 |
||||
Open for business 6am to 6pm coast to coast! |
||||
| (Home Page) | (How to Buy Gold) | (Gold Coin Images) | (Daily Market Report) | (Live Gold Price) |
| (First-time Buyers) | (Gold Discussion) | (ABCs of Gold Book) | (Gold IRA) | (Buy Gold Coins Online) |
| (European Clientele) |
|
(About Us) | ||
Welcome to the Central Bank Insider Archives. We are pleased to be able to provide you with this intimate look at central banking events, policies, and staff. Commentary is updated as available (generally bi-weekly) and archived monthly. The source commentary "Newsmakers" is reprinted at USAGOLD with permission and by courtesy of Central Banking Publications Ltd.
31 May 2002
******************************************
A selection of news stories from CentralBankNet
http://www.centralbanknet.com/
By Benedict Mander
Central Banking Publications
******************************************
BÄCKSTRÖM QUITS, BUT WILL GO ON BEING PAID
After almost ten years on the job, Swedish central bank governor Urban Bäckström decided last week, "I think that's about enough." He consequently officially declared to the chairman of the Riksbank's general council, Sven Hulterström, his intention to resign at the end of this year. Hulterström thanked him "for good cooperation and valuable contributions as head of Sveriges Riksbank" and announced that "the work accordingly begins of finding a successor who can fill the post on 1 January 2003". Some who claim to be in the know have suggested that the job may go to Lars Heikensten, currently first deputy governor.
But although this means Bäckström will leave office a full two years before the end of his term, it is not for want of stamina. He explained that by resigning this year instead of seeing his term through to December 2004, he will give his successor time "to manage the issues that may become topical in the coming years" - such as joining the European monetary union, and the consequences of a referendum on this issue. He therefore hoped his decision would provide "the best possible continuity".
Bäckström thanked his colleagues for a "fruitful collaboration" adding tearfully that he would miss them. He subsequently became unreservedly emotional when describing his relationship with those outside the bank who had allowed the Riksbank to "conduct a dialogue" with the people of Sweden - whom he described as "our taskmasters".
As for his own future he said he had "not yet decided" although he would "be 'in quarantine' for up to one year... So there will be plenty of time for me to think about the future." The Riksbank Act states that for one year after members have left the executive board, they may not be employed (without the consent of the general council) in activities where their knowledge might potentially bring them into conflict with the Riksbank, although they continue to receive full remuneration for employment with no official duties.
NOISOME NOTES
One or two members of staff at the Bank of England may have blushed at news that the much-heralded new five-pound note was duff. Although the note had been "rigorously tested" before issue, and the Bank's chief cashier Merlyn Lowther said that the new fiver would be "the most secure five pound note we have ever produced", it transpired that there was one detail the printers didn't get right: the confounded serial numbers! Of all the silly... After all, they simply allow you to verify where and when it was printed. For all the state-of-the-art features of the new note, including a foil hologram, metallic thread and what not, making counterfeits virtually impossible to produce, the serial numbers just seemed to vanish into thin air with a touch of leisurely confrication.
However the Bank regained its composure rapidly from this most vexing of incidents, and has the matter in hand, having assured the public that there is no cause for alarm: "As a precautionary measure, we have asked the banks and the Post Office to suspend further issuance of the new £5 note, while we carry out further tests and investigative work into what might have caused the fault and how widespread the problem is." The London Banknote and Monetary Research Centre (LBMRC) believes that the problem lies in the new varnish used to increase the lifespan of the note (currently only a year) which "may interfere with the serial number printing process" as it is applied before the serial number - "these two processes may not be compatible".
In a related incident, according to the LBRMC, a man in Berlin has reportedly been rendered impotent as a result of overexposure to a similar type of varnish specific to the ten euro note. After counting a friend's cash inheritance all in ten euro notes, the poor man complained that he "suffered from headaches, feeling sick and had trouble breathing; he also claims not to be able to perform sexually". The ECB is frantically running tests to check on this, and meanwhile Wolfgang Fritz, the man in question, is in the process of suing the German government - presumably in the hope that they might provide him with free Viagra.
CENTRAL BANKER EXECUTED
On a more sober note, investigations into a corruption case exposed in 1999 involving nine central bank officials in China have resulted in the execution of one of them. Chen Zhiqing was an official with the state treasury department at a People's Bank of China branch in the impoverished northwest province of Qinghai. He was mixed up in accusations of using tax refunds, fake transfers and false receipts to pocket nearly 15.5m yuan ($1.9m; £1.3m) between 1992 and 1997. Corruption is not suffered lightly in China where it is viewed as compromising the legitimacy of the communist government, and consequently the Supreme People's Court, China's uppermost judicial authority, last month endorsed the decision. Newsmakers hopes this gruesome practice doesn't spread, though no doubt many a finance minister has wished such a fate would befall his central banker.
