Andrew Bailey's brush with animal spirits

Andrew Bailey Image copyright Reuters
Image caption Bears are not just for markets where Andrew Bailey is concerned

The appointment of Andrew Bailey as the 121st Bank of England governor is a safety-first move from the government after its re-election.

The former deputy governor has long-standing experience at the Bank and takes over at a tumultuous moment in the UK's economic history.

As the current chief executive of the Financial Conduct Authority (FCA), he is well known internationally for his role in the regulation of the banking system and helping clean up the financial crisis.

Mr Bailey's challenge now will be keeping inflation low and maintaining the stability of the banking system, particularly through the Brexit process. Both require co-operation with the government, but on occasion, having to stand up to them.

Focus not on the fact that Chancellor Sajid Javid has a rescue puppy coincidentally called "Bailey", but the reality that the new governor once helped his wife Cheryl Schonhardt-Bailey fight off a grizzly bear, albeit from a distance.

According to the Financial Times, Ms Schonhardt-Bailey, a professor and head of the government department at the London School of Economics, was confronted by the bear in 2007, after it wandered into their home in New Meadows, Idaho.

Mr Bailey gave her "moral telephonic support" on the line from London, where he was trying to halt the collapse of Northern Rock.

Mr Bailey was the "stand-out candidate", Mr Javid said when making the announcement, which was confirmed after Prime Minister Boris Johnson made the recommendation to the Queen to appoint Mr Bailey.

The chancellor said it was one of the most important decisions he would have to make, denying that Brexit views were a consideration in the process. For example, Gerard Lyons, a key ally of Mr Johnson, was overlooked for the post.

Mr Bailey has, however, stressed the importance of being a public servant, and while applying Bank of England modelling which assumes the economy could have faced a severe hit from a no-deal Brexit, he has also suggested new options for the UK from greater regulatory freedom outside the European Union.

But the FCA, the City misconduct watchdog, has also been right at the heart of a number of some recent financial controversies, such as the closure of the Neil Woodford investment funds and the "mini-bond" scandal.

Completely independent

The government was not tempted down the path of creating a more compliant, less independent central bank, as is an emerging pattern elsewhere. It is difficult to see Boris Johnson tweeting abuse at Andrew Bailey for not cutting interest rates, as does now occur in the US.

I asked the chancellor if he would welcome the Bank continuing to make frank and occasionally unflattering assessments of its Brexit plans.

Mr Javid said the Bank needed to be completely independent. Indeed, he chose on purpose to host the announcement in the same room where 22 years previously, Gordon Brown had announced the Bank would be responsible for setting interest rates.

At that time, Mr Bailey was the private secretary to Eddie George, a key official in the "Ken and Eddie show" that had decided rates up until then with Chancellor Ken Clarke.

Setting interest rates and avoiding financial crises is now his show, alongside the Bank's expert committees for the next eight years. He will take over in mid-March, as Mark Carney has agreed to extend his tenure by a few weeks.

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