28 April 2003

NEWSMAKERS

 

Greenspan Going Strong
Alan Greenspan could have hoped for no better fillip to his recovery from a "routine and successful" operation after testing negative for cancer than President Bush's out-of-the-blue remark on Tuesday that "I think Alan Greenspan should get another term." This was in response to reporters quizzing him on whether he thought Greenspan had done a "good enough job" - remember there was a little tension recently when he criticised the administration for its planned tax cuts as it risked creating damaging budget deficits in the future. But all this seems to be water under the bridge, and the Fed chairman appears to be delighted at Bush's remark - although it came as something of a surprise.

Greenspan swiftly issued a statement saying, "The President and I have not discussed this but I greatly appreciate his confidence." If all the necessary procedures were to go as planned, Greenspan said with impressive resolve that he would have "every intention" of continuing in his role. No spring chicken at the age of 77, he would continue until 2006 if he completes his 14-year term begun in 1992 (although he became chairman in 1987, he was then serving a partial term). According to former Fed governor Lyle Gramley, "He loves his job. His mental acuity is as sharp as ever and his physical health has not deteriorated." So what is his secret, envious septuagenarians might be forgiven for asking?

Central Banker For President?
After little more than 100 days on the job, speculation is rife that Ukraine's central bank governor, Serhiy Tyhypko, is angling for another even bigger catch - the presidency. Newsmakers readers may recall the highly politicised nature of Tyhypko's appointment as governor of the central bank, with opposition members of parliament doing their darnedest to prevent this from happening by resorting to some, shall we say, unconventional tactics. They did not have the desired effect, and Tyhypko, who had been leader of the pro-presidential Working Ukraine faction (which he has since quit), became governor.

But already his enemies are stirring up trouble again, and a national newspaper, Ukrayina Moloda, has reported that Tyhypko may be putting himself forward as a candidate for the 2004 presidential elections. Purportedly, the current administration favours Tyhypko as a potential successor, and his omnipresence in the government-controlled media has been seized on as evidence. One disaffected journo accused him of being "engaged in a campaign of calculated charm", peevishly commenting that "like some sort of gas, Tyhypko fills the entire space available to him - information space in our case... And he doesn't even ask you whether you actually want to hear about his crystal clear transparency - he just seeps into your brain, your lungs, your pocket and your wallet."

What is more, Tyhypko has made some rather ambiguous statements concerning the role he may play in the elections. According to Ukrayina Moloda, he has even been contradicting himself. It says that only a few months ago he said that his participation in the presidential campaign was "a very remote possibility". He later decided that discussing his role in the election was "premature". Now he is complaining that "Journalists frequently ask me a blunt question: what is my role in the 2004 election campaign?" But he seems to remain unsure: "It is very difficult to give a definitive answer to it." Reluctant to burn bridges?

Oddly, he seemed more certain at the time of his appointment, when people had already been questioning his staying power: "Even friends, let alone political opponents, have already asked me if I came to the national bank for a year or a year and a half. If I am not mistaken I was elected for five years. I would like to work for at least five years and then we will see."

Will we see sooner? In his defence, he does recognise the importance of his current role: "It is my strong conviction that I am able to do a lot of good for common people and for the country in the capacity of the National Bank chairman. In a period of high political tension the central bank is able to ensure stability and the well being of every person through maintaining the stability of the national currency and of economic growth. Could there be any more important and honourable task? This is the politics of a professional, if you wish, and I am ready to deal in such politics every day." Admirable talk, but is it the talk of a central banker or a politician?

McDonough Turns Regulator
The recent announcement that William McDonough, outgoing chief of the New York Fed, is to head the Public Company Accounting Oversight Board seems to have triggered intensified speculation as to who will be his successor. Although at the time McDonough declared his retirement the media in turn confidently declared that US Treasury Undersecretary Peter Fisher would replace him, these assertions have been quietly forgotten and minds now seem to have changed. Stanley Fischer is the new dead cert. Roundabout ratiocination has lead Fed watchers to conclude that it could be no other, with various unnamed sources alleging that a single contender has emerged for the job, while other "insiders" have been assuring that the man is Stan.

Fischer's lips are sealed, of course, having only recently left the IMF as its first deputy managing director to become vice-chairman of Citigroup. Newsmakers' source at the New York Fed brushes aside the generous column space devoted to speculation on who will succeed McDonough, saying, "It's still premature for the press to anoint a successor, even though the speculation is rampant... There has been no decision yet." We will just have to wait and see.

As for McDonough, his post at the accounting oversight board is intended to play a critical role in the tightening of corporate accountability - it was created under the Sarbanes-Oxley Act following the string of corporate scandals that has blighted America. Technically it is an independent corporation, set up by the Securities and Exchange Commission, so McDonough does not need to go through Senate confirmation, having been named by the SEC commissioners. McDonough's salary will be boosted from $313,000 annually, already considerably more than Greenspan's, to $556,000, surpassing even that of President Bush - it is hoped he will be worth it. But before he gets there he will be attending his last FOMC meeting on May 6. Governors leaving the Fed to move to the private sector typically don't go to the next-to-last meeting before their departure - nevertheless McDonough's attendance has caused murmurs. Entirely unjustified, as it happens, and as one senior Fed official told Newsmakers, it's "just some folks looking for something to talk about."

