Adam has been described as the most prominent ‘dove’ on the Monetary Policy Committee. He consistently advocated an extension of the Bank of England’s Quantitative Easing Programme, a full year before the MPC extended the asset purchases by £75bn at the start of October.
In a speech at Wotton-Under-Edge in September, he suggested that lack of private sector finance will inhibit the rebalancing of the economy. He said that the best way for finance to find its way to SMEs was the establishment of two new public institutions – one public bank that would choose among loan applications rejected by existing banks, and ‘an entity to bundle and securitise loans made to SMEs,’ or ‘Bennie’ (as he suggested it might be named).
Since then, the Chancellor has suggested that the Treasury is examining how ‘credit easing’ could be implemented.
Several CPS authors have tended to be more sceptical than Adam about the need for credit easing and in particular the method of setting up public institutions to do so. Is there a huge unmet demand for credit? And if so, are public institutions best placed to deliver finance?
In a piece of CPS research to be published shortly, we will be examining the true level of business demand for more bank lending and investigating the possibility of making credit available via a mezzanine-type proposal, whereby the existing bank framework can be used to free up marginal lending decisions, particularly to SMEs – a method which would respond to demand whilst minimising public cost.
We are delighted that Adam has agreed to participate in this event. He will briefly outline why he thinks credit easing is necessary and why, in his view, the existence of two new public institutions would make this policy most effective. It will then open out into a general discussion.