• Keen to work in a war zone?
• Italy Nominates Bini Smaghi for ECB Board
• Krugman on the Greenspan succession
• Will Bernanke be "damaged goods"?
• "Newsmakers" versus Krugman
• ECB Shuffles Senior Management
• Genberg Joins HKMA
• Website speculates on World Bank job
• Why Yellen wants to be at the Fed
• Macklem moves up at Bank of Canada
• The man who shaped the Federal Reserve
• NY Fed names research director
• Brittan's new book
• Alan Budd says "never again"
• Key topic for upcoming G7 meeting in London
• Gordon Brown eyes IMF gold
• Why the Bundesbank will not sell gold
• Weber's stand
• Shorter Notes
  

Keen to Work in a War Zone?

Elections in Iraq this week have not dispelled the notion in London and
Washington that the American-led coalition was more prepared for
winning the war than winning the peace. As well as restoring power and water
supplies, this means restoring the machinery of government. Both Iraq
and Afghanistan have been given a new currency and central bank as part
of this effort. To remember the lessons learned in these conflicts
Britain, the United States and Canada are creating a series of inter-agency
teams whose job will be to stand ready to reconstruct and rebuild after
the shooting has finished in future wars.

The British version, now up and running in the Department of
International Development, is called the post-conflict resolution unit.

The unit is recruiting a panel of 400 civilian experts, including
experts in building the financial infrastructure and banking supervision,
who can be called on to go in after the troops and help with
"post-conflict stabilisation".

For those keen for war-zone work experience, or wanting to comment on
the plans, visit the unit's website: http://www.postconflict.gov.uk

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Italy Nominates Bini Smaghi for ECB Board

Italy has nominated Lorenzo Bini Smaghi as a candidate for the European
Central Bank's executive board. Handelsblatt, a German financial
newspaper, reported that two other people had been approached by the Italian
government but had spurned the offer - Mario Draghi, former director of
the Treasury, and Mario Monti, former EU competition chief.


If approved, Smaghi, who is 48 and who hails from Florence, will
succeed Tommaso Padoa-Schioppa, 64, whose term expires at the end of May.
Smaghi, who is very well known in international financial circles, is
primarily a central banker, having started his career (after getting a PhD
from Chicago) at the Bank of Italy's research department, before
moving in 1994 to be deputy director general for research at the European
Monetary Institute and head of the policy division where he was
responsible for the preparation of the ECB in the fields of foreign exchange
policy and reserve management, middle and back office, payment and
securities settlement systems, the accounting system and procedures of the
ESCB, as well as financial supervision.


Only in 1998 did he move to the Italian Ministry of the Economy and
Finance as director for international financial relations. While there he
served as G7, G10, G20 deputy, a G7 sherpa, president of the Italian
Export Credit Agency, a member of the economic and financial committee of
the EU, chairman of the committee on financial markets of the OECD, and
alternate governor for Italy at the World Bank and regional development
banks.


Newsmakers watches with interest to see what Padoa-Schioppa's next
career move will be. As a member of the G30 since 1979, he will expect to
be offered something. If he has missed becoming president of Italy's
central bank, how about going for president of Italy instead?

Will Bernanke be "damaged goods"?

"I hope I'm wrong, but my guess is that what's intended for Mr Bernanke
is a form of hazing: he will be expected to prove his loyalty by
defending the indefensible and saying things he knows aren't true."

"That might seem a tolerable price to pay for the Fed chairmanship -
but a year of it might well make Mr Bernanke damaged goods from the point
of view of the markets."
 

"It's a dilemma. I don't have any sympathy for the administration's
perplexity. But I do wish Mr Bernanke the best of luck, and hope he knows
what he's doing."

Newsmakers' bets are on Feldstein, whatever Krugman says.

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"Newsmakers" versus Krugman

Newsmakers has to take the great Krugman to task for not giving fair
credit to Central Banking Publications in the above article. He wrongly
credited the FT with the story!

"According to yesterday's Financial Times, central banks around the
world have already started shifting into euros. If Mr Greenspan is
replaced with someone who looks like a partisan hack, capital will rush to the
exits, the dollar will plunge, and interest rates will soar."

Excuse us, Paul, but it was Central Banking's indispensable survey of
central bank reserve managers, and CBP not the FT should be given credit
for that news. The FT was only reporting Central Banking's survey of 64
central banks, which contains unique insights into the way central bank
reserve managers actually approach their job in today's turbulent
market conditions. To purchase, click here:
http://www.centralbanking.co.uk/publications/books/rmt05.htm

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ECB Shuffles Senior Management

The ECB has made some important changes at senior management level.
Wolfgang Schill, deputy director general economics, has succeeded Gert
Hogeweg, director general of economics, who has become an adviser to the
executive board. In his new role, Hogeweg will contribute to the
analysis of strategic, organisational and managerial issues regarding the ECB
and the eurosystem.