Fresh Start For Chile
Following Carlos Massad's announcement that he is to leave Chile's central bank, a new governor has been appointed. The respected economist Vittorio Corbo, who was appointed as director at the beginning of April, has now been named as Massad's replacement, as of the beginning of May. This came as no surprise, and seems in fact to have been widely expected. When the Senate approved his nomination as a director earlier in the month with a resounding majority of 40 to 6, certain senators commented at the time that they were aware that they were not only approving a director of the central bank, but really also its governor. One senator has since said, "He couldn't have been anything but governor of the board. Someone on that international level could hardly accept to be a mere board member."

When he was named governor, Corbo said, "I am happy to have the opportunity to help to continue strengthening this great institution which our country has, which is an independent central bank." He added that his main challenge would be to continue to keep inflation close to the 3% target, as well as perfecting the payments system. Corbo used to work at the World Bank and has a doctorate from MIT. Although he is judged to be politically independent, he is assumed to lean more towards the more right-wing opposition than the ruling centre-left coalition.

Back To Court
Not long after winning an acquittal for its governor, Sjaril Sabirin, who had been sentenced to three years imprisonment for corruption, Bank Indonesia once again prepares to lock horns with the legislature. Three ex-directors, Hendrobudiyanto, Paul Sutopo, and Heru Supraptomo have now also been declared guilty of corruption. Their "crime" was to extend liquidity support to ailing banks during the Asian crisis, instead of stopping the clearing process of such banks as normal procedures would require. They have also been sentenced to three years imprisonment, as well as being landed with hefty fines. Spurred by the central bank's recent victory in court, the central bankers are preparing to fight back. The verdict was only ruled by the district court, meaning that there is still a chance to appeal to both the high court and the supreme court.

The case is considered by some to be highly politicised, because, as the central bank tells Newsmakers, "Bank Indonesia was still under the ministry of finance and therefore subjected to carry out orders from the government, including the order to extend liquidity support to prevent crisis-stricken banks from failing." Since then, the bank has gained independence from the government, but as it is the bank maintains that the accused ex-directors were under orders from the government. For this reason, the bank is right behind its ex-directors: "We at the central bank are very concerned with the guilty verdict, and thus we support the ex-directors' effort to appeal to the higher court and supreme court." It also doesn't think that this can be damaging for its credibility, for the simple reason that the bank was not independent at the time so "people will not relate the outcome of the case to our current performance."
Polish Punch-Up
Sparks have been flying in Poland as the central bank and the government once again trade blows. The central bank's governor, Leszek Balcerowicz, has denounced the government's perpetual needling of the central bank to lower interest rates as "behaviour unprecedented in the civilized world." A few days earlier, the central bank had also told the government in no uncertain terms that its blueprint for fiscal reform was woefully inadequate. Supposedly designed to help breathe some life into the torpid economy and clear the way for entry into the EU, the bank's monetary policy council said that the plan was unlikely to achieve its aims: it "cannot be recognised as a comprehensive programme of actions leading to a deep and lasting fiscal reform."

Furthermore, the bank refused the finance ministry's proposal to release one-third of its 27bn zloty ($6.8bn) revaluation provision, a safeguard against exchange-rate shocks, to help out with Poland's EU-related financial obligations. Balcerowicz pointed out that this would be tantamount to printing new money, and would consequently violate EU national accounts standards: "Printing additional money is not the way to co-finance EU aid." The grazed finance minister bit back, saying, "If the central bank will oppose this move, it would be a very ill-advised, short-sighted and stupid policy." Put out by the central bank's wilfulness, he added, "If the central bank is serious about my drive to cut the fiscal deficit, they should support me." Perhaps he should listen to, and even think about, what they are saying first.
Please Sir, Can I Have Some More?
Quite apart from being possibly the least independent central bank in the world (see Newsmakers issue of March 31), the Reserve Bank of Zimbabwe may also be the least well fed. Zimbabwe's central bankers are up in arms, protesting at the preposterously stingy portions they are being served in the staff canteen. Outraged workers are demanding that the caterers be expunged, and are boycotting the canteen by simply eating elsewhere. According to one senior official at the central bank, "Only 90 senior managers out of the staff complement of 520 are having their lunch at the canteens."

The problem is said to lie in the penny-pinching politician Irene Zindi, whose catering firm is feeding the central bank, and which workers complain is not meeting the criteria specified in the tender it won last year. A source at the central bank told the Zimbabwe Independent that Zindi had ordered her staff to reduce the quantity of food served; such effrontery was met by central bankers with indignation and subsequent demands for an explanation. Apparently, "She rudely told RBZ staff that 'I came here to make money and not to feed you', which resulted in the boycott." As far as Newsmakers can determine, Zindi is still malnourishing Zimbabwe's central bankers, but let's hope not for too much longer.
 
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