MORE PRIZES
Following on from last issue's item about the Charlemagne prize, one reader has alerted me to the fact that there was another occasion when Wim Duisenberg received a prize on behalf of others - this time to the members of the ECB council. It was as the European Banker of the Year 2001. I am told that it was quite a distinguished occasion, with Karl Otto Pöhl giving the laudation speech at the historical century-old Frankfurt Römer followed by dinner at the Frankfurter Hof. In his speech Pöhl confessed that most central bankers were originally suspicious of the euro project and saw it as an imposition on central bank independence - without a politician like Delors, European Monetary Union would not have materialised. What's more, as if invalidating the prize, he hinted that they should take a leaf out of Alan Greenspan's book and keep interest rates low.
ANOTHER IN THE BAG
A welcome, please, for new currency board cum central bank being born in the waters north of Australia. East Timor has at last achieved its long sought-after independence, and the country actually found that the central bank was already being set up. A spokesman for the Bank Indonesia made it clear to me that "Bank Indonesia ceased acting as the central bank for the region quite a long time before the inauguration of East Timor Independence".
The new bank faces a tough task. After October 1999, when the Indonesian army pulled out of the territory, many banks' HQs were incinerated and senior staff beat a hasty retreat to Indonesia. According to Fernando DePeralto, who became the general manger of the Central Payments Office (the then de facto monetary authority) in mid-2000, "this resulted in a total cash economy". DePeralto was formerly a deputy governor of the Bank of Jamaica, and has since returned to his homeland, perhaps in exasperation at the Herculean task with which he was confronted.
In early 2000 the United Nations Transnational Administration in East Timor settled on the US dollar as East Timor's official currency. But according to Bank Indonesia, in certain regions, particularly near the border, the rupiah is still being used. The Bank Indonesia spokesman informed me that "we have a MOU between Bank Indonesia and the monetary authority in East Timor dealing with the repatriation of the rupiah to Indonesia".
So the banking system is still under construction. According to the British ambassador in Dili, Hamish Daniel, the Billing and Payments Authority (BPA), which is the downbeat name of the new monetary authority, "is close now to operating as a full monetary authority, with the passage of the BPA Regulation in November 2001." However he cautioned that "a number of challenges remain, including strengthening the BPA which needs to be properly capitalised over time to strengthen its financial autonomy, in line with the ongoing institution-building in which the IMF has a role."
Newsmakers looks forward to getting in touch with the new governing board as soon as they are named.
CONVERGENT EMOLUMENTS FOR EU CENTRAL BANKS?
The Bank of England's Annual Report, which has just been released, continues to exceed the accepted requirements of transparency by readily making public the salaries of the individual members of the executive board and monetary policy committee. The Bank's governor Sir Edward George gets £249,909 while the deputy governors Clementi and King are runners-up with £208,051 and £207, 400 respectively.
Ian Plenderleith, who is to retire at the end of this month, had a salary amounting to £177,816, while Charlie Bean, the Bank's chief economist, only gets £147,000 - though this isn't such an inconsiderable sum for someone accustomed to the paltry pay academics have to put up with in this country, which was how he passed his time before joining the Bank in 2000. Also, it is more than the external members of the MPC get, on £137,979. But who knows what the monetary value of being able to say you sat on the Bank's MPC is to your future career?
A thumbnail comparison with salaries in other central banks suggests a convergence play. The ECB - which does not openly disclose salaries of individual members in its annual report - paid its executive board, comprising six members, EUR 1.9m (£1.2m) in 2001. That is an average of EUR 316,666 (£200,000) which compares closely to the Bank of England's average executive board pay of around £198,195 (misleadingly accurate as executive director Alastair Clarke's salary is not mentioned in the report). Duisenberg once publicly said that his pay should be in line with his fellow executive board members, and it seems now that the Bank's pay for senior people is roughly in line with the ECB's.
We cannot say the same for Italy however. Again, salaries for individual members of senior staff are not revealed, but the Economist estimated a couple of years ago that Antonio Fazio's salary was around the $600,000 (£410,000) mark - almost five times Alan Greenspan's salary at the time. Unconfirmed reports suggest he might be getting more than $700,000 today (£478,000), almost double what Eddie George is getting.
Elsewhere in the world, the Bank of Japan sets aside 487,532,000 yen (£2.68m) for its executives, which would be on average £297,000 - rather higher than European levels. In contrast, as is well known, the Americans get a comparatively raw deal. Alan Greenspan is paid $166,700 (£113,796) while his fellow board members get $150,000 (£102,396). But presidents of the branches of the Federal Reserve get considerably more: ranging from Robert Parry at the San Francisco Fed with $315,200 (£215,168) to Anthony Santomero at the Philadelphia Fed with just $214,400 (£146, 358). Not for me to explain the reasoning behind all this.