Klaus Gressenbauer, previously director of planning and controlling,
has succeeded Michèle Caparello as director of internal audit.

Caparello in turn has become an adviser to the executive board on the
wide range of issues related to combating illegal financial activities
and money laundering, and the fight against the financing of terrorism.
She will also provide advice on the "new ECB premises project" from a
general risk management perspective. Meanwhile, Koenraad de Geest,
deputy director of general payments and market infrastructure, has become
director of planning and controlling.

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Website Speculates on World Bank Job

A new website dedicated to airing speculation on who will succeed James
Wolfensohn as the next president of the World Bank is offering the
rumours and gossip on who is in the running to take the job. Current
candidates include household names like Bill Clinton, Bill Gates, and Colin
Powell. Others in the frame are Jack Hennessy, former boss of CSFB; Anne
Krueger, deputy managing director at the Fund; Nancy Kassebaum-Baker,
who is on Tony Blair's Africa commission; John Taylor, American
under-secretary for international affairs; Robert Zoellick, America's trade
rep, Carla Hills, a former trade rep; Larry Summers, president of Harvard;
Peter McPherson, head of Michigan State University who advised Dubya on
Iraq's post-war economic policies; Randall Tobias, global AIDS
coordinator for the United States; and Elaine Chao, America's labour secretary
(the first Asian-American to reach cabinet rank). Then there is Bush's
old pal, Sam Brownback, a Republican senator.

If Krugman is right that Bush only appoints his chums, Brownback has
got to be a front-runner, despite being the least qualified for the job.

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Why Yellen wants to be at the Fed

Janet Yellen says in her spare time she enjoys running, and has even
done a few half-marathons. She describes her time at the White House as
exciting and interesting but says she keeps coming back to the Fed
because the people are truly motivated by a vision of making the world a
better place and serving the public interest.   

Macklem moves up at Bank of Canada

Tiff Macklem has been appointed a deputy governor of the Bank of Canada
and a member of the governing council. Tiff has written respected
research papers on a wide range of topics including monetary theory and
policy, open-economy macroeconomics, inflation targetting and
macroeconomics stabilisation policy. He is filling the vacancy left by Mark Carney,
who has become senior associate deputy minister of finance.

As one of four deputy governors, under governor David Dodge and senior
deputy governor Paul Jenkins, Tiff will be responsible for
international economic and financial issues impacting on monetary policy - a broad
portfolio.

(Note: The Bank of Canada was a worthy winner of last year's Central
Bank "Website of the Year Award" from Central Banking and Lombard Street
Research - and a new ranking is currently under preparation. David
Dodge has vowed to retain the award - so Tiff, keep up the good work!)

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NY Fed names research director

Joseph S. Tracy has landed the much sought-after job of director of
research at the New York Fed. Is this appointment a pointer to the way Tim
Geithner, the new Fed president, is reshaping the institution? If so
the focus will be domestic - on American markets and the risks of asset
price bubbles. Joseph's research has been on trades unions and housing.
Prior to joining the New York Fed, Joseph was an associate professor at
Yale and Columbia universities.

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Brittan's new book

Sir Samuel Brittan has come out with an impressively wide-ranging book
of collected essays and articles, entitled "Against the Flow:
Reflections of an Individualist" (Atlantic Books). For central bankers the main
interest will centre on his comments on monetary policies and
institutions. The Federal Reserve is taken to task for delaying monetary
restriction in the late 1990s boom. He reminds us that the granting of
operational independence to the Bank of England by the Labour government in
1997 represented more of an evolution from the framework evolved by
Conservative chancellors like Nigel Lawson, Norman Lamont and Kenneth
Clarke than as a revolution. Of "Black Wednesday" (September 16 1992) when
the Britain was forced ignominiously out of the ERM at huge monetary
cost, he acknowledges that nobody came out of it with credit. Brittan
himself had been a prominent supporter of Britain's membership of the ERM.

The officials, he says, should have had contingency plans ready for a
run on the currency. "All of us should have seen the writing on the
wall"; the crisis "took everyone by surprise". But he still fails to grasp
or analyse properly the enormity of the damage that the sheer
incompetence of the Conservative administration and its advisors in those fatal
days inflicted on Britain and on the popular sentiment towards the
Conservatives. The Tories have never recovered from that blow to their
reputation. Brittan, like other commentators, fails to understand fully why
that was. Perhaps he was himself too deeply involved. There is also a
dangerous tendency to blame Germany, and the way it handled the
economics of re-unification, for what went wrong with British policy!

