He's Blowing the Whistle on Central Banks

He's Blowing the Whistle on Central Banks

By Mattea Kramer


Sir Paul Tucker thinks central banks should be more accountable. He should know: He helped lead England’s.

By Mattea Kramer

If you were unsettled when banks got billions in taxpayer dollars during the financial crisis while ordinary homeowners were left wanting, you’ll want to know what Sir Paul Tucker has been up to in the years since.

The former deputy governor of the Bank of England — that’s the British equivalent of the No. 2 spot at the Federal Reserve — Tucker retired in 2013, was knighted by the queen, then boarded a plane across the Atlantic and settled into a not-spacious office at Harvard, where he began to write a 568-page book about why we should place some limits on the powers of central banking.

Once elected officials outsource key swaths of government to unelected bureaucrats, they have less incentive to — what’s the phrase? — do their jobs.

But let’s step back to talk about what central banking is. There’s a straightforward definition — central banks set key interest rates and prevent volatile inflation — but it’s also true that the boundaries of central banking are up for grabs, and that’s a problem. It’s been a problem since the global economy hit the proverbial fan a decade ago, at which time unelected leaders at the Federal Reserve, along with their counterparts at central banks around the world, had no agreed-upon charter for what to do, and so they wrote themselves expansive new job descriptions as they pumped trillions of dollars into world economies. Tucker is concerned that central banks now wield too much power and that it’s compromising the legitimacy of representative democracy on both sides of the Atlantic.


Sir Paul Tucker in London. 

Source Photographs by Leslie dela Vega/OZY 

Speaking via Skype from an armchair in the sitting room of his London home, a small abstract canvas is visible over Tucker’s right shoulder, and cinnamon-colored drapes frame a window overlooking a leafy alley. The 60-year-old’s voice is rich and comforting in a way that would probably make him eligible for a second career narrating Sherlock Holmes movies.

And we are plumbing an enigma worthy of Holmes. The Federal Reserve operates independently of direct congressional oversight of its policies or annual budget, in order to prevent inflation and interest rates from fluttering in the political winds. But independence is power — unelected power, which happens to be the title of Tucker’s book.


Once elected officials outsource key swaths of government to unelected bureaucrats, they have less incentive to — what’s the phrase? — do their jobs. In Tucker’s view, governments now rely too much on monetary policy (decisions made by central banks regarding the money supply) at the expense of fiscal policy (decisions made by legislators about how to use taxpayer dollars to support the economy). If that sounds abstract, think of it this way: Without the aggressive moves by the Fed, might Congress have been more willing to rescue the 9.3 million American families who lost their homes?

“My concern is a slow-motion concern,” Tucker once told the Financial Times. “Eventually the people wake up and say, ‘Who the hell is governing us?’”

curbed power of central banks

A native of Codsall, about 150 miles northwest of London, Tucker read widely while at Cambridge University but stayed out of politics. Avoiding affiliations with the left or right has been important to his self-identity — he’s out to save democracy itself, rather than a political constituency.

And democracy is indeed suffocating, in Tucker’s view, as long as the business of government is delegated haphazardly to independent agencies. The Fed, for instance, is responsible not only for setting interest rates and controlling inflation but also for overseeing banking regulation. Its eagerness for those jobs vary: Alan Greenspan, who was Fed chair for 18 years, has admitted a lack of regulation on his watch helped give rise to the financial crisis.

Tucker would like us to know we can do better. While he was deputy governor of the Bank of England from 2009-2013, he helped put restraints on the governor’s role. Like the Fed, the BoE has several missions. Unlike the Fed, a committee now supervises each of them — thanks to Tucker “trying to snooker the leadership of the bank.” A committee isn’t the sexiest way to do things, but when your government’s legitimacy is at stake, it’s probably worth giving it a whirl. Tucker also recommends placing clear boundaries on the mission and scope of central banks — to prevent their charters from widening at times of crisis — and more involvement by elected representatives.

“Had he chosen to stay in the private sector, [Tucker] would have by now amassed a small fortune,” says Sir Nick Stadlen, a former High Court judge who has known Tucker for 27 years. Instead, he spent decades at the Bank of England because of what Stadlen calls a deep commitment to the public interest. “His contribution during the financial crisis was absolutely pivotal. … The country owes him a great debt of gratitude.” Outside of work, Stadlen says Tucker is great company thanks to his witty sense of humor.

On the other side of the Atlantic, Larry Summers — treasury secretary under President Bill Clinton, director of the National Economic Council under President Barack Obama, and now Tucker’s Harvard colleague — lauds Tucker’s immense curiosity. “Paul Tucker’s book is the most important study we have of unelected independent public actors,” Summers says.

Other scholars see Tucker’s work as the starting point of a much longer conversation. “The question he raises for us is, how can we create more political responsibility within a separation of powers system?” says Bruce Ackerman, a constitutional law expert at Yale Law School and author of the multivolume history We the People. It’s an urgent question that deserves the publicity, Ackerman says, but Tucker never resolves it.

“This is an extraordinary thing about America,” Tucker says from his sitting room, leaning back in his fawn-colored chair. He says the U.S. has grown careless in the centuries since its Founding Fathers designed an elegant government. “In slow motion, it’s hurting the most important country in the world,” he says, a tremor of emotion in his voice.

“Slow motion” seems to be Tucker’s favorite phrase, and it suits him. He isn’t after a quick fix to what ails 21st-century government. Instead, he hopes to nudge democracies toward painstakingly reshaping their institutions to act legitimately in the people’s interests, in time for the next crisis.

Illustration by Peter and Maria Hoey.