IAN TAKES HIS BOW
Ian Plenderleith, Bank of England stalwart, and the man who modernised the UK government bond market, had a merry farewell shindig this week at which all the movers and shakers of the UK banking community were present, as well as a galaxy of central bankers past, present and future, barring, interestingly, those who are mentioned as possible successors to the governor - namely, Mervyn King, Sir Howard Davies and Andrew Crockett. Eddie George, who had promised Plenderleith there would be no speeches, found himself at the podium saying that he didn't know how they would do without Ian, whilst Plenderleith responded gallantly by declaring that he had learnt everything he knew "at the feet" of Eddie.
By the way, can Newsmakers readers tell us who they think started all this early rumour-mongering about who will be the next governor? My guess is that it can all be traced back to Gus O'Donnell, who is the Treasury's "observer" at MPC meetings and with whom, they say, you lunch with a long spoon.
GREEK GOVERNOR CHOSEN
Panagiotis Thomopoulos, who Newsmakers reported in its May 3 issue had volunteered for the job of governor for the Bank of Greece, may have been disappointed to learn that his rival, Nicholas Garganas, got the job. Both deputy governors at the bank, the only two serious candidates for the spot, even the same age at 65, it was a close call.
Garganas, an urbane ex-academic, said after his promotion was announced that he would "make every effort to achieve the goals of the Bank of Greece in the framework of the Eurosystem". The central bank explained that Papademos had recommended to the board that Garganas replace him as governor and that Nick Paleokrassas be appointed to fill Garganas' spot as deputy governor. Equally importantly, the proposal had the backing of the government. In fact, Garganas is on first name terms with Greece's prime minister, Costas Simitis, as he was architect of an economic stabilisation program in 1985-87, which Simitis implemented as economy minister at the time.
Garganas has a string of letters after his name, some of which were gathered at the London School of Economics (MSc) and University College London (PhD). After eight years as research officer at the National Institute of Economic and Social Research in London he joined the Bank of Greece in 1975 as senior economist, and was chief economic adviser to the national economy ministry and a member of the council of economic advisers from 1985 to 1987. He was drafted in as deputy governor in September 1996 in the hope that he would help wrestle down inflation, liked also because he backed Papademos's "hard drachma" policy, both of which ultimately allowed Greece to enter the euro zone. He has been a member of the monetary policy council since February 1998.
KOREAN CRONYISM
Meddling in central bank affairs is a time-honoured practice that politicians just can't resist, though many live to regret it. But Park Seung, the new governor of the Bank of Korea, does not seem to find it particularly amusing. And he has said as much to the finance and economy minister, Jeon Yun-churl, albeit in a rather roundabout way. In reaction to the appointment of Lee Kun-kyong, head of the state-invested Korea Technology Credit Guarantee Fund, as a new member of the monetary policy committee to replace Kang Yung-joo, who is now head of the Korea Stock Exchange, the central bank governor had one or two comments to make, amounting to a severe slap on the wrists when translated into plain English.
He reportedly told the finance minister that he would prefer him to approach the issue with a "broad" view, and therefore not to regard it merely as an opportunity to infiltrate the central bank with just another of his sidekicks. Park suggested that such bureaucrats would have a tough time trying to distance themselves from outside pressures. Union members at the central bank even labelled the ministry's decision as "selfish", claiming that the ministry wanted to give the job to one of its senior officials so other officials can be promoted. With this new appointment, half of the monetary policy committee's six seats will comprise former bureaucrats.
NAME CHANGE
The Azeri parliament wishes to trumpet its country's newfound status as a multinational player by changing the name of the National Bank of Azerbaijan to the Central Bank of Azerbaijan. Only established in 1992 when it splintered from the Central Bank of Russia, it is keen that the new name should "match the functional tasks of the country's principal bank", according to Sattar Safarov, chairman of the parliamentary committee for economic policy. At the bank's tenth anniversary recently, the governor, Elman Rustamov, extolled Safarov's virtues, and this move will surely endear him still further.
ASIAN SUCCESS
A nod to Ayesha Shah, Treasurer of the European Bank for Reconstruction and Development, who has been awarded the illustrious Business Woman of the Year Award in the Asian Women of Achievement Awards. She began her career at Citicorp Investment Bank as a risk analyst and manager and moved to Nomura International in 1986. There she set up and co-head the Swaps team and also established the research, trading, marketing, operations and systems infrastructure necessary to support several currency derivative trading portfolios. In 1993 she defected to the EBRD as a consultant, and was soon promoted to Head of Funding before her appointment in 2001 as Treasurer and Acting Head of Investments-Credit.
17 May 2002
******************************************
By Benedict Mander
Central Banking Publications
******************************************
ARGENTINA'S CENTRAL BANK SHEDS SENIOR STAFF - AND GOVERNOR?
