NEWSMAKERS
A Stab In
The Back
Chile’s central bank governor, Carlos Massad, one of the most well-known
and popular economists on the central banking circuit, has become the
unwitting victim of an egregious act of treachery. Surely one of the most
alarming dangers risked by any central banker became reality for Massad
when he happened to detect irregularities in his email. Innocently thinking
he might have a virus, he alerted the IT manager; but it transpired that,
to his horror, his trusted personal secretary had been sending illicit
emails from his computer to the CEO of a Chilean financial group, Inverlink.
The precise contents of those emails remain undisclosed (although it is
a subject of much interest to the local media, and generally assumed to
be market-sensitive), but the secretary, Pamela Andrada, was sacked on
the spot.
Massad pluckily admitted, “I bear the responsibility for having chosen
a bad secretary.” Hard to face up to considering that not only had she
joined the central bank five years ago when he was appointed governor,
but he had brought her with him from his previous post (as is quite normal)
at the ministry of health. The recipient of the secretary’s missives,
one Enzo Bertinelli, took fright and resigned immediately. Some say that
Bertinelli and Andrada were involved in an amorous entanglement. Inverlink
washed its hands of the thing, denying involvement and saying that it
was an isolated incident involving only Bertinelli. The bank is prosecuting
Bertinelli and Andrada, and Massad just says he wants to get it over with
as quickly as possible, and assures that it will have no effect on the
markets.
The episode has caused uproar in Chile, triggering accusations that the
central bank’s credibility has been compromised and that its security
measures are inadequate. The bank denies these accusations vigorously.
Massad said, “I’m afraid that she has broken a basic rule of work in an
institution like the central bank. Central bank employees have carried
out their jobs carefully and prudently, and they have strictly obeyed
their obligations for many years until this happened. This event is absolutely
limited to strictly one person and it does not tarnish the reputation
of the rest of the employees of the central bank.”
In a press conference, the central bank’s general manager rationally observed,
“We are convinced that this is not something that can harm the credibility
of the bank… Nobody is capable of guaranteeing 100% that one person, within
an institution where there are 600 people, could not fail… It can happen
to anybody that at a given moment a human being should radically change
his attitudes and betray the trust that one has put in him. It is something
that is very difficult to guarantee that it is not going to happen.” He
emphasised that the incident was “completely alien to the work ethic in
the bank”, admitting that it was “to a certain extent inexplicable”. A
moral lesson for governors everywhere.
Fighting
Talk
With the metamorphosis of the former republic of Yugoslavia into Serbia-Montenegro,
the National Bank of Yugoslavia (NBY) is set to become the National Bank
of Serbia. This will be marked by the inauguration of a hulking new building
for the national bank, a splendid space-age style piece of architecture
(see the picture: http://www.nbj.yu/english/1_1_3.htm).
A central bank in Montenegro also began operations in March 2001, although
it does not issue currency (click here to find out more on its website:
http://www.cb-mn.org/indexE.htm).
The new issue of Central Banking journal features an exclusive interview
with Mladjan Dinkic, the governor of NBY, who is not so sure about the
direction in which things are heading: “I am a pessimist. I do not think
that we can have one country with two economic systems. We have this union…
but we have two central banks, two currencies, two customs, two banking
systems and no harmonising of systems. So basically it cannot survive
in the long term.”
The process of the creation of this new state has also put the bank’s
independence in jeopardy, furnishing politicians with a prime opportunity
to meddle: “There was an attempt by the prime minister to use these constitutional
games to put the position of the central bank in question. This has caused
a big debate between myself and the prime minister.” For the moment Dinkic
seems to have succeeded in fending off hostile intruders, but the fight
is by no means over. Defending assaults on the central bank’s independence
he says is his principal challenge, and Dinkic vows, “I will fight against
it and do my utmost to prevent it to the very end.”
The central bank in Paraguay has had to put up with another old favourite of politicians: the plundering of its coffers. The oldest game in the business. It appears that Paraguay’s president has been liberally helping himself to lashings of cash from the bank’s stash, but was unfortunate enough to get his hands caught in the till. President Luis Gonzalez Macchi is sitting through impeachment proceedings, accused on five counts of corruption - one of which is the embezzlement of $26 million from the central bank. He has not shown the slightest display of agitation, however, saying of the trial, “I watched everything; it was nice.” He seems quite resigned to his fate, and has admitted to having no problem with quitting his job: “I have very few clothes and everything will be very quick. I will take my little bag and leave Mburuvicha Roga [the presidential palace].”
A Safe Pair
Of Hands
Central bankers are generally held to be a sober and punctilious bunch,
but you don’t get that impression on reading Dallas Fed President Bob
McTeer’s latest speech. It is a rather lengthy affair, and dwells in an
almost improperly self-deprecating fashion on his meteoric rise to fortune
and glory. In a bid to banish any concern that punters may be over-confident
in America’s public policymakers, McTeer says, “I must confess to being
seriously deficient in real math.” He sounds almost proud of this, and
goes on to describe his experiences on the Fed’s rate-setting committee,
the FOMC: “I went from being one teacher with 30 students per class to
being the only student in a class with about 15 teachers. I had a lot
of catching up to do, and I haven't caught up yet. I get to ask stupid
questions, and they are supposed to answer them without calling them stupid,
although I do detect an eye roll every now and then.” Just to reassure
his listeners that America’s economy is being looked after with due care
and attention, he sticks his oar in on the deflation debate, refusing
to admit that the “zero-bound problem” is worth worrying about - or, if
by some extraordinary twist of fate it is, “I'll worry about it tomorrow.
