[Viewpoint] No chance to analyze our top bankerBen Bernanke, the current chairman of the U.S. Federal Reserve, was prepared for the challenges at hand when he took the job.
After 17 years as a professor, he served as a member of the Fed’s Board of Governors for three years. The market prepared for his arrival as well. The selection of Bernanke as chairman of the Federal Reserve was an expected move, and there was more than enough time to analyze and verify his abilities.
At a confirmation hearing, the Senate attacked him by arguing that he was a specialist in recession economics - not an inflation fighter.
Bernanke, however, refuted the argument by presenting his countless research papers and speeches on monetary policy, asking critics to avoid obsessing solely over his doctoral dissertation. Bernanke in fact proved his ability to fight inflation as head of the Board of Governors of the Federal Reserve System.
Over the past 15 days, the selection process here at home of the new Bank of Korea governor has been quite painful. It was not a beauty pageant, but a contest of the “least ugly.”
Euh Yoon-dae and Kang Man-soo were deemed “inappropriate” choices for the post because they were the president’s confidants. The opposition parties surely would have lobbied to prevent either of the two from taking the position, and the Blue House likely was concerned about Korea’s position hosting the Group of 20 summit, as it wanted to avoid criticism that it is effectively “controlling” monetary policy.
Faced with this reality, the Blue House aimed to make a choice that wold create the least amount of political controversy. It ended up selecting Kim Choong-soo, Korea’s ambassador to the Organization of Economic Co-operation and Development.
During the selection process, the selfishness of various entities was laid bare. The Bank of Korea said bluntly that it wanted a strong governor. On the eve of the planned revision of Bank of Korea laws, it was too concerned about seizing financial investigative authority. Bank of Korea employees were more concerned about their independence, not the BOK’s independence.
The Ministry of Planning and Finance did not hide the fact that it did not want to work with a strong Bank of Korea governor. As the possibility of Kang’s selection disappeared, it quietly backed the selection of Kim.
This process will likely repeat itself when members of the central bank’s Monetary Policy Committee are reshuffled. Rumors have spread that a group of former presidential camp officials and professors have formed a long queue for the positions.
The United States, however, selects members of the Board of Governors of the Federal Reserve System in a completely different manner. Appointments are confirmed with a Senate hearing, and it is an honorable post that comes with a high salary and 14 years of tenure. Members, however, rarely complete their terms. As of now, two out of the seven seats are empty. After working three or four years with conviction, members often leave for other posts. They are capable of doing so because of their abilities.
Not everyone on the Board of Governors of the Federal Reserve System is a person of exceptionally high standing in business or political circles, however. Kevin Warsh was named a Federal Reserve Board governor when he was 35. That’s roughly the age of a manager at the Bank of Korea.
The case of Randall Kroszner, an economics professor at the University of Chicago, is similar.
He was 43 when he was named a member of the Board of Governors of the Federal Reserve System. He recently stepped down after serving for three years.
When there is no verification and analysis, the people do not know who the candidates are. It’s difficult -if not impossible - to win the public’s trust with such a system.
And that’s exactly where we sit with new BOK Governor Kim. Korea Development Institute officials who have worked with him for a long time do not agree with the evaluation that he was a bit player when he served the Blue House as a senior secretary for economic affairs.
He was the only secretary who entered the Blue House without something political at stake. He was careful, and he soon stepped down in the aftermath of anti-government protests over the resumption of U.S. beef imports.
In reality, Kim is known for having strong convictions and organizational control. In fact, he transformed the Korean mission at the OECD. A diplomat even returned to Korea complaining that it was too hard to work at the OECD mission because Kim pushed those under him too much.
The Blue House recently held a conference with civilian financial experts. A foreign expert said Korea should seriously consider whether continuing to freeze the key interest rate is really the best strategy.
The atmosphere is now chilly.
The Blue House and the government want to hold off on increasing the interest rate. And yet the Bank of Korea’s independence in making monetary policy should be guaranteed. A wrong decision in this area always comes back like a boomerang to smack the economy in the head.
When will the selection process for the Bank of Korea governor and members of the Monetary Policy Committee be normalized?
It is time to seriously think about introducing a confirmation hearing into the mix for the selection of the Bank of Korea governor and the extension of the tenures of Monetary Policy Committee members. No country that treats its central bank lightly has become truly advanced.
*The writer is an editorial writer of the JoongAng Ilbo.
by Lee Chul-ho