Rumours are circulating furiously around Buenos Aires that the head of Argentina's central bank Mario Blejer's resignation is imminent. Although Blejer - who has contributed to the Central Banking journal in the past - has only been in the job since this January, one could hardly blame him, as tensions are rising high in frantic efforts to resolve the pitiful state of the nation's finances. Talking to the local media, Blejer clarified that he had not in fact resigned yet (at the time this commentary was sent out), but cast serious doubt on the prospect of his remaining much longer in the present circumstances, especially if the economy ministry refuses to force holders of frozen term deposits to swap them for bonds. He obviously does not want to be around when the economy is set upon by the hyperinflation that he says is inevitable if politicians do not follow his advice, which at the moment they do not seem to be willing to do.
Already this week, two of the bank's seven directors have resigned for "personal reasons": Amalia Martínez and Roberto Reyna. The bank has denied rumours that two more directors, Felipe Murolo and Aldo Pignanelli, have tendered their resignation. Martinez, who is in charge of the bank's rapidly dwindling reserves (which now stand at US$10.8 billion, roughly two-thirds the level they were at in January), will stay until the end of this month. But although she only handed in her resignation recently, she has been eager to leave the bank for months, "fed up of going from crisis to crisis" according to one source. Now that she has been made a tempting offer to work in the private sector, she has decided not to turn it down. Reyna on the other hand is just going to go on holiday for a while "to ease the stress".
This shedding of senior staff comes as no surprise, considering how awful working conditions at the bank have become. Hate mail is now the norm, and the public has recently made a habit of going into the bank and haranguing senior members. Aldo Pignanelli, the vice-president, has had the front of his house defaced with offensive graffiti. Blejer has complained of a constant stream of insulting emails. A director's monthly pay is roughly 5,000 pesos, in return for which they must work gruelling hours, regularly sitting through 10-hour long meetings to make decisions for which they may be tried in court in a few years time if they make the slightest slip up. Former governors Pou and Maccarone are currently under trial for actions they took while in office. Putting former governors on trial is an old tradition in Argentina. Old-timers will recall the trial of Martinez de Hoz in the 1980s.
Central bank staff are also severely frustrated because they are frequently bypassed in negotiations between the government's economic team and commercial banks who are desperately seeking a feasible way of lifting banking restrictions. The central bank predicts grave consequences if it continues to be ignored. It says it will not be long before the peso reaches a value of 5 pesos to the dollar, while monthly inflation is certain to hit double digits, and 40% of banks will close. For its part, the economy ministry alleges that there is a "conspiracy" amongst the central bank's directorate to ensure that their current plans fail.
DOUBTS OVER TAYLOR'S RULE
John Taylor, under-secretary for international affairs at the Treasury and monetary-policy prophet, has been seen as a possible successor to Alan Greenspan as chairman at the Fed. His performance so far, however, has removed the lustre from his exemplary credentials. In policy terms he has been accused of sitting tight, merely biding his time for the call to move the short distance across town to the Fed. Rudiger Dornbusch, a professor of economics at MIT, thinks he has been "doing nothing". Dornbusch says that when a decision has been required he has appeared indecisive or - to Dornbusch's dismay - too thoughtful.
It has not gone unnoticed that there is a stark contrast between Taylor's reluctance to act over the crisis in Argentina and the hefty Latin American bailouts orchestrated by his predecessors David Mulford and Larry Summers. This lack of international bluster appears to have deflated those in the upper echelons of the Treasury used to a more proactive role. Moreover, with his aloof stance on international matters Taylor has conceded policy ground and initiative to the Treasury's bitter rival, the State department. The result has been an internal memorandum complaining of a drop in staff morale, complaints of indecision and the departure of high-level advisers from the Treasury. Taylor may be following the Bush administration's line on scaling down official sector involvement, but he is not scoring many points for man-management.
Also, Taylor has hardly made himself popular at the IMF. His dismissal of former colleague Anne Krueger's approach to sovereign debt workouts drew strong criticism from various commentators. The retraction of this position a week later by Taylor's deputy, Randall Quarles, represented something of an embarrassing climb down for the Treasury.
Giving mixed signals and displaying a lack of enthusiasm for regulation do not in themselves rule out anybody from becoming chairman of the Fed. But Taylor currently does not exhibit the quality essential for the top job at the Fed: that of inspiring confidence.
INGNOMINIOUS INCIDENT AT THE DALLAS FED
At least his chances [Taylor's] would seem to better than those of the Dallas Fed governor Bob McTeer. A recent gathering hosted by McTeer of top tier Fed officials from the Dallas and San Francisco districts, although intended to be a sedate and gratifying affair, degenerated into ignominy. And this did not escape the notice of those in Washington. McTeer made the mistake of, perhaps unknowingly, inviting to address the central bankers a politically very incorrect speaker, Harry Stein, author of "How I joined the Vast Right Wing Conspiracy (and Found Inner Peace)", but his talk turned out to be extremely embarrassing.
