NEWSMAKERS

• The Great Bank Robbery
• U-Turn Or Business As Usual?
• New Governor In Iran
• Tonga Too
• Currency Quandary
• Boon For The Blind
• Information Overload?

The Great Bank Robbery
Forget the looters that ran loose in Iraq after the war. In one fell swoop, Saddam Hussein has put those small-timers to shame by single-handedly snatching double the amount of cash that it took the lot of them three weeks to scavenge. It could even have been the greatest bank heist of all time: after all, $1 billion is no paltry sum. But the brazen nature of it is what is so startling. Not for Saddam any of these fancy hi-tech hacking devices you see in the movies, no need for any of that. A good old-fashioned tractor-trailer combo seems to have done the trick perfectly.

A senior Iraqi official, who remains anonymous on account of his personal safety, told the New York Times that Saddam successfully executed the summary removal of three tractor loads worth of cash from the central bank’s coffers. On the eve of the first Baghdad bombings, on March 18, a gang of complicitous minions spent two hours relieving the central bank of what amounted to about a quarter of its foreign exchange reserves. Saddam allegedly entrusted the job to his second son, Qusay, and his own personal assistant, Abid al-Hamid Mahmood, who piled the trailers with $900 million worth of $100 bills and $100 million worth of euros before the bank opened.

They may have been last sighted, according to a colonel in the US special forces, trundling across Iraq’s border with Syria, although he was unable to confirm the exact contents of the trailers, or whether they were in fact the same ones. Others allege that the hoards of cash discovered in Saddam’s now conquered palaces could account for much of what was taken from the central bank, with as much as $650 million found in one. Meanwhile, Diyaa Habib al-Khayoun, general manager of the state-owned al-Rafidain Bank, upheld to United Press International that $250 million and 18 billion Iraqi dinars were pinched from the bank, but by professional thieves, and it was nothing to do with Saddam.

Whatever the case, it is not known what effect this will have on the Iraqi economy, and anyway Iraqi central bankers may have more pressing things to worry about. For starters, finding a place to work: the elegant building that used to house them lies in smithereens, described by the Associated Press as a “burned out husk”, with all nine floors levelled to the ground. Although trumped royally by Saddam, looters, armed with acetylene torches and rocket-propelled grenades, seem to have done a pretty good job at trashing the place. Still, according to Humam Shamaa, an Iraqi economist at the University of Baghdad, operations could resume in another location as “the staff is ready to return if there is security”.

Then the central bank has the introduction of a new currency to be thinking about, although it may be that the US Treasury has done quite a bit of the thinking for them. The $1.7 billion in Iraqi funds seized from US banks is being used to pay civil servants, but US officials say it could be another three to six months until a new currency is issued, once a new government is formed. There is no doubt that the Saddam dinar, the currency most widely in use before the war, has had its day. But although there have been ritual burnings of these worthless notes in Iraq, ironically they are selling like hotcakes on online auction sites like eBay - at intriguingly inflated prices: http://listings.ebay.com/pool1/plistings/list/all/category3411/index.html?from=R4.

As for Saddam’s super swipe on the central bank, well, you could forgive him. Frankly, anyone else with that kind of cast-iron grip over his central bank would have been eccentric not to do the same. As the New York Times informant put it, “When you get an order from Saddam Hussein, you do not discuss it.” Governments the world over may be seething with envy at the kind of sway Saddam had over his central bank. But happily, as far as Newsmakers knows, his position was fairly unique.

U-Turn Or Business As Usual?
Many hearts missed a beat, perhaps even several beats, when the ECB blithely (or so it appeared) let slip that its long-slated monetary policy strategy would be “modified”. Rather than keeping inflation between 0-2%, it has now restated this as “below but close to 2%”. But beware, the ECB is very touchy on this matter - never suggest to a member of the executive board that it is a “target”. Wim Duisenberg almost began frothing at the mouth at such a suggestion at the press conference that preceded this momentous announcement: “I protest against the word ‘target’. We do not have a target, as you know, and - as Mr Issing will explain later - we won't have a target.”

Furthermore, the ECB also appears to have relegated the notorious first pillar which tracks money growth to something more like a cross-checking mechanism. But the decision to make these changes would not have been taken without some heated discussions, to put it mildly. Is there blood on the boardroom carpet?

Otmar Issing says not. The ECB’s chief economist and formerly of the Bundesbank (whose practice of tracking money growth the ECB inherited - or had foisted upon it?), who one would suppose is a keen advocate of the first pillar, protested (perhaps over-enthusiastically) that the process of revising the ECB’s monetary policy strategy was a breeze: “It was no trouble. It was not always pleasurable, but it was fascinating... The word ‘trouble’ is certainly not appropriate in this context.”

The ECB’s monetary policy has sustained relentless flak from economists and media alike from the very beginning. As Issing put it, “There was a lot of criticism and we do not ignore criticism.” And now, presumably, the ECB reckons it has been around for long enough as an institution and has amassed enough credibility for it to be safe to do something about it, without too big an uproar. The ECB is in the extremely fortunate position, as central banks go, in having an almost unprecedented amount of self-determination in policy terms. Although it is legally mandated to achieve “price stability”, it is up to the ECB to decide exactly what that is - and to many observers it looks like the ECB has just changed its mind.

More worrying still, particularly for the implications this could have for the ECB’s credibility, is that people will quite reasonably wonder what on earth is to stop the ECB doing this again, as and when it pleases? But Professor Issing assures us, “I do not know if this procedure will become regular. My term runs for another three years and I do not expect another evaluation within that period. We are somewhat exhausted and need some recreation now. These studies... cannot be done every day and it would not make sense to do so.”

But in any case, the ECB vigorously denies that it has done anything so radical as to change its mind. Issing adamantly maintains, “We have clarified what we always had in mind. Perhaps we have previously not communicated it successfully enough... Even if we had had the same clarification back in 1998, our policy would not have been any different.” Nor do they think it will be any different in the future.

So why bother to change it in the first place? Put simply by Wim Duisenberg, “We wanted to improve communication... It is an effort on our part to be better understood than we were in the past.” Issing’s rather more whimsical take was this: “If you are married and after four years of a happy married life, perhaps one evening you sit together over a glass of wine and think about why you are so happy all the time: nobody would say it does not make sense.”

Tonga Too
Far-flung Tonga has been blessed with a new governor too. But unusually for central banks, it comes in the shape of a lady: Siosi Cocker Mafi. Tonga is the first Pacific Island nation to entrust the governorship of its central bank to - the horror! - a woman. No, this is a welcome turn of events, for there is a definite dearth of female figureheads at central banks, with no good reason for it. Including Mafi, there is now a sum total of ten female governors in the world’s 162 central banks (or 174 if you include the Eurosystem’s NCBs) - surely there could be more? There were just eight in 2002, but in El Salvador’s central bank, the governor’s early departure meant that it also got its first female governor in Luz Maria de Portillo. The majority of lady governors are actually in the Central American/Caribbean region: in Barbados, Bermuda, El Salvador, Guyana and Honduras. Others are in Botswana, Denmark, Malaysia, Sao Tome, and now Tonga. Mafi joined the central bank’s research department ten years ago, and was appointed as one of the two deputy governors in 2000, having been an economist at the ministry of finance for three years before joining the central bank.