If that makes you nervous, relax. There are plenty of serious Dallas Fed
economists who do worry about such matters, and they've promised to wake
me up when the time comes.” Good to know the world’s largest economy is
in safe hands then. Click here to read the speech: http://www.dallasfed.org/htm/dallas/speeches/2002/112402.html
Former Latvian central bank governor and now the country’s prime minister, Einars Repse, has succeeded in performing an impressive feat of political acrobatics only weeks after coming to power: he has managed to triple his salary along with those of other ministers. “I’m not going to work and be naked and hungry [for my efforts],” he said controversially. It took little to persuade his fellow ministers to have this approved, but Repse said, “If I could have raised the salaries myself I would have done so, but I needed the support of ministers. This decision is correct and absolutely necessary. Ministers have to make decisions about millions of lats and their responsibilities are much greater that those of public servants.” This move forms part of Repse’s anti-corruption campaign as high salaries should encourage ministers to work hard while lowering the temptation to flesh out their income by illegitimate means. Also, Repse is trying to bring the Latvian economy into line with Western standards as soon as possible, although that would mean he would apparently actually have had to quadruple his salary - are we to assume, then, that there are more pay rises in the offing…? Although many Latvians have reacted with outrage at Repse’s self-imposed pay rise, at least one local editorial writer has a more measured outlook: “Latvians should feel lucky to have such an inspired and dynamic young man at their country’s helm. If anybody will finally drag Latvia out of the Soviet quagmire at warp speed it is Repse.”
The Dutch central bank has given the all clear to the well-meaning and well-known Indian mystic, Maharishi Mahesh Yogi, who has issued his own alternative currency, the “raam”, as part of his mission to spread peace and love in the world. Last October, his organisation based in the Netherlands, the Global Country of World Peace, issued a series of colourful notes, denominated in ones, fives and tens, that the Dutch central bank has investigated and decided do not violate any laws. A spokesman for the bank said, “It is within the boundaries of the law... as long as the Maharishi doesn't suggest that this is legal tender and it doesn't resemble the euro… There is a closed circuit; transactions can only be made at certain shops.” Raam are accepted in over 100 shops in the Netherlands at a fixed rate of 10 euros per raam. The Maharishi, whom the Beatles paid a much-publicised visit in India in 1968, and whose followers number some six million, also hopes to use the raam to help people barter goods and services as part of its aid programmes in developing countries.
Newsmakers would like to reassure anyone who was labouring under the illusion that the governor of the central bank in Uzbekistan, Fayzulla Mullajonov, had been sacked that this is not the case. In fact it was just a “joke” of some Uzbek wag who thought it would be good for a laugh to circulate the rumour that the head of a commercial bank, Toshpolatov, was acting in his place. Pure fabrication. The story maintained that the National Security Service officers had detained Mullajonov's nephew having found a large amount of foreign currency and Uzbek soms on him - which somehow seemed to mean that Mullajonov would lose his job. Not so - he is still very much alive and kicking, as a quick call to the central bank would confirm, and his five-year term does not expire until 2006.
There have been lavish festivities at the central bank of the Netherlands Antilles to celebrate its 175th anniversary this month. Established in 1828, it is the oldest central bank in the world outside Europe, and only eight central banks were in operation by the time it was set up, most of them only a few years before - with the notable exceptions of the Riksbank (established in 1668) and the Bank of England (1694). To commemorate this winsome occasion, the central bank has constructed a new building and is holding various events with such dignitaries present as Wim Duisenberg (who came especially to deliver a lecture), Arnoud Wellink (governor of its sister bank, De Nederlandsche Bank) and Anthony Caram (governor of the neighbouring Central Bank of Aruba). The celebrations kicked off with a lunch and lecture, and, in the middle of all the excitement, a spokesperson for the bank told Newsmakers that, “Yesterday evening we had a reception and today we have a brunch for the employees, and later in the afternoon we have the groundbreaking ceremony for a park that the bank has donated to the people of Curacao in general and the inhabitants of Scharloo (the neighbourhood our new building is located) in particular.” Click here to read a speech by the central bank’s governor, Emsley Tromp, in honour of the occasion: http://www.centralbank.an/speeches/main-27.html
It also happens to be the 10th anniversary of the rather less well-established Trans-Dniester Republican Bank. In fact, nobody serious apart from the inhabitants of the breakaway, self-styled “Trans-Dniester Moldavian Republic” itself actually recognise this institution as a central bank, and least of all the piqued Moldovan central bank which is internationally recognised to be the true central bank for the area. In practice, however, the Trans-Dniester Republican Bank seems to have a fairly free rein over its territory, and is celebrating its birthday with the issue of a special commemorative coin, to go alongside the everyday currency it circulates, the Trans-Dniester rouble. Another thorn in the side of the Moldovans - but in the spirit of free enterprise and adventure, Newsmakers wishes it a happy anniversary anyway. This is a link to their website: http://www.cbpmr.net/eng/
Click on the link below for a nice picture displaying touching solidarity between Hong Kong’s zappy central bank and its neighbouring colossus. Joseph Yam, chief executive of the Hong Kong Monetary Authority, paid a visit to welcome the appointment of the new governor of the People's Bank of China, Zhou Xiaochuan: http://www.info.gov.hk/hkma/eng/press/2003/20030129e3_index.htm
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