Wednesday, June 1, 2005

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I wonder if Bangkok will take a check?

Note to self: no matter how much money they offer, never, ever accept an offer to become the governer of Thailand's central bank.

The BBC explains why:

A former Thai central bank governor has been fined 186bn baht ($4.6bn; 2.5bn) for his leading role in the country's 1997 financial crash.

Rerngchai Marakanond spent that figure trying - and failing - to prop up the country's currency during the crisis.

The Bangkok Civil Court has now ordered that Mr Marakanond must reimburse the Bank of Thailand within a month.

Otherwise he will face the seizure of his personal assets. The case was brought by the Thai government.

Adding insult to injury, the Bangkok Post reports that on top of the 186 billion baht, "The court also ordered Mr Rerngchai to pay 7.5% a year interest, retroactive to July 2, 1997, the date of the central bank's last currency transaction, although the court limited total interest charges to 62 million baht." I wait with bated breath to see if there is a Far East Economic Review story reporting that the court has also ordered Rerngchai's girlfriend to dump him.

Kidding aside, the Economist pointed out three years ago that, "The whole exercise seems grossly unfair, in that many other officials and politicians must have had a hand in the policy, as well as pointless, in that Mr Rerngchai seems unlikely to stump up the 186 billion baht he is alleged to owe." Actually, I think it's worse than that -- surely this will dissuade competent people from taking the job -- no matter how big Thailand's foreign exchange reserves are right now.

UPDATE: Brad Setser has semi-serious thoughts about whether the head of China's central bank needs to worry about this.

posted by Dan on 06.01.05 at 01:36 AM




Comments:

An economist in Chile named (I think) Lavila won an Ignobel Prize in economics for pressing the wrong key on his computer when he was a deputy finance minister in charge of pensions. This caused some mammoth investment error which he somehow magnified, in misguided attempts to fix things, that eventually totalled something like 2% - 5% of Chile's GDP for the year. The Ignobel Prize said his name was used as a verb - "lavilar" - meaning "To Screw Up Royally".

posted by: Tom Holsinger on 06.01.05 at 01:36 AM [permalink]



Is that the largest fine levied against an individual in world history?

posted by: Joe Grossberg on 06.01.05 at 01:36 AM [permalink]



So, are they going after George Soros next?

posted by: SocraticGadfly on 06.01.05 at 01:36 AM [permalink]



Soros? Nah! They'll go after Greenspan!

posted by: jeffk on 06.01.05 at 01:36 AM [permalink]



Maybe he can use the Court Jester defense?

posted by: Chrees on 06.01.05 at 01:36 AM [permalink]



"The whole exercise seems grossly unfair, in that many other officials and politicians must have had a hand in the policy, as well as pointless, in that Mr Rerngchai seems unlikely to stump up the 186 billion baht he is alleged to owe."


This is one of those rare occasions when the Economist is being childish. The unfairness of the action is a feature, not a bug. The time-tested way to treat a systemic problem, rather than some individual crime, is tomakea hideous, bloody example, inflict a completely disproportionate punishment, so as to make even the thought of doing it radioactive.

posted by: Jim on 06.01.05 at 01:36 AM [permalink]






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