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 Greenspan Says Hong Kong’s Yam Was Right to Buy Stocks in 1998 By Scott Lanman May 19 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan, who in 1998 criticized Hong Kong’s central bank for purchasing $15 billion in stocks during the Asian financial crisis, now calls it a savvy move. “It turned out that his timing was exquisite,” Greenspan said, referring to Joseph Yam, who plans to retire Oct. 1 after 16 years as chief executive of the Hong Kong Monetary Authority. “It was a risky action, but he pulled it off,” as share prices rose for several years, the former Fed chief said in a telephone interview today. “I wouldn’t recommend that as a general rule for central banks.” Yam, 60, bought the shares 11 years ago in a successful effort to defend Hong Kong’s dollar. Greenspan told the House Banking Committee in September 1998 that the strategy would fail and erode “some of the extraordinary credibility” of the HKMA. “My concern about that at the time was that it’s very risky for a central bank to intervene in your domestic market, or you may end up with a very large share of the outstanding securities,” Greenspan said. About six or eight months later, “I told him he was right, and I shouldn’t have been concerned,” he said. Greenspan, 83, served as head of the U.S. central bank from 1987 until his retirement in 2006. Yam “was one of the most effective central bankers in the world for a long period of time,” Greenspan said. “They’re going to miss him. He’s not going to be easy to replace.” The successor to Yam, Asia’s longest-serving central bank governor, will face a deepening recession in the city and a credit crisis that has triggered bank failures around the world. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net. Last Updated: May 19, 2009 16:45 EDT |
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