And after a few minutes reflection in an interview a year to the day that he took office, he added: "That crisis has also helped raise the profile of FE."
The crisis was provoked by a declaration from ministers in January that the sector had grown beyond all expectation. Extra cash had been available for colleges which recruited students in excess of their targets at marginal costs. That was to stop immediately.
It was always on the cards that the open-ended cheque for expansion on the cheap would cease. But the last thing anyone had expected was to have #163;100 million rudely snatched mid-year from an already depleted budget,by ministers who feigned hurt and surprise at the "overspend".
For a moment, it looked as if he would lose his nerve and cave in to demands in the hope that a new government would be more acquiescent. His now famous letter to the sector, where he expressed concern over the sudden end to cash for growth, unnerved many college principals.
It was a style they were not used to under the management of his predecessor Sir William Stubbs, a practised performer who exerted control behind closed doors in the corridors of power.
It was a high-risk strategy, testing whether the sector was behind him. It paid off. There was a furore. The Association of Colleges turned up the heat. National daily papers, which till then had largely ignored the sector, were running stories of the threat to staff jobs and at least 250, 000 students.
There was a partial though highly significant climb-down as ministers ran away claiming they had been wronged, that Treasury officials had been kept in the dark over the costs. He brushed the claim aside with some disdain.
"The council did keep the government informed. But on anyone's money, #163;100m - generating hundreds of millions more in future costs - was bound to provoke a reaction from the Treasury." Even if that source of cash has dried up, he reminds the sector: "We did not have a major haemorrhage of funds in the middle of the year."
For Professor Melville, the crisis was "a turning point" when the sector came of age. It was galvanised into a sector, well beyond the establishment phase of incorporation in 1993. "But the most important thing to arise out of this is that I could share my anxieties with the sector."
And there will be more anxieties - colleges face budget cuts next year unless managers can convince ministers and civil servants to give them a big share of the Welfare to Work cake from January. If colleges come up with the goods, Professor Melville will demand that ministers put their money where their pre-election mouths were.
When he took the FEFC hot-seat last September, Professor Melville made two modest pledges: to raise the public profile of the sector and boost collaboration among all post-16 players.
His tactics have surprised some principals and governors. The latest plans for an FE-HE merger in Derby appear to have his tacit blessing. In the days of Sir William, the off-the-record line was "over my dead body".
Another famous letter was the joint declaration from him and his Higher Education Funding Council counterpart Brian Fender. "I felt it was important early on to demonstrate the importance of collaboratio n between the sectors. It was the first time a letter came out with the two council logos."
But to accuse Professor Melville of giving away the family silver, as some did, is to misunderstand his game-plan.
For every "Derby" proposal since he took office, there is a Manchester one. Here, as reported in The TES last week, the chief education officer Ron Jobson, who is also president of the Association of CEOs, asked the colleges to take over school sixth-form provision in disadvantaged areas of the city in the most radical step yet towards schools-FE collaboration.
Such diversity fits Professor Melville's apparent anti-institutional view: further education to be provided wherever it is needed. His views are echoed in Helena Kennedy QC's report on widening participation. "The Kennedy report was another turning point in FE," he insists, voicing irritation over a conservative resitance to such change.
"I am relaxed about the mechanisms but concerned about the lack of coherence. It is that which creates the barrier to progression. "
That is not to say that he has some romantic "de-schooling" vision of the FE system. Quite the opposite. "My vision for the next five years is that we do have an FE system which is seen as the first choice sector post-16."
The sector was already substantially there, he says. But the public perception of it still had a long way to go - despite the crises. To dress Cinderella in the clothes to suit her station is easy in the fairy tales. In real life, it is not that simple.
Managers in the sector are also too defensive. "Suppose the Derby merger took in all the colleges. Then the FE would substantially outweigh the HE element and it would become our institution," he said. But, even with FE in the minority, "there are powerful legally-binding documents to protect FE provision".
The crunch issue as far as higher education in FE is concerned is summed-up for him in Sir Ron Dearing's inquiry into HE. "The real issue is sub-degree expansion (though it is a label I loathe) and this must come in the colleges. " Professor Melville is angered by the denigration of Higher National Diplomas and Higher National Certificates, as students were tempted away to expanding degree courses with a recruitment crisis.
"How to tackle the esteem thing is a very difficult question. We need to turn the clock back, to allow expansion only at sub-degree level and work to reverse the trends we have seen in recent years."
Kennedy, Dearing, the new lifelong learning working group under Bob Fryer,the planned White Paper Professor Fryer will advise on and the range of initiatives from Welfare to Work to the University for Industry are, in Professor Melville's view, all part of the same set piece, and a broad territory in which FE will be the leading player.
The political climate is radically different since the ministerial squealing over the growth cash overspend. In 10 weeks' time, when the details of Labour's new deal are expected, Professor Melville will expect colleges to have their plans ready.
Colleges will have no shortage of innovative ideas, he predicts. There is core skills training in conjunction with other players such as the training and enterprise councils, basic skills training centres where every adult is screened for individual needs, franchised deals with others to provide NVQ level 1 and 2 job-related training for those identified by Kennedy, not usually association with education and training, and the tailoring of programmes to improve the employability of individuals.
Ministers have pledged to overhaul schedule 2 of the 1992 FHE Act which created an artificial divide between academic and vocational courses. The model he will push the Education and Employment Secretary David Blunkett to adopt is a variation on the Kennedy report proposal.
That suggested making local education authorities responsible for ensuring provision and the FEFC responsible for paying the cash. "But there would have to be a transfer of the necessary funding to cope with this."
Professor Melville is set to embark on a series of meetings with regional groupings of chairs and principals, with Baroness Blackstone, Association of Local Government chairman Graham Lane, Nick Tate, chief executive of the Qualification s and Curriculum Authority, and key players in the TECs and HE.
He insists it is aimed at giving FE the centre-stage role it deserves. "Don't forget that David Blunkett said the key question for FE is raising its profile with the public and politicians. It is for everyone to come up with the ideas to ensure this."