Brittan thinks that the fashion in monetary policy may have swung too
much towards rules rather than discretion. He cites Ben Bernanke and
Mervyn King in aid of the view that to stimulate a depressed or
deflationary economy will need close cooperation between central bank and
treasuries, rather than the arm's length relationship of the 1990s.

Unfortunately Brittan pays little attention to the biggest longer-term
dangers to monetary policy which stem from the unbridled growth in
governments' budget deficits, especially in the United States, the eurozone
and Japan but in many other countries as well. In the end, fiscal
discipline can only be constrained by agreed rules limiting discretion.

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Alan Budd says "never again"

Sir Alan Budd, a distinguished economist and former member of the Bank
of England's monetary policy committee, was asked by John Gieve, the
Home Office permanent secretary, to undertake an "urgent investigation"
into claims that David Blunkett, who recently resigned as home
secretary, fast-tracked a visa application for the "nanny" (childminder) of his
married lover, Spectator publisher Kimberley Quinn. Budd said
afterwards he would never again take on such a thankless job.

Budd's inquiry, which looked at the role of Gieve himself (who as it
happens is one of Budd's old buddies) among others in the affair, was
inconclusive, because the officials involved somehow "couldn't remember"
the all-important details of the affair. Blunkett had in any case
resigned by the time Budd reported.

But Blunkett, who had been busy introducing legislation (ostensibly to
"fight terrorism"), which Britain's leading lawyers said was contrary
to all Britain's traditions of law and liberty, is expected to be back
in the cabinet after Labour wins the general election expected in May.
Meanwhile, his successor as home secretary, Charles Clarke, is extending
further his powers to detain people without trial and without charge
indefinitely if he doesn't like them.

Legislation to enable the government to put British citizens under
house arrest if the Home Secretary does not like them (or if the United
States asks for an individual to be incarcerated) "is a form of police
state" said Guy Mansfield, chairman of Britain's Bar Council. Meanwhile,
John Gieve has been promoted.

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Key topic for upcoming G7 meeting in London

Finance ministers and central bankers assembling in London this weekend
will be considering the full implications of the finding by Central
Banking Publications that central banks are turning away from the dollar.
More than two-thirds of central banks responding to a survey have
increased their exposure to the euro in the past two years, mainly at the
expense of the dollar. In addition, over half of the central banks
surveyed now regard eurozone money and debt markets as being as attractive to
invest in as those of the United States. These are among the most
important findings of a wide-ranging survey of reserve managers of 65
central banks, who control reserve assets worth $1.7 trillion, carried out
between September and December 2004. This survey appears in "RBS Reserve
Management Trends 2005" published on Monday January 24 by Central
Banking Publications Ltd. For a summary of the other results go to:
http://www.centralbanking.co.uk.

The worldwide publicity given to these results is now thought to be
causing other central banks to reconsider their policy. Central
BankNet.com, the on-line news service, reports that the Nigerian central bank for
example is considering moving away from the dollar as a result of the
decline in the value of America's currency.
http://www.centralbanknet.com/fullstory.asp?page=1&itemid=21208

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Gordon Brown eyes IMF gold
He is at it again. Having upset the gold market back in 1999 through
his action in dumping of some of Britain's gold stock, the British
chancellor now wants to "use" the IMF's gold for his pet political project of
debt relief - going after other people's money in order to cover
himself in glory as the friend of the poor. This weekend he will be drumming
up support among the finance ministers and central bankers attending
the G7 summit for his proposal that the Fund should either sell or
revalue its gold to finance debt relief. This could stir up the whole
question of official gold sales all over again, just when the central bankers
thought they had got it all nicely under control and out of the news.
Trichet and other European central bankers didn't welcome Gordon Brown's
initiative in 1999 and they will like his new proposal even less. It
will probably eventually get kicked into the long grass by the Fund and
the Europeans. Gold always causes politicians problems but they just
can't keep their grubby fingers off the stuff.
 

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Why the Bundesbank will not sell gold

Better news for gold investors came from Germany, when Germany's
central bank sasid had decided not to sell gold for the 12 months to this
October at least. But what was behind this?

