Mervyn King, Baron King of Lothbury
Mervyn King, Baron King of Lothbury | |
|---|---|
| Born | March 30, 1948 Chesham Bois, Buckinghamshire, England |
| Occupation(s) | Economist, public official |
| Years active | 1972–present |
| Known for | Governor of the Bank of England (2003–2013) |
Mervyn Allister King, Baron King of Lothbury, born on 30 March 1948, is a distinguished British economist and former public official who held the position of Governor of the Bank of England between 2003 and 2013. He currently holds the title of Emeritus Professor at the London School of Economics and has been serving as Chairman of the Philharmonia Orchestra since 2020. Additionally, he is the President of the Marylebone Cricket Club for the term 2024/25.
Originating from Buckinghamshire, King pursued his economics studies at King's College, Cambridge and furthered them at Harvard University. After being elected a Fellow at St John's College, Cambridge, he contributed to the Cambridge Growth Project and held academic roles at institutions including the University of Birmingham, Harvard, and the Massachusetts Institute of Technology. Prior to joining the Bank of England in 1990 as a non-executive director, he was a professor at the London School of Economics. He quickly progressed to chief economist in 1991, was promoted to deputy governor in 1998, and became a member of the Group of Thirty.
King’s appointment as Governor in 2003 placed him at the helm during the turbulent times of the 2008 financial crisis and ensuing Great Recession. He stepped down in June 2013, with Mark Carney succeeding him. Following his retirement, he was granted a life peerage in July 2013 and took a seat in the House of Lords as a crossbench member. Between 2014 and 2022, he held a joint professorship in economics and law at the Stern School of Business and School of Law at New York University.
Early life and career
Born in Chesham Bois, Buckinghamshire, Mervyn King is the son of Eric King, who transitioned from working as a railway porter to becoming a geography teacher, and Kathleen (née Passingham). His early education included Warstones Junior School and Wolverhampton Grammar School. He earned a first-class degree in economics from King's College, Cambridge in 1969 and subsequently obtained an MA in 1973. His academic journey continued at St John's College, Cambridge before being awarded a Kennedy Scholarship to study under economist Martin Feldstein at Harvard University.
In 1972, King was appointed Fellow at St John's College and collaborated on the Cambridge Growth Project with Nobel Laureate Sir Richard Stone and Terry Barker. From 1977 until 1984, he lectured at the University of Birmingham while also serving as a Visiting Professor at Harvard and MIT, where he shared office space with Ben Bernanke. During this period, his economic views were shaped by influences from the Austrian School. In 1984, he became Professor of Economics at the London School of Economics and established the Financial Markets Group. Notably, in 1981 he was among 364 economists who publicly opposed Chancellor Geoffrey Howe’s budget via an advertisement in The Times.
Bank of England
King joined the Bank of England as chief economist and executive director in March 1991 after serving as a non-executive director from 1990 to early 1991. He was elevated to Deputy Governor on 1 June 1998 and that same year became part of the prestigious Group of Thirty. Since its formation in 1997, King participated as an ex-officio member on the Bank’s interest-rate setting body, the Monetary Policy Committee, attending its monthly meetings regularly. On 1 July 2003, he succeeded Sir Eddie George as Governor, becoming notably the first sitting Governor granted an audience with Queen Elizabeth II.
Throughout his tenure as Governor, King supervised the release of new banknotes featuring notable figures such as industrial innovators Matthew Boulton and James Watt on the £50 note, economist Adam Smith on the £20 note, and statesman Winston Churchill on the £5 note.
2008 financial crisis
Upon assuming the role of Governor, King characterized the Bank of England's approach as closely aligned with that of the Federal Reserve during Alan Greenspan's tenure, which prioritized managing the consequences of asset bubbles rather than actively preventing their formation. King concurred with Greenspan’s view that pinpointing asset price "bubbles" presents significant challenges.
Concerns regarding the UK housing market had been raised by entities such as the National Institute of Economic and Social Research in 2004 and the OECD in 2005. Early in 2004, King drew attention to a notable gap between RPIX and CPI inflation figures and observed that UK house prices had surged by over 20% within a single year and more than doubled over a five-year span, reaching levels deemed unsustainable.
