However, for reasons not very clear, this assistance was sought from USA and not from the UK, the traditional advisor of the country. Thus, the Federal Reserve Bank of New York was approached by the then Minister of Finance, J. R. Jayawardene, to obtain the services of a suitable consultant. The Bank, in turn, informed the government that it could not release its best consultant, namely, David L Gosse, for this purpose, because he had been occupied in some other assignment at that time. Gosse was considered the ideal expert for the job, because he already possessed the required experience for the job at hand by pioneering the work relating to the establishment of the Central Bank of the Philippines. However, Gosse was kind enough to recommend his assistant, John Exter, for the job. Hence, Exter was not the first choice, but an engagement done by default. Yet, the wisdom, erudition and professionalism shown by Exter in both making the recommendations and subsequent running of the Bank, is a testimony that he was the correct choice for the job at hand. John Exter had an illustrious academic as well as professional career. After graduating from the College of Wooster, he completed post graduate work at both the Fletcher School of Law and Diplomacy and Harvard University. After a brief stint at MIT during World War II, he joined the Federal Reserve System as an economist. Then, in 1948, he was on release to serve the Government of the Philippines as advisor to its Secretary of Finance.
In order to minimize the ill effects of using a central bank’s profits for government expenditure, Exter has made special provisions in the Monetary Law regarding the application of profits of the Central Bank. Accordingly, out of the surpluses of the Central Bank, the first charges should be to build the reserves of the Bank to support the currency it issues. Any remaining balance should be utilized to retire the government’s borrowings from the Central Bank or paid into the government as a normal profit transfer. However, it has to be done collaboratively by the Minister of Finance and the Monetary Board, having taken into account the inflationary impact of each such measure. As such, the government does not have the first claim on the profits of the Central Bank, though it is owned by the government. The profit criteria that are applicable to other governmental institutions are, therefore, not applicable to the Central Bank. A general concern which has often been raised at numerous public fora has been the existence or the absence of the independence of the Central Bank. Many have found fault with Exter for making the Secretary to the Ministry of Finance a member of the Monetary Board. They have argued that this official member with his own self interest in funding the government expenditure programs would use the opportunity to dictate terms to the Monetary Board, thereby permitting the fiscal policy to override monetary policy.