Blast of last resort
ROBIN LEIGH-PEMBERTON, Gov- ernor of the Bank of England, is an amenable chap and an admirable public speaker. So people keep asking him to make speeches and he keeps saying Yes. I am not sure that that this rapid oratorical fire (three speeches in three countries in ten days) makes it easier for the Governor to be, what he needs to be, the big gun of last resort. Every now and then a target presents itself which needs nothing less than a 16-inch shell from the Threadneedle Street battery, to destroy it at a blow and silence argument. One such target must have been in the sights for years, without drawing fire. This is the conduct of local authorities, in failing on their obligations to their banks. The test case, involving Hammersmith and Fulham Council, came up for final decision in the House of Lords this week, with bankers fearing the worst. They expect their Lordships to rule that the authorities exceeded their powers in entering into 'swap agreements' with many millions of pounds at stake, and that these agreements cannot be enforced. That may leave the banks now to disentangle a series of transactions going back for a decade. The reputation of public credit in this country, and that of London as a financial centre with reliable Hiles and responsible participants, are both of them at risk. So for that matter is the Bank of England's reputation. Can it be content to preside over such a mess in the markets which it supervises? Can it accept the consequences for the banks? Will it hold out no remedy, or simply bow its head to this interpreta- tion of the law? I hope to see and hear a gubernatorial shell come whistling down and, when the smoke clears, silence broken only by the scribble of parliamen- tary draftsmen setting the law to rights.
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