At least one board member from the San Francisco district stormed out in disgust, and the president of the San Franciso Fed, Robert Parry, issued a statement describing the speech as "offensive and inappropriate". McTeer was quick to make amends, but word had already got around. Predictably, McTeer said that he regretted the incident, although he unwisely maintained that Stein was not "out of line". Others were less accommodating, not sharing his appreciation for Stein's sense of humour. This extreme right-winger described the Democrats as "morally corrupt to the core", multiculturalism as responsible for "debasing standards", feminism had "poisoned culture", and the prevailing liberal attitude to homosexuality was "tragic". One San Francisco Fed director who was not there said that many of his colleagues were uncomfortable with what was said: "I understand it got fairly quiet in there".
But the episode may be forgotten by the time Greenspan's job is finally up for grabs. Greenspan may be around for longer than we think. Parry for one has been trying to get this message across: "I don't think we should think too hard at this point about life after Greenspan at the Fed because he could be around for quite a while."
PAPADEMOS POLL
Lucas Papademos's path to vice-presidency at the ECB has been smoothed by MEPs as they have voted solidly in favour of his nomination by the council. In a secret ballot, it turned out that 425 out of 516 were comfortable with the idea of Papademos getting the job. And the remaining 91 who were reluctant to endorse the Greek? 24 seemed convinced that he was simply the wrong man for the job, no friends of Greece perhaps. A further 67 sat on the fence by abstaining.
MORE EUROS FOR THE EURO
When deciding to whom they could present the international Charlemagne prize for contributions to European unity this year, the prize-givers were stumped. They could not think of a single living body worthy of such an honour. In the past they have made do with various heads of state - from Winston Churchill to Bill Clinton. But this year no one really fit the bill - so, they must have thought, how about doing something crazy like giving the prize back to itself? The 5,000 euro prize money was, hilariously, awarded to the euro. For cover, the prize-givers blustered something about the euro bringing its people closer together, in an effort to appear sufficiently concerned with European matters.
Or was it just an elaborate practical joke on Wim Duisenberg, president of the ECB? He obligingly accepted to receive the prize on the euro's behalf, but he must have felt a little redundant, if not rather dizzy in the face of the metaphysical implications of being handed both the prize and its recipient simultaneously. What's more, he must have been startled to discover that the prize-givers were so brazenly perpetrating such an inflationary act. What he did with the prize money it may be impious to ask, but it is not inconceivable that he considered putting it in the shredder.
JOB UP FOR GRABS
How do you persuade people to apply for one of the best jobs a country has to offer? Prospective candidates to succeed Don Brash as governor of the Reserve Bank of New Zealand are dropping out at an alarming rate. Former deputy governor Murray Sherwin says he is happy running the Ministry of Agriculture and Forestry, which after all he only joined last November. Also, one strong contestant, former Deutsche Bank head in New Zealand John MacFarlane, seems not to be interested, as is the case with one of the bank's non-executive directors Arthur Grimes, although he has only been at the bank since March.
Those who do wish to partake have until 20 June to decide according to an advert the bank has put in the press this week, although apparently no one of any stature has so far put himself forward. Adverts will be placed in New Zealand, Australia, the United Kingdom, and the United States for the job which pays just under $500,000 a year. The bank has also appointed headhunter Signium International to comb the world for a new governor.
So let's hope the job attracts some competition; Newsmakers will be happy to forward any applications from readers to the appropriate quarters. The advertisement consists mainly of a job description. Amongst other things, "the governor must be a person of the highest integrity and credibility. Intellectual ability, appropriate academic qualifications and business experience are also key requisites." It is also emphasised that they are looking for someone with "the ability to withstand criticism, strength of character and personal courage." Needless to say, the governor must also show "a strong commitment to price stability, a strong understanding of monetary policy, display political awareness, have an understanding of public policy decision making regimes and the New Zealand economy."
FRESH BLOOD
The Reserve Bank of New Zealand has been garlanded with another senior member: Hugh Fletcher, former head of Fletcher Challenge, was appointed non-executive director this week, although he too has already denied any interest in the post of governor. Finance minister Michael Cullen said Fletcher's "considerable business experience would be an asset to the board", and he replaces IT entrepreneur Sir Gil Simpson whose term expires on June 8. Fletcher also headed an inquiry into telecommunications that recommended tighter regulation of the sector, with most of his ideas taken up by the government. He has brought to the bank his own opinions and is known for criticising Brash's tight approach to monetary policy.
Another development is that Rod Carr has been confirmed by the government - on the recommendation of the bank's board - as acting governor for up to six months until late November, if a permanent appointment is not made before then. This move was no surprise and people inside the bank think the government may delay an appointment until after the coming general election.
