Sunday, November 2, 2008

The Day The Oracle Sighed - Atlas Shrugged ?

Not many imagined that they would see The Oracle apologise for his prophecies. Most newspapers carried the larger-than-life picture of the grim-faced octagenarian. When Alan Greenspan acknowledged his role in the current crisis in a Congressional hearing last month, it was a shock for the markets - after all his tenure spanned the greenest years in American Capitalism. That (no) regulation did not keep pace with market innovation is hardly an excuse. Aren't regulators supposed to be ahead of the curve? Of the realms and realms written about this once-in-a-century event, this piece in The Guardian was funny. But the unfair thing was those who spoke highly of him, have now gathered to boo him. In my conversation with a senior banker recently, he admitted that while rest of the world stood in awe waiting for the next pronouncement, he often thought that The Oracle was an "empty suit" as he put it. But the point, is more and more people will claim to have felt the same way. I think it has a lot to do with the way the media makes a hero of personalities just as quickly as it would strip any one of the aura it bestowed. Or may be the contrarians are never heard loud enough.

Half a world way - another regulator is being celebrated. In my brief stint as a journalist, I had the great opportunity to be writing on the Reserve Bank of India when governor Dr Y V Reddy was quelling inflationary pressures and talking down irrational exuberance(s). Reckoned as the king of conservatism, he was pretty unpopular with the bankers and a government that was gloating on higher growth and a less tight monetary policy. Friends back in newsrooms in India tell me how everyone is now singing eulogies for Dr Reddy. Known for being upright, Dr Reddy was transferred more than half a dozen times, as a young bureaucrat. His appointment itself, may have been political - but what a great choice! Dr Reddy loved surprising the markets (not a good thing?!). He raised risk weights for real estate loans, that went a long way in tackling "overheating" as he called it. Prime Minister Manmohan Singh had once remarked that the job of a central banker as "the loneliest job in India". Dr Reddy whose term concluded in September this year, will also be remembered for his wit. He would always have journalists in splits during his post-monetary policy press conferences (so much so that I would sometimes, actually scribble some of his witty remarks!). Of course, he was extremely tight-lipped about what would be going on in his mind - except smile the Buddha-smile. His take on the current crisis - “historically significant redefining of the concept of the central bank”.

Autonomy of central banks, has long come under pressure. Political pressures from governments on central banks are unavoidable. Barring exceptions like Dr Reddy, very few can stave off pressure from governments.

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