• Alan Greenspan tends his legacy
• Former RBI governor to lead India
• Do central bankers make good prime ministers?
• Undiplomatic Koehler
• Wars of independence continue at the ECB
• Sodbusinessbank closes doors
• Report says Liberia's saleeby kicked out
• Retired central bank staff in Canada may sue
• A riotous bunch of central bankers
• Proliferating monies
• Revision time
• Possible deal over Welteke
• Speculation over new Macedonian governor
• MAS chairmans' dual role to stay

ALAN GREENSPAN TENDS HIS LEGACY
So Alan Greenspan, the 78-year-old grandmaster of central banking, gets a chance to add some finishing touches to his legacy. When his nomination by President Bush for his fifth four-year term is confirmed by the Senate, he will be able to hold office as chairman until his 14-year term as a Fed governor expires in January 2006. By law, individuals are only allowed to serve one 14-year term, although, as in the case of Greenspan, they can also complete any unexpired term left by their predecessor. William McChesney Martin served from April 2 1951 until 1970 nearly 19 years. Greenspan took office on August 1987 and will exceed Martin's record if he stays in office until June 2006.

This may well happen. If, by January 2006 the White House has not proposed and the Senate confirmed Greenspan's successor, he will stay on until this happens. Although it is unlikely he will stay on too much after his term expires there is much speculation that the new chairman will not be confirmed until the summer, by which time the octogenarian Greenspan will have earned himself a place in the record books as the longest serving chairman.

The big long-term threat to Greenspan's reputation is of course the possibility of a resurgence of inflation - there are plenty of economists on hand to warn of that risk. But doubtless he is calculating that he now has enough time left in office to fend that off with a few judicious rate increases.

But politically Bush had every reason to keep on board the man who, through a continued policy of low interest rates and easy credit, has done more for his chances of re-election in November than anything the president has done himself. Deep in the mire of a dismal war where chances of bringing home glory are well and truly over, the one thing going for him is the economy.

Greenspan's term has also been great for investors. The Dow Jones index has risen by 274% since he took office, compared with a rise of 225% under Paul Volcker from 1979 to 1985 and 200% under Bill Martin, from 1951 to 1970.

But although Greenspan's tenure is running its course, the maestro of monetary policy is showing no signs of slowing down. If the last year has been anything to go by it seems he is keen to pack as much as possible into his remaining time at the Fed, speaking on issues from the role of education in the economy to advances in agricultural productivity. However, as Greenspan moves towards 80, rumours of the chairman's state of health are only natural. And with every slight quiver of Greenspan's firm hand investors are also likely to take a sharp breath.

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FORMER RBI GOVERNOR TO LEAD INDIA
In news greeted with cheers in economics faculties and think-tanks around the world, Manmohan Singh, a former governor of the Reserve Bank of India, has become India's Prime Minister, after Sonia Gandhi's decision to turn the job down. Singh led the bank from September 1982 to January 1985. Manmohan Singh, long a familiar figure at academic seminars, has managed to maintain his academic interests while also holding down a string of high-pressure jobs he was of course the chief architect of India's economic reform programme when he was finance minister in the 1990s. He used the crisis of 1991-92 brilliantly to instigate reforms that laid the basis for India's remarkable and continuing growth.

He is personally close to economists like Amartya Sen, the Indian Nobel-Prize Laureate, while not sharing all of Sen's trendy New Labour views

According to an article on Singh's time at the Reserve Bank of India, published by The Economic Times "if you ask how autonomous he was as the central bank governor, I would say that while he went with the broad political stance, he never hesitated in exerting his independence on various issues."

Although, the article claims, most RBI employees who got to know Singh have now retired, certain personal details about him still amuse them; "He used to hardly sit in the office… we found him standing even while browsing through files. And no one climbed the steps as fast as he did. He almost ran, leaving ...other officials breathless," says one employee.

UNDIPLOMATIC KOEHLER

Talking of Koehler, the new man in Berlin is making waves already. Normally seen as little more than a ceremonial post, in the past few weeks Koehler, as president-elect of his country, has called for further action to turn around Germany's stagnant economy - greatly upsetting the centrist and left-leaning Germans. He says the Chancellor Schroder's reforms are "only a first step". Many voters on the contrary consider them to be the last straw.