TROUBLED TURKMENISTAN
An entire stratum of Turkmen potentates has been purged, ostensibly in an attempt to extinguish endemic corruption and incompetence. Amongst those to feel the wrath of President Nyyazow was the now former central bank head, Seyitbay Gandymow, appointed in May 1999. In a meeting of the council of ministers - of which Gandymow was also deputy chairman until his dismissal - which was broadcast on national television, the president chided him for taking liberties while in office and failing to fulfil the tasks he was appointed, including monitoring the finances of various state ministries. The president declared himself puzzled that so many so close to Gandymow had landed such lucrative jobs - including his three sons. Charges of embezzlement and buying up land were also stacked against him. Gandymow protests his innocence. And some questioned whether his dismissal was linked to his friendship with, among others, the former central bank chief and former deputy prime minister, Hudayberdi Orazow, who has now joined the opposition.
Gandymow's successor has already been nominated, although confusingly they share the same last name but are not related! Ymamdurdy Muhammedowic Gandymow was appointed as the new central bank governor on 6 May. A callow 34, that makes him one of the youngest of all central bank governors, only a few months older than the most precocious of all governors, Irakli Managadze from nearby Georgia. This follows a trend in ex-Soviet and Eastern European countries to appoint much younger staff to senior positions than the more developed countries. The average age for governors in this is region is 49, while in the G7 governors are appointed at considerably more advanced ages, the average being 66. Before beginning his banking career, Gandymov was senior lecturer in accounting and finance at the Turkmen agriculture institute. He joined Dayhanbank [Peasant's bank] in 1996 as a senior economist; in 1998 he became acting head of the governing board of Dayhanbank, the state commercial bank. In April this year, the president appointed him as the first deputy minister of agriculture.
"BIZARRE" PRAISE
Surely Alan Greenspan deserves our compassion. Imagine an incessant, almost indecent barrage of praise shovelled on your good name. Greenspan finds it all a bit OTT. Michael Moskow, president of the Federal Reserve Bank of Chicago, doing little more than following convention, offered the usual laudatory preamble to a keynote speech Greenspan was to make at the Chicago Fed's bank structure conference. He unleashed the usual litany of Greenspan's accomplishments on his listeners: his early facility with the saxophone, his exceptional achievements in the private sector, his subsequent elevation to god-like status at the Fed. He had even come to the Chicago Fed's conference every year since he became Fed chairman. Greenspan sardonically responded that this was only because he was curious to hear his counterpart's "increasingly bizarre" introductions. Moskow, unabashed, suggested that he should "wait until next year".
HOW TO DO IT VOLCKER STYLE
Paul Volcker has his own way of introducing Greenspan: "Now let me introduce Alan, whose record is much to be envied. Particularly by me."
3 May 2002
******************************************
By Benedict Mander
Central Banking Publications
******************************************
ALL CYLINDERS MAY SOON BE FIRING AT THE FED
The two unmanned seats on the Federal Reserve Board of Governors look like they might finally be catapulted back into action, so that the board could be firing on all seven cylinders before long. The empty seats have been languishing uncomfortably in the background while the board has been working overtime with just five members participating. But it is widely reported that President Bush has now singled out two possible candidates for the board: Princeton economist Ben Bernanke and Federal Reserve official Donald Kohn.
Bush has so far made two appointments to the board, Susan Bies and Mark Olson, who both have banking backgrounds, satisfying the demand for expertise in this area. Presumably Bernanke and Kohn are intended to plug the gap in the board left by Laurence Mayer's departure when his term expired in January, rendering the board short on economists. And these heavyweight economists are eminently eligible to take on the job - should they get it.
Over his 48 years, Bernanke has notched up a gleaming set of academic credentials: he is the chairman of the Princeton economics department and hailed as one of the world's leading academic authorities on monetary policy. He also has a Phd from MIT, a BA from Harvard and has taught at Stanford. Bush went as far as to summon Bernanke to the White House on April 17, indicating that he is a hot favourite for the spot. Bernanke is also part of the elite National Bureau of Economic Research where he is director of the Monetary Economics Program, as well as sitting on an advisory body to the New York Fed. The fact that he is an advocate of inflation-targetting has caused some comment, as the Fed does not have a formal target.
Kohn, who is 59, has a rather different background, very much an insider - he has been at the Fed since 1975 and is one of Greenspan's right hand men. Since last June he has advised the Fed board on monetary policy and helps write many of Greenspan's public statements. Before that he spent 14 years as the director of the Fed's division of monetary affairs. He is well known also internationally - he wrote a quite critical report two years ago on the processes of the Bank of England's Monetary Policy Committee (many of his recommendations have in fact been implemented). Kohn would be the first senior Fed board staff member to be appointed to the board since former Fed governor J. Charles Partee in 1976 and only the third senior staff member ever to join the board directly from the Fed's staff. Should he get the job, he will be facing a drastic pay cut: top staff members like him have their pay capped at $192,000, while members of the board are paid $150,000.
