Outlook: The Old Lady's down in the dumps

ALL ORGANISATIONS, even the most successful, have their disaffected souls, those who constantly moan and groan about how awful things are. But right now the Bank of England seems to be suffering from a surplus of the problem. The City is alive with talk of plunging morale and threatened departures. There is said to be a feeling of loss of purpose and direction, which is causing quite a number of the Bank's loyal and long-serving officials to seek an early exit.

To some extent all this is just loose talk, the result of late summer boredom. Apart from trouble with the rouble, there's not much else to speculate about. What's happening with the Old Lady of Threadneedle Street makes as good a subject as any. But there is an element of truth in it all.

Indeed it would actually be quite surprising if there was not. There are any number of good reasons for the Bank's staff to feel fed up. For starters, the Bank of England has recently been ripped apart, with responsibility for banking supervision parcelled out to the new Financial Services Authority (FSA) and, with it, most of the Bank's staff.

Supervision always used to be thought of as the least glamorous bit of the Bank to work in. Actually supervision is not as dull and boring as it might seem (there are all those trips to Basle to look forward to for starters), but it is the part that would persistently get it in the neck. Supervision tends only to get publicity when there is a banking failure, which by extension is invariably regarded as a failure in regulation.

But then you never know what you've got until it's gone, do you? And now supervision is gone, everyone misses it. Those chaps in supervision weren't too bad after all; at least in the old days there were more people to talk to.

What's more, responsibility for supervision added to the Bank's prestige and authority in the City. It was a large part of the Governor's eyebrows, the Bank's ability to influence affairs more generally in the financial community, and a major part of its intelligence network.

All this was predicted by Eddie George, Governor of the Bank of England, when Gordon Brown surprised everyone with the formation of the FSA shortly after giving the Bank its independence. One minute Mr George was celebrating independence, the next he was contemplating resignation over loss of half his empire.

But this is only part of the Bank's present identity crisis. The other is that responsibility for monetary policy has been placed with a committee which is often not perceived to be wholly a part of the Bank at all, as it is half made up of outside economists. On the other hand, the Bank does very much get the blame for an unpopular policy. This is something new to the Bank, a reversal of roles. In the old days it was always possible for the Bank to say that decisions on interest rates were the Chancellor's, and better still, that if the Chancellor had followed the Governor's advice, the economy wouldn't be in such a mess. Now it's the other way round.

Worse, the Bank's Monetary Policy Committee has also been forced grudgingly to admit that it got policy wrong in the early months of the new government, and that if it had put up interest rates more rapidly then, the pain might now be over. If all this were not bad enough, there's the spectre of the European Central Bank hovering on the horizon. When and if we go into the single currency, the Bank will take on largely irrelevant subsidiary status.

So in summary, the Bank has had half its job removed, it now gets the blame for an unpopular policy, and at the end of it all is the prospect of redundancy. No wonder so many people round there are feeling down in the dumps. Who wouldn't?