Regarding the unpopular question of imposing longer working hours on Germans who have got used to working for no longer than 35 hours a week, Koehler flatly says: "It's necessary." Koehler argues also that the idea of charging fees to students attending Germany's vast and cosseted universities should be discussed.

He sometimes seems to be talking as if he is still head of the IMF.

But his foreign policy views (which he could never speak publicly about at the IMF) are clearly very popular at home. After years in Washington, Koehler is bluntly undiplomatic about his analysis of the US-led war in Iraq.

He says the US had "behaved arrogantly" in Baghdad and that "power has gone to the heads of the Americans." Which all makes one think the US administration was probably quite pleased to see the back of Koehler. After all, the IMF is supposed to support US policy otherwise, what's the use of it?

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WARS OF INDEPENDENCE CONTINUE AT THE ECB

Guardians of central bank independence at the ECB are unsurprisingly nervous about any further signs of government attempts to whittle away their privileges. There is the constant risk of appointments to the governing council being made on political grounds (see last issue of Newsmakers). Now comes a new bill allowing Italian central bank governors to be sacked.

What, no job security?

Having just fought off a move to curb the independence of the Bank of Finland, the high priests of the Eurotower are not going to let Italy get away with anything like that. Such a move would clearly violate the charter of the European System of Central Banks, asserts the ECB. Quite right too.

The Italian move followed criticisms of alleged supervisory failures of the central bank that came to light after the Parmalat affair and form part of a raft of new legislation reforming the Italian regulatory system.

The ECB maintained that the independence of the heads of national central banks must be guaranteed and therefore governors must be allowed to continue in their roles until the end of their mandate.

The stumbling block is that in Italy this mandate is life-long. How's that for job security? In this instance the ECB did graciously accept that some arrangement "may" be reached whereby a fixed-period tenure could be introduced.

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SODBUSINESSBANK CLOSES DOORS
Russia's central bank has started to show its tough side in the latest announcement of the closure of a bank accused of alleged money laundering, unexplained transactions, untransparent ownership and receipt of ransom money. The name of the bank, Sodbusinessbank, is a contraction of Russian words meaning "the bank that co-operates with business. Evidently, despite its name (which in English means roughly "To hell with our customers!"), it was being all too obliging to certain types of businesses.

Investigators allege the bank processed 126 million rubles of ransom money for two business executives kidnapped last year. They were later found dead. Sodbusinessbank also stands accused of inflating capital. The central bank say more than 80% of its capital is fictitious. It's now under temporary administration by the central bank, but so far the administrator has been locked out.

Depositors are demanding their savings, but they've been locked out too. The central bank has told them they'll be able to apply in court to get their money back in about six weeks, but many are resigned to waving goodbye to their hard-earned savings. The bank was a contributor to President Putin's re-election campaign, but that does not seem to have done the much good either. Sodthat.

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REPORT SAYS LIBERIA'S SALEEBY KICKED OUT
Ellie Saleeby, executive governor of the Central Bank of Liberia, has been given the boot on the insistence of a visiting IMF delegation to Liberia, according to a report by The Analyst, a Monrovian publication.

The delegation has been in the country to help repair Liberia's damaged monetary links with the outside world and to establish a means by which funds can be received from donors who pledged assistance during the Conference on the Reconstruction of Liberia held last February in New York.

The delegation apparently felt so despondent with the status of the nation's monetary arrangements and financial management system that they issued a vote of no confidence in the executive governor of the Central Bank of Liberia.

Meanwhile it is reported that Saleeby has been replaced by veteran banker, Charles A. Greene.

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RETIRED CENTRAL BANK STAFF IN CANADA MAY SUE
A group of 1,200 Bank of Canada retirees may sue the central bank, claiming it refuses to discuss sharing a surplus in the employee pension plan, a report by Bloomberg said.

"We do in fact have a law firm, and we will probably do a class action lawsuit if the bank won't come to the table," Arnold Finkelstein, president of the Bank of Canada Pensioners' Association, said in a telephone interview with Bloomberg.

The central bank's pension fund had a C$188 million ($135 million) surplus as of January 2002, the group said in a statement to Bloomberg. A Bank of Canada spokeswoman said she couldn't immediately comment. The retirees don't have a specific dollar amount in mind, Finkelstein said, according to the report. About 40% of the pension surplus results from past contributions made by retirees, he said.

