'I have adequate grounds to seek a judicial review. But it is difficult to confront the entire political engine with my own force.'
Joseph Yam Chi-kwong
Former HK Monetary Authority chief executive
In 2007, Yam was the highest paid central banker in the world, with an annual salary of US$1.32 million, about seven times that of the chairman of the Federal Reserve (US$191,300), and approximately three times that of the President of the European Central Bank (Euro351,816 in 2008) ...
I think Joe has a valid case to argue against the findings of a Legislative Council report pinning him with 'ultimate responsibility' for the Lehman minibonds fiasco.
There is no way that the HKMA could have known how bad these things would go. Wall Street itself was surprised when Lehman Brothers went spectacularly bust in 2008.
Obviously, some insiders saw what was about to happen, which explains the wide distribution to unsuspecting retail investors around the world of poisonous securities that offered relatively high rates of interest but depended on the continued solvency of Lehman Brothers.
But the HKMA could never have been able to spot the fatal flaw of Lehman Brothers' financial difficulties when all official sources of information were ignorant of it. The HKMA is government, and government operates by established procedure, not by the independent conjectural thinking of a few individuals, however brilliant that might be.
Established procedure showed that the minibond documentation stated the risks. There was no direct fraud. There may have been a clue in that commissions were very rich for sales people who sold minibonds but the buyers did not complain of pushiness when they bought. That came later.
So I think Joe has a point. The HKMA was not in a position to stop these minibond sales. They met the official requirements. On any grounds that they could have been stopped, half the financial transactions in Hong Kong would have had to be halted. Regulators can do little about scams that operate within the law. Let the buyer beware.
And yet I have little sympathy for Joe's pleas of innocence. The difficulty is the very big salary he took home right from the first day he was given the job.
In monetary matters, the HKMA is essentially a mechanism. It operates a modified currency board against the US dollar and must issue or buy back Hong Kong dollars under specified conditions. It can bend the rules a little, and I think it does, but it is not a central bank and it has no control over interest rates or local liquidity.
You do not, however, pay someone big money at the level Joe was paid just to push buttons on a machine. Someone whose annual salary runs into the millions is expected to bring exceptional skills to the job, to be able to do what very few other people can do.
So what could Joe do that very few other people could do?
The sad answer is that he bought nothing exceptional to the job. He was a competent HKMA chief, a skilled technician of the dollar peg mechanism and he hired good people to supervise the banking system, for which he deserved a decent salary. But he wasn't worth HK$10 million a year and he didn't have better credentials than any of the world's central bankers.
He never told us so, however. He took the money he was offered. If he thought he was worth it then he suffered from a conceit which has now very properly been deflated. If he knew he wasn't worth it then he is now paying the price of keeping the truth hidden from us.
Either way, he has no reason to complain now about being pilloried for minibonds. His salary and his acceptance of it without comment led us to believe that he could foresee incipient crisis or scandal and stop it before it became full-blown. He oversold himself.
So here is the long and short of it, Joe. Just shut up and take your knocks.
And don't worry about it too much. It was only a Legco report, the subcommittee behind it was divided, the administration will do nothing about it and its future is to collect dust on behalf of the shelf on which it sits.Topics: Hong Kong Hong Kong Dollar Hong Kong Monetary Authority Hong Kong Lehman Brothers Hong Kong Monetary Authority Joseph Yam Chi