Most people think that this was just a show of independence by the
Bundesbank, which was threatened by the public demands of the finance
minister, Hans Eichel, that it had to sell the 120 tonnes a year for five
years allocated to it under the current European central bankers' gold
pact. Eichel needs the money desperately to help fill a yawning budget
black hole. So he piled on the pressure. After all, he must have thought,
I appointed Weber to be Bundesbank president less than a year earlier -
the least the chap could do is pay back the favour!

Well, there may be some truth in that so far as it goes. But in fact
Newsmakers understands that the Bundesbank would not have sold the gold
even if Eichel had kept his mouth shut - Eichel's intervention just made
it easier for its board, which had been dithering on the issue, finally
to make up its mind.

The Bundesbank had always made clear that it would not sell just to
finance the current expenditure of Germany's federal government. Board
members felt that to sell an asset to plug a hole in the government's
finances would have further undermined business confidence in current
economic policies (currently at an all-time low) and in the Bundesbank as an
institution. So the board came up with some reasons for not selling
like "gold is of great symbolic value" and so on, which pleased the gold
bugs no end.



 

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Weber's stand

The new boss of the Bundesbank knew he had to make a stand, like Thomas
a Becket in 1170, against the politicians. But he had his reasons. It
would not be surprising if his views on the impropriety of financing
current government deficits by asset sales exactly coincided with those of
the ECB's boss, Jean-Claude Trichet himself. If the ECB could let
Germany get away with selling gold just to finance a budget deficit, all
hell would break loose - why, all European governments would start doing
it! Goodbye to ECB independence! (Of course, France is selling, but
then, France is different, isn't it?)

One should also remember that Weber, an academic economist who was only
appointed last year when his predecessor, Hans Welteke, was sacked in a
scandal also connected with gold, is still very much the new boy in the
august company of Europe's central bank governors (NB to
Britain'sGordon Brown - keep away from gold for the sake of your own health).

Weber hardly wanted to be given the cold shoulder from fellow governors
for "rocking the boat" at his next ECB council meeting. Far better to
offend his old pals at the finance ministry than his new ones at the
ECB. You can imagine Eichel muttering, like Henry II of England, "Who will
rid me of this meddlesome priest?"

Newsmakers nervously awaits news of Weber's current health.

For the latest picture, click on:
http://www.anglican.org/history/beckett.html

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Shorter Notes


GREENSPAN, KING HONOURED

After the G7/8 meeting Alan Greenspan and Mervyn King will travel to
Edinburgh to be presented with honorary degrees at a graduation ceremony
at the university on February 7.


SOMALIA'S CENTRAL BANKER REAPPOINTED

Dr Mohamud Mohamed Ulusow has been reappointed as governor of the
Central Bank of Somalia for the second time.


AMOY CHANG FONG RETIRES, HAPPY

Amoy Chang Fong, deputy governor of the Central Bank of Trinidad and
Tobago, has reitired. She said the position of the central bank "at the
heart of the economy" and the immense changes the country went through
had kept her challenged and continually interested in her work during
her 36 years at the bank.


PMA CHIEF STEPS DOWN

The governor of the Palestine Monetary Authority, Amin Haddad, resigned
on Wednesday January 5, according to a Palestinian minister who was
quoted in local press reports.


INTERVIEW WITH CBBH'S PETER NICHOLL

After almost seven years, the mandate of the distinguished and
courageous governor of the Central Bank of Bosnia and Herzegovina, Peter
Nicholl, ended on 31 December 2004. In a recent interview, available on the
central bank's website, Nicholl discusses the role of the CBBH and its
development in the future, and offers advice to the next governor of the
central bank.


NEPAL URGED TO SPEED UP CENTRAL BANK APPOINTMENT

A committee of three economists set up to suggest suitable candidates
as the new governor of the Nepal Rastra Bank, the central bank, has
urged the government to act on its recommendations. Disagreement within the
government has meant no decision has yet been made.


OECD SECRETARY-GENERAL TO STEP DOWN

Another top job becomes vacant in May 2006 when the secretary-general
of the OECD, the Honourable Donald J. Johnston, steps down after 10
years in office.


YUSHCHENKO BECOMES PRESIDENT

Former central bank governor Viktor Yushchenko has been inaugurated as
president of Ukraine. The head of Ukraine's central bank, Serhiy
Tyhypko, resigned from his position on Monday November 29 to engage in
politics full-time. Volodymyr Stelmakh, who headed Ukraine's central bank
between 2000 and 2002, is to return as the bank's new chairman.


FISCHER GETS ISRAEL JOB

Israel's state appointments committee approved the nomination of
renowned American economist Stanley Fischer on Tuesday January 18 as chief
of Israel's central bank.


