Why Germany Wants to See its US Gold

Bundesbank President Jens Weidmann wanted to personally convince Peter Gauweiler that the German gold was still where it should be. Early this summer, the head of the Germany’s central bank took the obstinate politician from the conservative Christian Social Union (CSU), a party that is a member of the government coalition in Berlin, and a number of his colleagues into Bundesbank’s inner sanctum: the gold vault. There, 6.000 gold bars are stacked on industrial-strength shelves in a purpose-built building in Frankfurt. Additional 76.000 bars of bullion are stored in four safe boxes, in sealed containers. But even this personal inspection wasn’t enough to reassure the visiting member of the parliament, on the contrary: «The Bundesbank monitors its domestic gold in an exemplary fashion,» Gauweiler says, «this makes it all the more incomprehensible that the bank doesn’t look after its reserves abroad.» For quite some time now, Gauweiler has been pestering government and Bundesbank with questions concerning where and how the country’s reserves are stored, and how often they are checked. He has submitted requests and commissioned reports on topic. Last week, Gauweiler celebrated his greatest triumph to date in his gold campaign, which has been a source of some amusement for many fellow German politicians: A secret report by Federal Audit Office had been made public, and it contained stern criticism of the German central bank in Frankfurt. Bonn-based auditors urged a better inventory system, including quality checks. This demand, which even the bank’s inspectors saw as nothing more than routine, alarmed the Berlin political establishment. Indeed, the partially blacked-out report read like the prologue to an espionage thriller in which stunned central bankers could end up standing in front of empty vaults in the USA. For decades, German central bankers have contented themselves with written affirmations from their American colleagues that the gold still remains where it is said to be stored. According to the report, the bar list from New York stems from «1979/1980.» The report also noted that the Federal Reserve Bank of New York refuses to allow the gold’s owners to view their own reserves. Not surprisingly, this prompted strong reactions in Berlin: relevant Bundesbank board member Carl-Ludwig Thiele was summoned to Berlin to provide a full explanation to the parliamentary budget committee. Heinz-Peter Haustein of the business-friendly Free Democratic Party (FDP) was even quoted by Germany’s mass-circulation Bild newspaper as saying «all the gold has to be shipped back.» The Bundesbank’s otherwise reserved Thiele said he found at least «part of the debate» to be «rather grotesque.» His financial institution currently has more pressing problems. Bundesbank head Weidmann, for example, is desperately fighting European Central Bank decision to buy unlimited quantities of the sovereign bonds from crisis-ridden countries as a way of lowering their borrowing costs. In addition, Bundesbank has already pumped as nearly €700 billion into primarily southern European countries as part of euro-zone central bank transfers known as Target II. Germany’s gold reserves are currently worth some €144 billion and are not stored «with dubious business partners», but rather with «highly respected central bankers» (…..)

Link:  http://www.spiegel.de/international/germany/german-politicians-demand-to-see-gold-in-us-federal-reserve-a-864068.html

Field Trip: http://tribecacitizen.com/2011/08/29/field-trip-federal-reserve-bank-of-new-york/

Brazilians dare to hope crackdown on corruption is real

Normally, live coverage of events in Brazil is reserved for football matches. But in the recent weeks, the law professors at the Getulio Vargas Foundation (FGV), a Brazilian educational institution, have been running live commentary on something entirely different, the Mensalão (or big monthly allowance) case in the Supreme Court. So unprecedented is the case, in which court, in televised hearings, has convicted senior members of Brazil’s former Workers’ Party, the PT, of corruption, that the professors have set up an on-campus “situation room” to provide live commentary to the media. With the judges now moving to sentencing, interest in the trial is picking up. “This case is a result of the strengthening of rule of law in Brazil,” said Oscar Vilhena Vieira, director of law at the FGV. (source: Joe Leahy – Financial Times / The Washington Post – 31/10/2012)

Some Brazilians, jaded by decades of scandals in Brasília in which perpetrators seemed to act with impunity, are suddenly daring to hope old ways of doing business may finally be changing in the vast emerging-market. Those convicted in Mensalão include former top lieutenants of former president Luiz Inácio Lula da Silva, such as former chief of staff José Dirceu, who were found guilty of using the public money to pay secret monthly stipends to opposition politicians in the National Congress in return for their support. Scores of people have been found guilty. The few sentences handed out so far have been tough. “Brazil is taking this seriously because they see it as part of their role as an emerging power”, said Alejandro Salas, regional director for the Americas at the organization Transparency International, which ranks Brazil at 3.8 out of 10 in its corruption perceptions index (10 being regarded as “very clean”). This compares with fellow members of the big BRIC emerging markets: Russia at 2.4, India at 3.1, China at 3.6. “They will differentiate themselves with other emerging economies by doing this, improving governance”. One only needs to look at past cases, such as that of Ronaldo Cunha Lima, to understand the excitement in Brazil over Mensalão. Cunha Lima, a former governor of northern state of Paraíba as well as a former senator, deputy of the lower house of Congress and a municipal council member, shot and wounded a colleague in a restaurant in 1993. He died of cancer this year after having spent only 3 days in detention for the crime. When his case finally came before a local court, he escaped judgment by becoming a senator in 2003. In Brazil, only Supreme Court can handle criminal cases against federal politicians. When Supreme Court finally found time to hear case in 2007, Cunha Lima resigned from the Senate, returning the matter to square one in inefficient local court system. “This man has maneuvered and used tricks to escape trial for 14 years,” Joaquim Barbosa, Supreme Court justice who is leading the Mensalão case, was quoted as saying at the time. Yet the case was only one of many: from that of Fernando Collor, former president, who is today a senator despite being impeached when he was in office for corruption, to that of his father, Arnon Mello, senator who shot dead a colleague in the Senate in 1963 but never faced trial. Indeed, in past 30 years, 72 politicians have been murdered in Brazil, according to list compiled by Carta Capital magazine. Corruption+political violence remain entrenched. The Mensalão case points to a wider changes taking place in Brazil, according to Transparency International’s Salas.

Brazil is managing to couple institutional improvements with a more robust enforcement. Traditionally, Latin American countries have struggled to do both in tandem. Among the institutional reforms, Brazil has introduced the ficha limpa, “clean slate” law, which prevents people convicted of crimes from running for public office. A law also prevented the Supreme Court from trying federal politicians without prior approval from Congress has been revoked. On the enforcement side, the role of Supreme Court and independent public prosecutors, envisaged in Brazil’s 1988 post-dictatorship constitution as a check and balance on executive, is beginning to take effect. “It`s early to celebrate, but at least the process has started,” says Salas. Others caution the optimism should not be overdone. Campaign finance, a source of much corruption, remains murky, as are public contracts for jobs such as construction works and bus lines. They also point to growing size of government spending in Brazil. “Government is becoming interventionist, so you have more opportunities for corruption,” says Luciano Dias, a political consultant in Brasília. Still, Mensalão is leading some people, especially the young, to dare to take an interest in politics again, says Oliver Stuenkel, assistant professor of international relations at the FGV. “It’s amazing to see optimism without cynicism,” he says.