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THE
END OF AN ERA
A month ago, Newsmakers reported that Viktor Gerashchenko,
chief of the Russian central bank, was tiring of his
job, teetering on the brink of surrender; now Gerashchenko
has at last admitted defeat. He quite abruptly sent
a letter of resignation last Friday to the president,
Vladimir Putin, citing reasons of ill health. Although
he was known by his colleagues as Hercules, surely an
apt name for someone shouldering responsibility for
the behemoth that is the Russian central bank, it seems
he has finally just had enough, unable to see his term
through to its end in September.
He has been
quoted as saying, "I'm 64, and I don't want to die at
my office desk." But some of Newsmaker's sources have
suggested that Gerashchenko may be joining the bank
run by his son, so no need to fill in time by writing
his memoirs just yet? No doubt they would make for fascinating
reading, being, as he was, a pillar of the old nomenklatura
under Gorbachev, having worked his way up the ranks
to become chairman of the Soviet State Bank by 1989.
Former prime minister Sergei Stepashin said that "with
Gerashchenko's departure, the entire epoch of Soviet
and Russian banking systems is coming to an end."
Central Banking
Publications wrote to Gerashchenko in the early 1990s
asking for details of the central bank's activities
and maybe a balance sheet and names of senior staff,
but the reply received indicated that the bank was not
generous in volunteering information: "The State Bank
of the USSR at this moment does not publish its annual
reports or any other material on the economic performance
of the country." They added: "But we will not fail to
inform you as soon as we have prepared such materials."
Putin accepted
Gerashchenko's resignation; but newspapers suggest that
his resignation might have involved some gentle encouragement.
Just hours before his dismissal Gerashchenko had tried
to block government-proposed reform of the central bank
that will involve a brisk trimming of its independence.
He fiercely warned politicians that no country has "a
system as stupid" as that which the amendments would
set up. There is also political dissatisfaction with
the central bank's failure to stabilise the banking
system four years after the financial crash of 1998
as well as the overvalued rouble, which is allegedly
hurting Russia's exports.
Putin sent
a letter to the State Duma to nominate Sergei Ignatyev
as the new governor, who had previously been deputy
governor of the central bank under Gerashchenko in 1992-3.
Russians seem to have only good things to say about
Ignatyev. Stepashin has fully endorsed Putin's choice,
describing Ignatyev as "a wonderful professional who
has done well at both the finance ministry and the central
bank." Another senior politician said of Ignatyev that
he was "a very experienced person, a brilliant economist
and an excellent specialist…I think that under his guidance
the central bank will work even better than now." A
Newsmakers contact concurred: "Everybody says he is
a very professional banker." He added: "Although he
was at one time close to Chubais, his reputation is
impeccable."
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BANK INDONESIA
SUSPECTS FOUL PLAY
Sjahril Sabirin, the governor of Bank Indonesia, was
found guilty of the charges stacked against him, but
he continues to put up strong fight. He has appealed
against the verdict and the sentence handed out by the
court in Jakarta. He has the full support of the central
bank which has suggested that underhand methods could
be at play to ensure its governor's downfall, and has
vowed to do what it can to stop this.
A spokesman
at the bank told me that, according to the bank's sources,
the decision to sentence its governor is connected with
the prior detainment of Akbar Tanjung, the House Speaker.
Tanjung is also the chairman of the Golkar Party to
which Mr Sabirin is connected due to his previous position
there during the Suharto era. The bank believes that
Tanjung's detainment was intended to speed up the process
of review in the Higher Court, which may then make it
possible for the judges there to detain the governor.
However Mr
Sabirin stands firm and will continue his fight against
"oppression" by submitting an appeal to the Higher Court
or even to the Supreme Court. Based on Article 49 of
Bank Indonesia Act No. 23/1999, Sabirin is still in
charge of the bank. The bank says he intends to carry
out his responsibilities until a final verdict is confirmed
in the Supreme Court.
The bank
stands steadfastly behind its governor, and the result
of the verdict was "a terrible blow for all of us here."
At a board meeting in the bank held swiftly after the
verdict was announced, the members unanimously resolved
to back their governor, and all the employees at the
bank also supported this decision.
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NEW GOVERNOR
AT CENTRAL BANK OF IRELAND
John Hurley took over as the governor of the Central
Bank of Ireland last week as Maurice O'Connell wends
his way to a less exacting existence. Former civil servant
Hurley's on the other hand may well become more exciting
as he also becomes the newest member of the ECB's governing
council - although he is not a newcomer to central banking,
previously a member of the bank's board. Before being
appointed governor, Hurley was secretary general at
the department of finance. But there has been some criticism
that a member of the department of finance should head
the central bank: "The governor of the central bank
should...always undertake independent critiques of the
policies of the department of finance, and this is very
difficult when the person has recently been a leading
figure in that department," says Jim Mitchell, deputy
leader of the main opposition Fine Gael party.
Hurley took
the top job in the finance ministry in early 2000; among
other things he also sits on the Advisory Committee
of the National Treasury Management Agency and the council
of a respected Irish think-tank, the Economic and Social
Research Institute. Before being secretary general of
the department of finance, he was secretary general
of public service management and development, in the
department of finance, and secretary general of the
department of health.
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"TYPICAL
COUNTRYMAN " TO HEAD KOREA'S
CENTRAL BANK
Park Seung has been appointed as the next governor of
the Bank of Korea. He will take over at the beginning
of April after current governor Chon Chol-hwan's four-year
term ends on March 31. Seung was flattered to be chosen
for the post: "It will be a great honour to return to
the Bank of Korea, which is like my home town." But
actually, Seung has firm rustic origins. His students
at Seoul's Chungang University, where he is an honorary
economics professor, describe him as "a typical Korean
countryman…He really eats a lot of rice - and fast at
that." His rural background explains his delight for
mountain climbing. An old friend explained: "He was
born into a poor family and had to walk 8km to go to
school as an elementary schoolboy. He even had to skip
lunches. Such hardships in childhood made him a rational
guy who makes friends easily." And he is certainly very
fondly regarded by his students, who say he is "reminiscent
of a traditional fatherly image." Indeed, he has two
sons and two daughters of his own.