BMA'S NEW GOVERNOR

Sheikh Hamad bin Isa Al Khalifa, made a ministerial reshuffle this week
which saw Shaikh Ahmed bin Mohammed Al Khalifa, governor of the Bahrain
Monetary Agency, named Finance Minister on Saturday January 15.


DA AFGHANISTAN BANK APPOINTS DEPUTY

Sameollah Ebrahimi has been appointed first deputy governor of the
central bank.


CHAVEZ NOMINATES PARRA

Hugo Chavez Frias, Venezuela's president, has proposed economist Gaston
Parra as his choice for the presidency of country's central bank.

DEVELOPMENTS AT THE BSP

Former Far East Bank president O.V. Espiritu is a favourite to succeed
Rafael Buenaventura at the Philippines central bank (BSP), the
Philippine Daily Inquirer reported this week. Meanwhile, the bank has been
allowed by the Supreme Court to raise staff salaries to levels more aligned
with the private sector.


SLOVAKIA APPOINTS NEW CENTRAL BANK GOVERNOR

Ivan Sramko has become governor.


VARYING FORTUNES OF BRAZIL'S CENTRAL BANKERS

Brazil's Senate has approved a law that gives Henrique Meirelles, the
central bank president, cabinet-level status, giving him immunity from
prosecution for crimes in all courts except the country's highest.
Meanwhile, a congressional report has recommended that Gustavo Franco, a
former central bank president, and others be indicted on money laundering
charges.


GREECE SHOWS STATISTICS MATTER!

José Manuel González-Páramo, a member of the executive board of the
ECB, has said the Greek case [where the budget deficit has been vastly
bigger than that reported] speaks for itself: it is a reminder of how
important true statistics are for the credibility of the monetary union
project.


BODIL ANDERSEN TO STEP DOWN

The governor of Denmark's central bank, Bodil Nyboe Andersen, has said
she will retire in October, 2005, when she turns 65.


BANK NEGARA MALAYSIA APPOINTS ASSISTANT GOVERNORS

Encik Muhammad Bin Ibrahim and Puan Nor Shamsiah Yunus have become
assistant governors.


THE SHORTEST YEAR OF MY LIFE, SAYS GONO

It is one year since Gideon Gono took office as governor of the Reserve
Bank of Zimbabwe. He is quoted as saying: "It has been one of the
shortest years I've ever had to live in my 45 years of existence. The year
has been hectic, full of trials and tribulations."


RICHARD FISHER FOR DALLAS FED

Richard W. Fisher will become president of the Federal Reserve Bank of
Dallas effective from April 4. Fisher will succeed Robert McTeer, Jr.,
who resigned on November 4 to become chancellor of the Texas A&M
University.

Richard Fisher started his career at Brown Brothers where he was
assistant to Robert Roosa, a former senior official of the Federal Reserve
and under-secretary of the treasury who had trained several leading
financial officials, among them Paul Volcker. In 1977, Fisher was "loaned
out" by Brown Brothers to serve as assistant to the secretary of the
treasury during the Carter administration, where he worked on issues
related to the dollar crisis of 1978 and 1979, then returned to Brown
Brothers to found their Texas operations in Dallas. In 1987, he created Fisher
Capital Management, an investment advisory firm, and a separate funds
management firm, Fisher Ewing Partners, which focused heavily on
investing in distressed banks, savings and loans, and thrifts. He sold his
controlling interests in both firms when he again joined the government in
1997.

"I am excited at the prospect of working for the brilliant staff at the
Dallas Fed. This is a homecoming in more than one way. I started my
career at Brown Brothers as the assistant to Robert Roosa, a legendary
figure in both the Federal Reserve System and the American Treasury. He
and the partners there taught me the bond, stock, and foreign exchange
markets and the investment trade. It was Mr Roosa's ardent wish that
someday I would 'pay it back' by joining the Federal Reserve, which he
considered the 'purest form of public service, above and beyond the reach
of partisan politics.' He is probably grinning up in heaven right now,"
said Fisher.

WHEN HE "TOOK LEAVE OF HIS SENSES"

Fisher is a first generation American. He is equally fluent in Spanish
and English, having spent his formative years in Mexico. Fisher says he
took leave of his senses in 1993 and ran for the United States Senate
as a conservative Democrat. To his surprise, he won the nomination in a
run-off against an incumbent congressman and a former Texas attorney
general, but garnered only 1,639,615 votes (38%) in the general election
of 1994 losing to the Republican incumbent.

"I laboured briefly in the vineyards of partisan politics," Fisher
said, "but all it yielded was prune juice. I was a lousy politician."