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The Bank of England is full to bursting with economists, but must still have room, somewhere, for a student of the classics. He should force his colleagues to read A.E. Housman's lecture on the application of thought to textual criticism. They could learn from it. 

A critic, Housman says, must not expect to find faults and make corrections by rule and by rote: "He is much more like a dog hunting for fleas. If a dog hunted for fleas on mathematical principles, basing his researches on statistics of area and population, he would never catch a flea except by accident." 

In the City, the regulators have been busy at their task of disinfestation, relying on rule and rote. Behind them stand the lawmakers, always ready to write new rules when the old ones seem to flag. In less than a third of a century, they have given us three Banking Acts and two Financial Services Acts. Have they kept the City's fleas from jumping and bloodsucking? Apparently not. Better luck this time.

A weighty Bill is now on its way through Parliament, with another on the slipway close behind it. This first Bill's subtitle should be "We think Gordon Brown got it wrong." He freed the Bank of England to set interest rates, giving it a target for inflation, but took away its power to regulate banks. This went to the Financial Services Authority, at the far end of the Docklands Light Railway, while the Bank looked after financial stability at the other end. It was an easy guess that some bank would fall between the tracks. So it did. Others followed. 

Inflation behaved itself, helped by ever-cheaper Eastern imports and by an index which conveniently left out the cost of housing. So house prices took off, and the Governor of the Bank was reduced to preaching sermons which his hearers mildly resented. Then he turned out to be right, and they resented him bitterly.

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