Nairobi, Kenya

My latest two weeks in Nairobi are over. I am quite happy with the progress being made by the Central Bank of Kenya in developing its capacity to formulate and implement monetary policy. My advice in these areas has enjoyed the full and enthusiastic support of the Governor.

The sights and sounds of Africa included many memorable moments. Early on my first Sunday morning (about 6:00am), fifty or sixty singers passed on foot on the street below my window lead by a chanter. He would sing a phrase and the choir would respond. It was a lovely way to start the day.

My second Sunday, after two other members of the IMF team arrived, we drove to the home of Karen Blixen, authoress of Out of Africa. Much of the Meryl Streep and Robert Redford movie was filmed there. We also visited the orphan zoo on the edge of the Nairobi National Park. The zoo is unique and has a very different feel than any other zoo I have been to because all of its animals there have been rescued from certain death when they had been separated from their mothers (usually by her death) in the nearby jungles or bush. There I feed a giraffe from my hand and pet a cheetah. When I scratched the cheetah’s ears it purred loudly (reassuringly). You can see pictures on www.facebook.com/wcoats

Actually the highlights of my visit were the dinner discussions with fellow mission members Phil Bartholomew and Tom Lutton. Phil lead our IMF mission but earlier was Chief Economist of the Office of the Controller of the Currency ( the primary regulator of national banks) and staff economist of the former House Banking Committee (the Financial Services Committee now chaired by Barney Frank). Tom is now Principle Economist of Federal Housing Finance Agency, which regulates the bankrupt and now effectively nationalized Fannie Mae and Freddie Mac (the huge government sponsored mortgage financiers about which I have written much earlier). In 2003 Tom wrote a report on Fannie and Freddie for OFHEO as it was then called in which he concluded that they were not financially sound and should be broken up. He was asked to change the conclusion and refused. The report was not issued– an example of the corrupt relationship between industry, labor, and the government. Phil and Tom elaborated on why they consider the financial crisis of the last two years a major regulatory failure (not a failure to have enough regulations, but a failure to enforce existing ones) and why the government’s bailout response is a source of serious (moral hazard) problems for the future, and their disgust at the corrupting influence of Wall Street on American politics and government policy. I looked forward each day to another dinner discussion and wish I could share more of it with you but you have heard bits of it in my earlier notes on the crisis.

Our friend Denny Drabelle’s latest book is being published this month. He is also a traveler and has wonderful stories to tell. Information and reviews are attached.

There was sad news during my stay in Nairobi. Michael Jackson’s surprise death was announced. I received emails about it from all over the world. The next day the local newspaper delivered to my hotel room devoted its first full eight pages to Jackson.

The bodies of two of the Kroll PSDs (personal security details) assigned to my BearingPoint colleague Peter Moore, kidnapped in Baghdad two and half years ago, were turned over to the police. One of them, Jason Creswell, had an existing medical condition that may have caused his death, and we had been told a long time ago that the other Jason had committed suicide. Peter is the one that the kidnappers put on the Internet last year and may still be alive along with the other two Kroll PSDs kidnapped with him.

The two Jasons had actually been dead for some months. Their bodies were turned over to the police and then to the Ministry of Foreign Affairs. The bodies were released because one of the prisoners that were supposed to be exchanged for the hostages was released.  This was a "good faith" gesture on the part of the kidnappers. Such exchanges or payment of ransom keep kidnapping and piracy profitable, and guess what…

On the “lighter side” the joke (but all too true) of the week:

"Big Oil’s Answer to Carbon Law May be Fuel Imports"

By Joe Carroll and Edward Klump

June 26 (Bloomberg) — America’s biggest oil companies will probably cope with U.S. carbon legislation by closing fuel plants, cutting capital spending and increasing imports.

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About wcoats

Dr. Warren L. Coats specializes in advising central banks on monetary policy, and in the development of their capacity to formulate and implement monetary policy. He is retired from the International Monetary Fund, where, as Assistant Director of the Monetary and Financial Systems Department, he led missions to over twenty countries. Before then, he served as Visiting Economist to the Board of Governors of the Federal Reserve System, and to the World Bank, and was Assistant Prof of Economics at the Univ. of Virginia from 1970-75. Most recently he was Senior Monetary Policy Advisor to the Central Bank of Iraq; an IMF consultant to the central banks of Afghanistan, Kenya and Zimbabwe; and a Deloitte/USAID advisor to the Government of South Sudan. He is currently a member of the Editorial Board of the Cayman Financial Review and until the end of 2013 was a member of the IMF program team for Afghanistan. His most recent book is entitled "One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina."
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