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Jaime Caruana - Wikipedia, the free encyclopedia
Jaime Caruana (born March 14, 1952) is the General Manager of the Bank for International Settlements. His five-year term began on April 1, 2009. He was also the Governor of the Bank of Spain from July 2000 to July 2006.
Caruana was the man in charge during the bubble, when Spain was running the now much celebrated countercyclical regulatory capital policy for banks.

Note the term of his current appointment.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Jan 21st, 2011 at 11:37:35 AM EST
[ Parent ]
The previous Governor of the Bank of Spain is now 76...

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 21st, 2011 at 11:39:20 AM EST
[ Parent ]
Not if he was born in 1952, more like 58 or 59.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 21st, 2011 at 02:34:21 PM EST
[ Parent ]
I mean previous to Caruana.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 21st, 2011 at 02:35:48 PM EST
[ Parent ]
Was his counter-cyclical policy derailed or overridden by "trans-national" actors?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 21st, 2011 at 02:36:17 PM EST
[ Parent ]
No, but it appears the European Union didn't like it...

See this Bloomberg piece.

This Spanish interview with El Economista includes the following claim:

¿Está satisfecho de que al final se hiciera lo que usted proponía, aumentar las provisiones bancarias y el control financiero?

Se hizo finalmente lo que yo decía, pero no se hizo todo. El Banco Central Europeo (BCE) bajó demasiado los tipos de interés respecto de lo que yo decía. Y el tema de las provisiones se hizo con dificultades porque a Europa no le gustaba nada lo de mejorarlas y cuando se hizo fuimos muy criticados dentro y fuera de la banca. Nunca entendí por qué no se daban cuenta de que al ritmo al que iba la economía española era fundamental que se protegiera y tuviera unas mayores provisiones. Finalmente se reforzaron y eso ha tenido unos efectos absolutamente benéficos porque somos uno de los pocos países del mundo occidental que está pasando esta etapa con una cierta tranquilidad bancaria. Nuestra banca hasta ahora se ha comportado muy bien. Unos bancos menos, pero bueno.

Are you happy that in the end what you proposed was done, to increase the banks' provisions and financial control?

In the end what I said was done, but not all of it. The ECB lowered interest rates too much with respect to what I was saying. And provisions were done with difficulty because Europe didn't like the idea of improving them and when it was done we were much criticised form within and outside banking. I never understood why they didn't realise that at the spped that the Spanish economy was going it was essential that it protect itself and have greater provisions. In the end they were reinforced and this has had absolutely beneficial effects because we're one of the few countries in the world that's going through this time with a certain banking calm. Our banks have so far behaved really well. Some less so, oh well...

The Bloomberg article explains
The Spanish model has become the prototype for so-called counter-cyclical provisioning, said Paul de Grauwe, an economics professor at the Catholic University of Leuven in Belgium. Regulators in London and Brussels are considering adopting the Spanish model as they seek ways to prevent future blow-ups.

...

"It shows how far banks have been distracted from their historically conservative mission that people are getting excited by this now," said Jonathan McMahon, a former official at the U.K. Financial Services Authority and now a director of Promontory Financial Group. "Maybe Spain just remembered what to do when other people forgot."

...

The central bank implemented the system partly to rein in lending after Spain cut borrowing costs as a precursor to the start of the euro, Rojo said. Spanish interest rates plunged to 3 percent in 1998 from as high as 9.25 percent in 1995.

...

"We tried to sell it in Europe when we did it and we weren't successful," Rojo said. "The model has worked very well for us and it should work for everyone."



Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 21st, 2011 at 04:56:37 PM EST
[ Parent ]
More Rojo from Cotizalia.com in early October, 2008 (when the Paulson plan was being debated, and EU countries were falling over themselves extending deposit guarantees to forestall a bank panic)
... Rojo afirma que "de estas situaciones sólo se sale con algún tipo de actuación por parte de los Gobiernos".

