Sir Mervyn left to flounder in a Libor can of worms The email - not to mention the low-balling testimonies which it beggars belief UK authorities were unaware of - should have sent alarm bells ringing. The Bank and the FSA ought to have been kicking tyres and asking questions but instead the matter was passed on to the British Bankers" Association - an industry body made up of the very banks now at the centre of the scandal. That no one at the Bank or the FSA asked whether that was the right approach is hardly credible. That's light-touch regulation and then some. When asked about Libor last month, Sir Mervyn said there had been discussions to reform the system in 2008 but "there was very little support... among the markets, among banks and, indeed, among our overseas colleagues to make the change." Those comments now look difficult to square with Geithner's email. Now US treasury secretary, Geithner will himself be accused of failing to blow the whistle loudly enough given how clear cut the problems were, but at least he put it to his lips. Sir Mervyn, together with Lord Turner and Hector Sants at the FSA, look like they couldn't even find one. In private, US regulators are increasingly accusing their British counterparts of a glacial approach to dealing with the Libor scandal. It's a charge that looks more powerful by the day. They will try to excuse the oversight as a failure of the system - Sir Mervyn was careful to point out yesterday that the Bank "did not have any regulatory responsibilities in this area" - but that won't wash. And anyway, the Governor didn't seem to have the same qualms when he put a gun to Bob Diamond's head last week and told him to step down. Funding for Lending arrives much too late There was at least one ray of light for Sir Mervyn today as he unveiled the Bank's new plan to get lenders actually lending. In many respects the so-called Funding for Lending scheme looks like a step in the right direction. The aim is to use the Bank's considerable firepower to replicate how the lending market would look if conditions were "normal." It's trying to remove the eurozone threat and banks" credit concerns from the equation and create conditions where lenders compete against each other to attract borrowers, thereby reducing lending rates. All well and good but that's where the positive news ends. After all, you can take a customer to a bank, but you can't force him to borrow. The Bank might be able to help create conditions where lenders feel able to reduce funding rates, but convincing would-be borrowers that we're not in recession and that they should have the confidence to go out and raise debt is altogether a different thing. That might have worked in the early days of the economic downturn, but Sir Mervyn's eureka moment on lending looks to have come much too late in the day.