New Bank of England head will have too much power, warns insider New governor of the Bank of England Mark Carney. Photograph: Georgios Kefalas/EPA George Osborne's reform of the financial system risks putting too much power in the hands of the newly appointed Bank of England governor, Mark Carney, a former Bank policymaker has warned. As Osborne attempts to salvage his reputation with a tough autumn statement, Adam Posen said the expansion of the Bank of England's empire to include City regulation, coupled with the fawning response to Carney taking control next summer, could encourage Sir Mervyn King's successor to abuse his influence. Posen said that Carney, a Canadian who was handpicked by the chancellor to be King's successor, would be tempted to adopt an autocratic style of leadership that could stifle debate and exacerbate concerns that Threadneedle Street is out of touch with ordinary people. You just don't want to put too much power in one person's hands. And the new rules means the UK governor has enormous amounts of power and discretion," Posen said in his first UK newspaper interview since leaving his role on the Bank's monetary policy committee in August. You have a guy, irrespective of his individual traits, who has been wooed outside the interview process, got to negotiate his own pay packet and be told by everybody that he is wonderful. It will take a great deal of wisdom and restraint on Carney's part to not let that lead to over-reach by one individual. Notwithstanding that he is obviously well qualified, experienced, bright and hard working, sharing many of Mervyn's best qualities. But any individual given that much power ... what's going to happen? The US economist was also critical of King's handling of the financial crisis. He suggested the governor was too slow to react to the credit crunch when it first began with the collapse of Northern Rock and likened him to former US Federal Reserve chief Alan Greenspan, who failed to see the crisis coming. Like Greenspan, he probably stayed too long and was probably too set in his ways when history changed. There was this sense of enormous accomplishment, and of being at the pinnacle, with everyone treating him like the great maestro, just as they did Greenspan, so it was very hard for him to shift gears when times changed. But Posen added that King was "an extraordinary public servant who had real vision. He was involved in the implementation of the inflation target, setting up the MPC and for having the courage - and he is the only central banker who did this - letting people like me openly criticise policy. These were all extraordinary accomplishments ... I think in the end, after problems over Northern Rock, I think history will be quite kind to him because in 2008 and 2009, after Lehman's went bust, he did a good job. Carney, who worked for Goldman Sachs before taking up a post in Canada's central bank, will become the new governor of the Bank of England next June, earning a salary that is third more than King at £480,000 a year. He beat five UK candidates including one of the bank's deputy governors and the current boss of the main City regulator. MPs from all sides welcomed his appointment after Osborne described him as "the outstanding central banker of his generation." Posen came to prominence three years ago when he joined the Bank of England's interest rate setting committee and immediately set about criticising the central bank's conservative policies. The American launched a series of broadsides against his colleagues for their failure to print money under the bank's quantitative easing programme. He warned that the UK was in a parlous state and needed the central bank to use every lever to boost the UK's chances of recovery. In advance of the autumn statement, when Osborne is expected to admit missing at least one of his two deficit reduction targets, Posen said: "More austerity would be nuts. I think the Treasury should back off. It should be reducing the austerity, focusing more on temporary tax cuts to get the economy moving. Posen has consistently argued for looser monetary policy to counteract a lack of bank lending. Last year he put pressure on the government to go further and take control of Royal Bank of Scotland and Lloyds to expand the amount of credit in the economy. But he met with intense opposition from inside the Treasury to his ideas, he said. The Treasury didn't want anything that supposedly interfered with market functioning, which I found strange when the markets weren't operating very well. They also didn't want anything that might interfere with the sale of Lloyds and RBS, which I find hard to understand when they won't be selling them for quite a while. Officials also argued that taking control of the banks to be more interventionist would fall foul of EU state aid rules, which is not something the French or Germans worry about. None of these reasons make any sense. I think there is just a lack of will inside the Treasury to take control of the banks, whether that is a political decision or based on an economic view I don't know. But the entire British economy is now living with the consequences," he said. Posen said the euro crisis would continue to undermine the UK's recovery for several years, underlining the need to adopt domestic measures to stimulate business activity, and especially investment in new equipment. He said his confidence that US politicians would agree a set of tax cuts and welfare reforms to avoid the so- called fiscal cliff, was being undermined. I was quite optimistic that we might get a two to four year deal in which there would be some increases in tax revenue with some reform of social security and some budget cuts. But in the last three to four days Tim Geithner [the US treasury secretary] and the Obama team look like they want to play more of a game of brinkmanship with the fiscal cliff. I'm fearing there are people in the fiscally conservative part of the Democrat leadership who think it would be good to go over the fiscal cliff. In my view that is a very bad risk to take the risks of going over the fiscal cliff are bigger than they think.