Sin embargo, no le convence la nueva medida propuesta, la compra de activos bancarios por parte del Gobierno, puesto que Rojo considera que la dotación de liquidez al sistema es una competencia que "depende en gran medida del BCE". Comprar deuda... "eso lo tiene que hacer el sistema bancario, por coordinación de los Bancos Centrales a través del BCE. Los Gobiernos no se pueden poner ahora a inyectar liquidez mediante aumentos de gasto. Eso sería tremendo".

...

Francia y Alemania influyeron negativamente sobre el BCE

Para el viejo profesor, no hay dudas a la hora de repartir culpas. "Debería haber venido el impulso de contracción de EEUU, y no hicieron nada. En España yo era partidario de que la banca creciera menos, que se expandiera a unos ritmos más bajos, pero no sucedió así. ¿Es culpa de la banca? En parte sí, y de las autoridades también. Yo culpo también al Banco Central Europeo, porque  cuando inició sus actividades le dio por hacer una política expansiva tremenda impulsado por Alemania y por Francia.

Francia y Alemania estaban entonces convencidos de que lo que necesita Europa era gas porque sus dos economías lo necesitaban, y la verdad es que fue un desastre aquello. Y para países como España, Irlanda o como Portugal o como Grecia que eran países que venían de una fase de crecimiento bastante lento, pues el meterse en fase expansiva tan fuerte era peligrosísimo, pero bueno yo, en el consejo BCE lo dije hasta hartarme. Estábamos metidos en una cosa que no tenía salida. Pero en fin, como suele suceder en esos casos de expansión no me hicieron ni caso".

...

Distintos estados de gravedad y distintas medidas de actuación. ¿Dónde queda una acción coordinada de la UE? "Cada país debe arreglárselas como pueda y el conjunto pues será una cosa, un arreglo para toda Europa poco a poco. No creo que Europa esté en condiciones, por el momento, de abordar el tema de un modo conjunto. Sería bueno que el ECOFIN tuviera mayor poder, sería bueno que el BCE no tuviera las ideas que tiene y fuera una entidad con una visión más general".

... Rojo claims that "you only get out of these situations with some sort of government intervention".

However, he's not convinced by the new proposed measure, the purchase of bank assets by government, as Rojo thinks that systemic liquidity provision is a competence that "depends in great measure from the ECB". To buy debt... "must be done by the banking system, by means of Central Bank coordintion through the ECB. Governments cannot now start injecting liquidity through spending increases. That would be terrible"".

...

France and Germany had a negative influence over the ECB

For the old professor, there are no doubts when it comes to assigning blame. "The contraction impetus should have come from the USA, and they did nothing. In Spain I was for lesser banking growth, for it to expand at lower rates, but it didn't happen that way. Is it the banks' fault? Partly yes, and also the fault of the authorities. I also blame the ECB, because when it started functioning it got it in its head to carry out a tremendously expansive policy, pushed by Germany and France.

France and Germany were then convinced that what Europe needed was fuel because its two economies did, and in truth that was a disaster. And for countries such as Spain, Ireland or like Portugal or like Greece which were countries coming out of a phase of rather slow growth, getting into such a strong expansive phase was very dangerous, but well, I said it at the ECB council until I was fed up. We were in something that had no way out. But well, as it happens in these instances of expansion, they didn't listen to me".

...

Various degrees of seriousness and various policy measures. Where is a coordinated action by the EU? "Each country must cope as best it can, and the whole, an arrangement for the whole of Europe [will come] step by step. I don't think Europe is in a position, for the moment, to tackle the issue jointly. It would be good for the ECOFIN to have more power, it would be good for the ECB not to have the ideas it has and to be an institution with a more general vision".



Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 21st, 2011 at 07:02:57 PM EST
[ Parent ]
Luis Angel Rojo was, in fact, the designer of the countercyclical bank provision policy.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 21st, 2011 at 02:40:06 PM EST
[ Parent ]

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