One of the most powerful figures in a modern democratic country is a highly regarded central-bank governor. Not any central-bank governor, but one who is highly regarded.
Who is a highly regarded central-bank governor? Stated differently, how does a governor of a national monetary authority get to be highly regarded? Several factors come into play.
First, a central-bank governor must come into the position bearing excellent academic credentials. Possession of a solid reputation as an economist—not necessarily with a Ph.D. in economics, but preferably with one—is the ideal starting point for a claim to be deserving to be a highly regarded central bank governor. A stint as an economics professor at a significant university or college would be a big plus. Another big plus would be authorship of books or treatises or articles on economic topics related to the making of monetary policy.
A second factor to be considered in adjudging an individual a highly regarded central bank governor is business experience—whether as adviser or director or consultant—with one or more establishments engaged in finance, investment, advisory services, banking or economic consultancy. Excellent academic credentials joined to a career in Wall Street, London’s City or their equivalent is a powerhouse combination.
A third factor to be considered in deciding whether an individual holding the position of central bank governor is the quality and extent of his involvement in the life of a society. Chief among these involvements is his participation in or contribution to the work of the government. Providing advice, when requested, to the Executive Department or to the legislature will be a big boost for a highly-regarded-governor assessment. After all, a monetary authority, which is headed by its governor, must not be seen as an institution divorced from the rest of the nation.
Undoubtedly because the US economy is the world’s largest and the Federal Reserve System is the world’s largest central bank, the world looks to the head of the Fed (Federal Reserve Board), the Federal Reserve System’s policymaking body, to provide leadership and direction to the international financial system. The Chairman of the Fed is unquestionably primus inter pares among the world’s central bank governors.
This being the case, the Chairmanship of the Fed must perforce go to an individual who will be regarded highly by the international financial community. Little wonder that the scrutiny and vetting that candidates for the Fed Chairmanship undergo at the hands of the US Congress is one of the most intense and thorough scrutinizing exercises in the world.
The US Congress—particularly its banking and finance committees—has always done a good job, with the result that the individuals who have sat behind the desk in the Chairman’s office in the Federal Reserve Building in Washington D.C. have comprised a succession of first-rate individuals deserving of the high regard of the world’s central bankers and the International Monetary Fund. William McChesney Martin, Paul Volcker, Alan Greenspan, Ben Bernanke and, now, Janet Yellen have all proven to be equal to the herculean job of being chairman to the most powerful monetary institution in the world.
True, a central bank policymaking body—this country’s counterpart in the Monetary Board—is a collegial body, but a truly strong and self-assured chairman can, with the exercise of charisma, competence and tact, stamp his will on the decisions made by the body over which he or she presides. In recent years, during the entire length of 2008 world financial downturn, Bernanke put his well-deserved reputation on the line and got his Fed to follow his lead down the path to US and world economic recovery. Now the first female Fed chairman, Janet Yellen, is doing the same. Truly, the US has been very lucky with its choices of Fed chairman.
Our own experience? Let me just reproduce the title of this piece. A highly regarded central bank head is a powerful figure. Underscore “highly regarded” and “powerful.”
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