VETERAN CYPRIOT LEAVES BANK
Veteran Cypriot central bank governor Afxentis Afxentiou finally renounced his job on 30 April. He cannot be accused of lacking commitment: now 69, he has steered Cyprus's central bank with estimable resolve for a staggering twenty years, since 1982. That constitutes over half the bank's existence, as it was established in 1963, and he will certainly be missed. Afxentiou is to be replaced by Cyprus's interior minister, Christodoulos Christodoulou, appointed by the president for a term of five years. He is 63 and a former finance minister, who worked his way up the ranks of the civil service after starting his career as a primary school teacher. Afxentiou's devotion to the bank makes him the second longest-serving living central bank governor, and it came as no surprise that he has finally decided to leave, as speculation has been mounting over the past months. Whether or not he was trying to outdo Maumoon Abdul Gayoom, the governor of the Maldives Monetary Authority, we will never know. Gayoom took charge of the MMA in July 1981, only months before Afxentiou took his position, but Gayoom soldiers on, showing no sign of faltering.
PAPADEMOS CONFIRMED
Lucas Papademos has been approved by the European Parliament to succeed to the vice-presidency of the European Central Bank. Papademos adequately satisfied them of "his personal integrity, his professional qualifications and his openness with regard to transparency and democratic accountability", according to Christa Randzio-Plath, chair of the European Parliament's Committee on Economic and Monetary Affairs. After being grilled for several hours, Papademos convinced the committee that price stability was not his sole concern, and that growth and employment were also priorities. Randzio-Plath said: "The confirmation hearing of the nominee for the office of vice-president is no mere formality. This hearing is part of the transparency of monetary policy. The governor of the Bank of Greece is well-known to experts, but not to the citizens of Europe, and these have a right to get to know a future member of the ECB board."
AFTER PAPADEMOS
Papademos's successor at the Bank of Greece is soon to be chosen. Now that he will relocate to Frankfurt on 1 June, he is likely to recommend someone to take his place to the prime minister. The Bank of Greece's current deputy governor, Panagiotis Thomopoulos, has volunteered for the position, but he has modestly refused to speculate on his chances: "I don't know if I am a candidate, nor if there are other candidates." He met with the prime minister, Costas Simitis, but says he did not bring up the issue of his candidacy for governor, nor was that the reason for his visit. It was related to the end of an era in the central bank after Papademos's departure. He said: "A cycle in the bank is closing. A cycle with great successes From here on, we have new problems to face at the bank." Of his own performance he remarked: "I think I have given signs of very good operational performance with the Bank of Greece all these years."
GERASHCHENKO'S NEW CALLING
Viktor Gerashchenko, may no longer run the Russian central bank, but he still knows how to grab the headlines. With his usual dry wit, he has been poking fun at the snail-like Russian bureaucracy - of which he was once a part - complaining that they were fumbling over his pension application. The press loved it: "If I don't manage to get the pension bonus awarded to former state employees I'll have to work." He said that he was toying with the idea of becoming a road sweeper, and that at least in that way he could realise his childhood dream of keeping Moscow's streets clean - which is more than he did, some say, for Russia's banks.
ARCH-DOVE TO LEAVE MPC
The Treasury put an end to speculation over whether Sushil Wadhwani would continue at the Bank of England's MPC with the announcement that Marian Bell, a City economist and former Treasury official, will occupy his spot from June 1. Wadhwani sent a letter to UK Chancellor Gordon Brown saying that "upon much reflection" he had decided not to seek reappointment for a second three-year term. Brown thanked him for his "significant contribution", but some say that with Wadhwani's departure the MPC may become more hawkish. He later commented: "I am going to spend the three-month purdah period thinking about what I want to do next."
AND THEN THERE WERE EIGHT
The old-style council of the Bundesbank has undergone sweeping changes as part of changes bringing the bank in line with the new era of the European single currency. The council has been brutally purged from fifteen members down to eight. The new board has now been finalised as a further four members have been chosen: Franz-Christoph Zeitler (president of the Landeszentralbank in Bavaria), Hans Reckers (president of the Landeszentralbank in Hessen), Hans-Helmut Kotz (president of the Landeszentralbank in Bremen, Niedersachsen and Sachsen-Anhalt) and Edgar Meister (the vocal member of the former council in charge of bank supervision and also chairman of the ECB's Banking Supervision Committee). They are to accompany the fortunate four already nominated to the board, Ernst Welteke (Bundesbank president), Juergen Stark (vice-president, and Germany's top financial negotiator on the European and international stage, in particular at the G7), Hermann Remsperger (Bundesbank chief economist) and Hans Georg Fabritius (a new council member, in charge of payment systems and risk management). These eight are the ones deemed worthy to remain, the other seven from the old council were not quite so lucky.