Seung had
lowly beginnings at the central bank in 1961 as a clerk
where he remained for 15 years until he began his academic
career at Chungang University. He is a graduate of Seoul
National University, with a doctorate in economics from
New York University. He briefly returned to the central
bank as a member of the monetary policy board in 1986,
before serving as chief presidential economic adviser
1988. He was then appointed minister of construction
and transportation. He is currently the chairman of
the government's public fund management committee which
oversees the use of taxpayers' money in funding financial
and corporate sector reforms. According to the Blue
House, Seung has "broad knowledge and rich experiences"
in finance and macroeconomics which should serve him
well in his new post.
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GRIMES
TO ROCK THE BOARD IN NEW ZEALAND
The Reserve Bank of New Zealand's board is to be spruced
up as Arthur Grimes joins the team. Grimes has been
appointed a non-executive director for a five year term,
but this is not his first spell at the bank. He used
to work there many years ago as head of the economics
department, but others may remember him for different
reasons. He made a name for himself in the bank back
then as something of a rocker, according to my sources.
Staff at the bank would get down to his music at bank
functions where his very own rock band used to play.
He is apparently still very active musically, so perhaps
the bank is hoping he will contribute to more than just
monetary policy.
He has recently
kept himself occupied as an independent economic consultant
earning himself a reputation as one of the country's
leading monetary policy specialists. He has also previously
been chief economist for the National Bank of New Zealand
as well as a visiting lecturer at Victoria University
in Wellington. Grimes will replace Professor Viv Hall,
whose term expired on February 28, and is expected to
continue with his academic career.
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A RECESSION
, BUT NOT AS WE KNOW IT
In a fit of exasperation, William Poole, the governor
of the St Louis Fed, has decided that the sheer indecision
over whether the economic phenomenon that we have been
experiencing over the last year is or is not a recession
called for only one realistic course of action: inventing
a new term. Those who never thought of central bankers
as neologists may be impressed at Poole's characterisation
of the recent economic downturn as the "Pluto recession".
He would have us recall that this is not the only issue
people cannot agree on. Take astronomers, for example,
some of whom would prefer to reclassify the bundle of
mass we know as "Pluto" as asteroid No. 10,000: "Astronomers
argue about whether Pluto is or is not a planet. It's
a marginal object. Some astronomers say Pluto is a planet
and other astronomers say Pluto is not a planet...Any
time you have an event that is out on the borderline,
by definition it's not so clear." Poole was therefore
forced to conclude, "I think we're going to end up calling
this the Pluto recession." |
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VOLCKER
INNEFFECTUAL IN RESHAPING ANDERSEN
Former Fed Chairman Paul Volcker battles tirelessly in
the name of the public good. Once hallowed monetary champion
against the demon inflation, his most recent foray as
chairman of an independent oversight board to restore
Andersen's credibility by making, it was hoped, "fundamental
changes" to its audit practices has been something of
a disappointment. He has been doing battle with those
evil sorcerers who have been preying on the accounting
profession, but without success. At the outset he said:
"I anticipate that our work will assist in the broader
effort toward needed reform of a profession that, by its
nature, must be the trustee of truth and transparency
in our capital markets." How mistaken he was. He has since
awoken to the error of his fanciful designs, realising
he was ill-equipped to match those magicians: "I had hoped
that Andersen would become a model for reforming the profession,"
he said. "It was a dream, like Don Quixote. Still, trying
to bring change does make the blood run." |
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KIDNAPPERS
CAUGHT
Following the kidnapping of Guatemala's central bank governor,
Lizardo Sosa, police have apprehended a married couple
in connection with the crime. They were seized in their
home in Guatemala City, after they were linked to part
of the money, now recovered, which was used to pay Sosa's
ransom. The full amount of the ransom remains undisclosed.
Police say more arrests are to follow shortly. |
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SCANDAL
IN TURKMENISTAN
The former chairman of the Central Bank of Turkmenistan,
Khudaiberdi Orazov, is under fire from the top prosecutor's
office, accused of loan fraud. A warrant has been issued
for his arrest because he has allegedly embezzled $120
million. He supposedly stole loans from Deutsche Bank
and Credit Suisse which were granted to the Turkmen government
to boost cotton production at a state-run factory. He
was chairman of the central bank from 1992 to 1998, and
went on to serve as vice prime minister until 2000 when
he was unexpectedly ejected from his position by the hard-line
president who gave no specified reason for his actions.
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TOBIN
DIES
Newsmakers must pay tribute to Nobel prize-winning economist
James Tobin who died at the grand old age of 84 last week.
But it is lamentable that such a celebrated economist,
one of the last great Keynesians, should have been so
ridiculed in his autumn years. Although he contributed
to economics in an astoundingly rich variety of ways,
perhaps most famously for revolutionising investment theory
with his "Q factor", he is now best remembered by far
too many for proposing the "Tobin tax" which has been
rejected as a madcap scheme. Tobin was further distraught
when his idea was hijacked by a motley gang of economically
illiterate anti-globalisation crusaders, whose opinions
were in diametric opposition to his. "I have absolutely
nothing in common with those anti-globalisation rebels,"
he carped last September in an interview with Der Speigel.
"The loudest applause is coming from the wrong side."
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