By David Milliken and Marc Jones
LONDON/FRANKFURT — Britain masterminded this week’s central bank effort to avert a liquidity crunch, its central bank chief said on Thursday, laying claim to the genesis of a plan that began to take shape around 10 days ago and was ready by the weekend.
Bank of England governor Mervyn King said he instigated the move by the central banks of the United States, euro zone, Japan, Canada, Britain and Switzerland to provide cheaper dollar funding for starved European banks, which provided a longed-for fillip to market sentiment.
“It was the result of conversations which I initiated as chairman of what used to be known as the G10 governors, now the economic consultative committee, among a limited number of central banks,” he told a news conference in London.
“But let me stress, this cannot be a solution to the underlying crisis, all this can do, is to help temporarily relieve liquidity problems. But liquidity problems, often, reflect underlying solvency problems and in this case they do.”........read on
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