recommendation Irwin StelzerThere are things going on in the markets that require immediate attention rather than sitting around waiting for a select committee to make a recommendation Irwin Stelzer
Mr King was answering questions from the Treasury Select Committee about his handling of the woes at Northern Rock.Mr King was answering questions from the Treasury Select Committee about his handling of the woes at Northern Rock.
There are reports that the Treasury is looking at plans to limit the Bank of England's powers in such situations.There are reports that the Treasury is looking at plans to limit the Bank of England's powers in such situations.
Officially the government is backing the governor, with a spokesman saying he was doing "a first class job".Officially the government is backing the governor, with a spokesman saying he was doing "a first class job".
Slow to reactSlow to react
Under the current tripartite system the Bank of England governor, the chancellor and the head of the Financial Services Authority are supposed to work together.Under the current tripartite system the Bank of England governor, the chancellor and the head of the Financial Services Authority are supposed to work together.
The committee is considering criticism that the Bank of England was slow to react to problems at Northern Rock and should have done more to calm financial markets during the subsequent weeks.The committee is considering criticism that the Bank of England was slow to react to problems at Northern Rock and should have done more to calm financial markets during the subsequent weeks.
Mr King's main criticism of the tripartite system was that nobody had the power to intervene early enough to deal with a failing bank.
He was asked whether the system should be replaced with a new authority to deal with a crisis.
"It's most important we create powers for some authority to intervene pre-emptively in a failing bank," Mr King said.
"What's most important is that someone's got it and can exercise it."
He added that he did not mind who held that power and had "never fought any turf battles".
Before speaking to Mr King, the committee heard from the trade associations of banks and building societies.Before speaking to Mr King, the committee heard from the trade associations of banks and building societies.
"We do support the tripartite system - the problem was in execution rather than structure," Angela Knight from the British Bankers Association told the MPs. "We do support the tripartite system - the problem was in execution rather than structure," Angela Knight from the British Bankers' Association told the MPs.
But she said research was needed into what would have happened if action had been taken earlier.But she said research was needed into what would have happened if action had been taken earlier.
Adrian Coles from the Building Societies Association said that one role which needed clarifying which of the authorities was responsible for communicating with creditors when there was a crisis of confidence. Adrian Coles from the Building Societies Association said that one role which needed clarifying was which of the authorities was responsible for communicating with creditors when there was a crisis of confidence.
'Independence threatened''Independence threatened'
The shadow chancellor George Osborne has accused the government of briefing against Mr King.The shadow chancellor George Osborne has accused the government of briefing against Mr King.
Mr Osborne said the Conservatives believed that the Bank of England rather than the Treasury should have greater powers to be able to step in to control problems similar to those which befell Northern Rock.Mr Osborne said the Conservatives believed that the Bank of England rather than the Treasury should have greater powers to be able to step in to control problems similar to those which befell Northern Rock.
He said plans being considered by the chancellor to take more powers to the Treasury would threaten the independence of the Bank of England.He said plans being considered by the chancellor to take more powers to the Treasury would threaten the independence of the Bank of England.
Northern Rock was plunged into crisis earlier this year when problems on the world's credit markets forced it to seek emergency funding from the Bank.Northern Rock was plunged into crisis earlier this year when problems on the world's credit markets forced it to seek emergency funding from the Bank.
It is now being kept going by a loan of at least £25bn from the Bank and is seeking bidders to rescue it.It is now being kept going by a loan of at least £25bn from the Bank and is seeking bidders to rescue it.
The Liberal Democrats have argued that Northern Rock should be nationalised temporarily, saying plans to sell the bank will not work.The Liberal Democrats have argued that Northern Rock should be nationalised temporarily, saying plans to sell the bank will not work.
Mr Stelzer's article appeared in the Sunday Times at the weekend.Mr Stelzer's article appeared in the Sunday Times at the weekend.
He subsequently told the BBC: "The one thing Gordon Brown was always famous for was understanding a situation, especially an economic situation, and reacting quickly and positively and that doesn't seem to be happening.He subsequently told the BBC: "The one thing Gordon Brown was always famous for was understanding a situation, especially an economic situation, and reacting quickly and positively and that doesn't seem to be happening.
"There are things going on in the markets that require immediate attention rather than sitting around waiting for a select committee to make a recommendation.""There are things going on in the markets that require immediate attention rather than sitting around waiting for a select committee to make a recommendation."