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A RIOTOUS BUNCH OF CENTRAL BANKERS
Canada is not the only home to disgruntled central bank staff. The staff pay dispute continues in Israel where employees held a protest meeting during working hours and later disrupted a management meeting, which had to be cancelled.

The workers called for the governor, David Klein, to stand down because of his failure to come to an agreement with the treasury over their pay and employment terms. The Israeli press and treasury has been pursuing a long-running campaign on the high levels of pay received by central bank employees. In light of this pressure the management have decided to restructure central bank pay scales to slow advancement to higher salary grades.

Klein told the workers who burst into the management meeting: "I conclude from this behaviour the workers are getting misinformation about management measures."

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PROLIFERATING MONIES
According to conventional wisdom, the number of currencies is set to dwindle as efficiency gains spur on the monetary unions. But it ain't necessarily so. Indeed, the number of currencies is set to proliferate according to Benjamin Cohen, a professor at the University of California, Santa Barbara. In a book bearing the suitably grand title "The future of money", Cohen's suggests there will be an increase in small localised currencies and in private forms of money. To quote from his remarks at the forum:

"At one level, we have local community currencies - local currencies, local currency systems, community currency systems, which are growing by leaps and bounds. They individually involve very few people, but there are thousands of them now, in Europe, North America, Australia, Argentina. They are growing in number and more and more transactions are being conducted in these local currencies, each of which involves a devolution of a degree, of a portion of monetary authority down to the level of the community."

"But even more important is the emergence of electronic money, as this new phenomenon of cyberspace, the Web, electronic commerce, all of which is leading to the incentive for creation of viable currencies that can be described as electronic. My favorite example of this is airline miles. Airline miles serve all the functions of money-store of value, unit of account, medium of exchange-for a network of transactors, which increasingly involves not only the opportunity to use these to buy airline flights but also to rent a car, pay for a hotel, and the like. This is genuine money, even if it is not for general circulation, and my prediction is that we will see more and more of that."

The IMF forum on this topic had the interesting title: "Can Central Banks be Outsourced?". If you want to know the answer click on http://www.imf.org/external/np/tr/2004/tr040511a.htm

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REVISION TIME
A lot of revising has been going on in the world of financial regulation. The Financial Action Task Force (FATF) expended a great deal of energy last year reviewing their 40 recommendations to prevent money laundering and now they announce the revision of their mandate from four to eight years. Bureaucrats from the 33 members of the organisations can fit a few more revisions into that mandate, before it's time for another mandate revision…

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POSSIBLE DEAL OVER WELTEKE
The German press have reported that a deal may be close that allows German prosecutors to drop the case against former Bundesbank chief, Ernst Welteke, in exchange for the payment of a fine.

Welteke was being investigated over the scandal that caused him to resign from his top job at the Bundesbank revelations that he let Dresdner Bank pick up the bill for a four-night stay in a luxury Berlin hotel for him and his family over New Year 2002. Whatever the outcome it is likely that Welteke himself will be pleased to be out of the limelight for a while.

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SPECULATION OVER NEW MACEDONIAN GOVERNOR
The Macedonian media have billed Petar Gosev and Taki Fiti as the most likely candidates to succeed Liube Trpeski as head of the National Bank of Macedonia as the latter's term was due to expire last Friday. Opinion was split in the local press between Fiti, a professor at the Skopje University economics faculty and Gosev. Both have previously held the position of finance minister.

Trpeski, the governor for the last seven years, is eligible to serve another 7-year term, but according to the media he is unlikely to be picked for the post again as he is out of favour with the present ruling party because of his close links with the previous government.

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MAS CHAIRMANS' DUAL ROLE TO STAY
Singapore's second finance minister, Lim Hng Kiang, said this week that there is no immediate need to change the status quo for Deputy Prime Minister Lee Hsien Loong's concurrent role as the Monetary Authority of Singapore's chairman. His remarks were a response to questions from member of parliament as to whether the government would adopt what he called the "recommendation" from both the World Bank and the IMF that the central bank chairman should not have more than one role.

Lim said: "Ideally the chairman of MAS should not hold multiple roles. But there are practical constraints in Singapore that make it difficult to avoid completely senior elected officials holding multiple responsibilities. There is no immediate need to change the status quo."

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