By beginning of January, 2010, Thomas Griesa, a New York judge, had frozen the Argentine central bank’s account held at the Federal Reserve Bank of New York, following claims of investors that the central bank was no longer an autonomous agency but under the thumb of the country’s executive branch.
(The above summary is based in part on Argentina’s central bank chief resigns, Jude Webber, Financial Times, January 30, 2010; and Argentina: Bank independence at stake as Redrado exits, Jason Mitchell, Euromoney, February 7, 2010) This complex interplay of the sovereign’s exercise of its powers, the central banker’s exit, and the market’s revolt, will be at the center of my remarks today on why it is important for a wellfunctioning economy to have an independent central bank, i.e., a central bank that is independent from the executive branch of the government.