During this timeframe, The Economist described the situation as part of "the largest bubble in history," with UK housing prices peaking in October 2007. The IMF estimated that the market was overvalued by as much as 40%. The OECD cautioned that fluctuations in house prices posed systemic threats to both banking and mortgage sectors due to their significant exposure.
Critics such as Dean Baker contended that Greenspan and King’s failure to tackle housing bubbles contributed to severe recessions in their respective nations. Conversely, countries like China and Australia adopted stricter property market regulations during this period, employing measures including variable capital requirements and mortgage constraints to restrain credit expansion.
This crisis led King to reevaluate the Bank’s exclusive emphasis on price stability or inflation targeting—a strategy implemented following Black Wednesday in 1992. He recognized that maintaining price stability alone was insufficient for overall economic steadiness and underscored the necessity of strengthening tools aimed at financial stability.
The Financial Services Bill of 2012 shifted macroprudential regulatory authority from the FSA to the Bank of England, creating the Financial Policy Committee (headed by the Governor) empowered to restrict lending during economic booms, including limitations on mortgage lending.
A former senior official at the Bank later admitted that their pre-crisis performance was inadequate: "We were responsible for financial stability and completely failed to take any preventative measures against the greatest financial crisis in our lifetimes." Economist David Blanchflower remarked that even by mid-2008, King had not anticipated the full magnitude of the crisis.
The Treasury Select Committee reproached the Bank for its refusal to carry out an internal assessment of its crisis management. This issue was exacerbated by the destruction of crucial records detailing senior policymakers’ decisions—contrasting with the transparency practiced by the US Federal Reserve. The American response included new regulatory frameworks introduced through the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act.
Response to crisis
King maintained that during the 2008 financial turmoil, he alongside other Western central bankers "averted a Great Depression" by reducing interest rates close to zero. This perspective was supported by The Economist and a 2012 evaluation of central bank interventions. Nevertheless, the Bank of England faced criticism for its gradual reduction in rates, which took five months to decline from 5.0% to 0.5%, remaining at that level for several years.
As only the second Governor of the Bank of England to address the Trades Union Congress, King acknowledged widespread public frustration concerning unemployment and government bailouts of banks.
Following the crisis, King issued strong criticism of the banking sector, particularly regarding its £1 trillion bailout and ongoing bonus payments in 2009. He called for comprehensive reforms in banking structure and regulation. In a 2011 interview with the Daily Telegraph, he accused banks of placing profits above people and warned that neglecting reform efforts could precipitate another crisis, contrasting this with what he described as a more "ethical" stance within traditional manufacturing industries. By 2012, he asserted that banks remained oblivious to public resentment over their behavior, stressing that market discipline must encompass banks and highlighting their resistance to accepting fundamental flaws in their business models.
Prior to King's departure in 2013, leading UK banks cautioned they might relocate operations if his successor adopted a less confrontational stance. On 26 November 2012, Mark Carney was announced as his successor.
Bank rescue efforts
King faced allegations of denying financial support to Northern Rock Bank, which precipitated a bank run—an occurrence unseen in the UK since 1914. He later clarified that Chancellor Alistair Darling held ultimate authority over the decision to withhold assistance from Northern Rock. Reviewing King's period in office, Times journalist David Wighton pointed out that Sir John Gieve, Deputy Governor responsible for financial stability, was unjustly held accountable for the Bank's slow reaction; Gieve had pressed King to intervene but was absent during the crisis due to personal matters—a fact King neglected to disclose to the Commons Treasury Committee. This failure was perceived by some former Bank officials as a sign of weak leadership.
In his autobiography, Darling reproached King for emphasizing moral hazard—the principle discouraging bailouts for banks’ own missteps—rather than injecting capital during the 2008 financial collapse. Although King initially resisted providing funds to retail banks, he maintained his role and defended his decisions before a Treasury Select Committee, asserting that the Bank of England fulfilled its function as the "lender of last resort" but subsequently approved support for banks that were nationalised or partially nationalised.
Government involvement
King’s influential Mansion House Speech in 2009 reportedly strengthened Conservative prospects ahead of the 2010 general election. He proposed dismantling the UK's largest banking institutions and advocated for enhanced powers for the Bank of England to maintain financial stability, cautioning that without such authority, the Bank’s role would be limited to delivering "sermons or organise burials." Subsequently, King called for economic rebalancing, increased national savings, and elimination of structural deficits. In November 2009, he criticized Labour’s plan to reduce the deficit by half over five years as inadequate. Following the formation of the 2010 Coalition government, King supported Chancellor George Osborne’s proposal to reduce spending by £6 billion in 2010–11, with Liberal Democrats concurring on the scale of cuts.