Ernst Welteke - who will remain the president of the bank - in London recently drew on all his years of experience in answering yet another tedious question on the correct euro/dollar exchange rate. It seems that beneath the tough Teutonic exterior there lies a soft and rather muddled man. "I've seen so many exchange rates in my life I don't know what the right one is!" Now that's what Central Banking calls transparency.
HAYAMI DOESN'T SUFFER FOOLS
Masaru Hayami, governor of the Bank of Japan, does not suffer fools gladly. Some reporters, apparently ignorant of the ways of central bankers, thought they might elicit an insightful answer when they asked him whether the market rumours that he may step down before the end of his five-year term were true. "Don't ask such stupid questions" he retorted. Reporters should do their homework before asking central bank governors questions.
AFTER EDDIE . . .
At a time when there is growing interest in the so-called "race" to succeed Eddie George as governor of the Bank of England, Newsmakers brings its subscribers advance news of an article on this that will be published in the new edition of Central Banking (Vol. 12, No. 4). It is by William Keegan, the well-known economics editor of The Observer.
BRASH TO SERVE HIS COUNTRY "IN ANOTHER WAY"
Having adequately left his mark in the central banking arena, Dr Don Brash, now ex-governor of the Reserve Bank of New Zealand, still seems to be worried that he is underachieving. He has chucked in his central banking career to try his hand at politics, abruptly announcing his resignation on 26 April, which took effect immediately. At the age of 61, after 14 years in charge of the central bank, Brash says he is now "seeking to serve New Zealand in another way."
He explained that he had accepted an invitation to seek nomination for the opposition centre-right National Party as a candidate in the approaching general election. A contact at the bank told me that although Brash's resignation had come as a surprise, he saw nothing wrong with that. After all, had Brash made the decision to run for the elections and then carried on as governor for a while longer to ease the transition, "he would have faced an intolerable conflict of interest".
But as it stands, he has already provoked outrage from the finance minister, Michael Cullen, of the left-wing Labour/Alliance coalition government. He accused Brash of a conflict of interest when he predicted after resigning that interest rates would rise next month. Cullen said it was "completely inappropriate" for him to comment on such matters, and that now he is in a political role, he must be "careful to ensure that his actions and his motives are not liable to misinterpretation." In light of this episode, it may be pertinent to point out that Brash was careful to emphasise that his resignation was "not motivated by any tension with the minister of finance or the government".
Although he said that his time at the bank has been "a very great privilege", Brash is searching for fresher pastures. He is said to want to spread his wings and branch out from the field of monetary policy. It is certainly not the money that has attracted him to politics: as governor, Brash was paid $496,500 a year, while he stands to make just $95,100 as a backbencher. But this seems to be no deterrent: Brash has already shown an interest in politics when he stood unsuccessfully for the National Party in 1980 and 1981, before he was appointed governor. Interestingly, Brash is not the first New Zealand central banker to go into public service. Murray Sherwin, whose term as deputy governor expired last November, went on to become chief executive of the Ministry of Agriculture and Forestry.
The central bank was quick to assure the world that it was unfazed by Brash's departure, and that it would be "business as usual". Rod Carr, the deputy governor, said in a bid to calm the markets: "The Reserve Bank remains committed to carry out its statutory functions in the normal way." Law stipulates that he must act as governor for up to 28 days or until someone is appointed as acting governor or governor. Doubtless Carr will relish this opportunity to captain the ship, and many consider him a frontrunner to succeed Brash.
In the meantime, the board of directors will recommend to the Treasurer a suitable candidate for acting governor until a permanent governor is appointed (again, by the Treasurer, on the recommendation of the board). The precise procedure for his selection is confidential, and the board's recommendation to the Treasurer will not be made public; any announcements will come from the Treasurer. The post has been advertised, both within New Zealand and offshore, and the appointment must be made within six months of the Treasurer appointing an acting governor.
© Copyright 2002 Central Banking Publications. All rights reserved. Reprinted at USAGOLD by permission.
Benedict
Mander
Email: bmander@centralbanking.co.uk
Central Banking Publications Ltd
6 Langley Street, London WC2H 9JA, UK
Tel: +44 (0)20 7836 3625
Fax: +44 (0)20 7836 3608
http://www.centralbanking.co.uk
Disclaimer of Warranty
Central Banking Publications assumes no responsibility for errors or omissions in these materials.
THESE MATERIALS ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.
Central Banking Publications further does not warrant the accuracy or completeness of the information, text, graphics,links or other items contained within these materials. Central Banking Publications shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, lost revenues or lost profits, which may result from the use of these materials. The information on this server is subject to change without notice and does not represent a commitment on the part of Central Banking Publications in the future.
 Centennial Precious Metals Gold coins & bullion since 1973 Denver, Colorado 80246-0009 We educate first-time investors! |
for quotes and purchase information.
|