In November 2010, certain senior officials within the Bank expressed unease over King’s public backing of government austerity measures, accusing him of exceeding his remit in monetary policy. Despite internal apprehensions that swift fiscal tightening might impede economic recovery, King endorsed austerity, leading to accusations that he acted as a "coalition courtier" and made "overly political" interventions in UK economic affairs.
These critiques intensified after disclosures from WikiLeaks in December 2010. King was questioned by the Political and Constitutional Reform Select Committee regarding his involvement in coalition negotiations but denied advising on deficit reduction strategies; the committee accepted his account without reproach.
George Osborne revealed that Treasury officials had offered King a role briefing coalition parties during government formation talks; however, parties preferred Treasury representatives to manage these discussions.
King attracted further criticism in May 2012 after publicly supporting Coalition austerity policies during an interview on BBC Radio 4's Today programme.
In a May 2011 address to the European Parliament, King stressed that the Bank prioritized overall economic and banking system stability rather than focusing solely on inflation metrics, explaining low interest rates by elevated debt risks. He criticized Chancellor Osborne’s Project Merlin targets and forecasted their failure. Earlier, in March 2009, King warned against implementing a second fiscal stimulus without thorough evaluation.
His June 2009 Mansion House Speech took issue with Chancellor Alistair Darling’s resistance to regulatory reforms aimed at empowering the Bank to safeguard economic stability.
In January 2012, former government advisors alerted King about a possible carbon bubble; he agreed to investigate this concern.
The Bank's Financial Policy Committee (FPC), created to detect financial bubbles, sought enhanced parliamentary authority in March 2012 to avert future crises. The FPC concentrated on three instruments: countercyclical capital buffers, sector-specific capital requirements, and leverage ratios—underscoring transparency in their deployment.
Following the Brexit referendum in March 2019, King argued that departing the EU without a deal was preferable, contending that six months of preparation would limit adverse economic consequences.
Personal life
Barbara Melander, King's spouse, is an interior designer from Finland belonging to the Swedish-speaking minority there. The couple wed in a private ceremony held in Helsinki in 2007. Among King's personal interests, his preferred musical group is ABBA.
As an avid supporter of Aston Villa F.C., King arranged a football match featuring Bank of England staff against former Villa players. He was a member of Aston Villa’s board between February and April 2016, resigning together with David Bernstein in objection to the club owner Randy Lerner's leadership. In recognition of the club’s 150th anniversary in January 2024, King was appointed to Aston Villa’s Honorary Anniversary Board.
King briefly took on commentary duties for a 2005 Ashes Test Match on BBC Radio's Test Match Special. He holds the position of President at Chance to Shine, a foundation aimed at encouraging cricket participation in state schools, and maintains memberships with both the All England Lawn Tennis and Croquet Club (AELTC) and the Marylebone Cricket Club (MCC). In 2015, he assumed the presidency of Worcestershire County Cricket Club and is scheduled to serve as MCC President for a one-year term starting October 2024.
He has been awarded honorary doctorates from Cambridge University (Honorary LLD, 2006) and Abertay University (Honorary DLitt, 2013), and is a Visiting Fellow at Nuffield College, Oxford.
In 2015, King was ranked eleventh among the most influential figures in Financial Centres International’s top 500 list.
Honours
Lord King was honoured with a Knight Grand Cross of the Order of the British Empire (GBE) during the 2011 Birthday Honours. Subsequently, on 23 April 2014, he was elevated to Knight of the Garter.
On 19 July 2013, Queen Elizabeth II granted him a life peerage for his public service contributions. He formally joined the House of Lords as a crossbench peer on 22 July 2013, adopting the title Baron King of Lothbury, of Lothbury in the City of London.
On 6 January 2016, he received a commission as Deputy Lieutenant for Kent from the Lord Lieutenant of Kent, Viscount de L'Isle.
Books
King's authored works comprise:
- The British Tax System (1979 and four later editions), co-written with John Kay.
- The End of Alchemy: Money, Banking and the Future of the Global Economy (2016).
- Radical Uncertainty: Decision-making for an unknowable future (2020), co-authored with John Kay.