Continuing our meander through centralbankland.
"Did someone predict the crisis before it happened? ... If the answer is no, I don't want to hear what the person says. If the person saw the crisis coming, then I want to hear what they have to say."In life, justly earned rewards are often never delivered and proof of it is a man named Riad Salameh, the greatest central banker of our time. If you are scratching your head because the name doesn't ring a bell, no need to fret. You're not alone.
-Nassim Taleb, author of The Black Swan, 2010
Dr. Salameh has been Lebanon's central bank governor since 1993, steering her through multiple foreign invasions, civil war, political assassinations, and the greatest credit bubble the world has ever seen. Unique among all central bankers, he pulled his banking system from in front of the onrushing train of the Great Moderation so it went roaring by Lebanon's banking system and broadsided America's, sitting idle, dumb, and fat on the tracks just up ahead.
With admirable foresight, Dr. Salameh paid attention to the Lebanese banks' off-balance sheet items, forbade (in 2004) sub-prime investments, and required a minimum 30% cash reserve at each institution. The result? (In Dr. Salameh's own words), "Lebanon will not feel the effects of the financial crisis, because we took the necessary measures preemptively" and as they say in Texas, it ain't braggin' if it's true.
In the time since the burst of our bubble, Lebanon's banking system has been doing super, thanks for asking! The first seven months of 2010 saw "unprecedented growth in lending activity" from a Lebanese system made up of "highly liquid deposit rich banks with low leverage". Yet, as of this moment Dr. Salameh has garnered scant few American fans for his unmatched success. While Euromoney magazine has been granting him awards since 1996 and The Banker Magazine voted him 2009's Best Middle Eastern Central Bank Governor, all YouTube yields is 6 results and a search of Google but 17 news items about him. "Everything's fine" makes for boring press.
Boring over in our corner of the globe it was not. On full display was the riotous bacchanalia of a classic speculative mania, everyone snorting derivatives, pounding shots of sub-prime, and shooting craps ‘til dawn. It was great fun.
Who can forget Dr. Alan Greenspan? A swell bartender (he always poured with a heavy hand), he had just the funniest joke. After mixing your drink he'd look at you all solemn-like, wag his finger, and "Now, now", he'd say, "Don't you go gettin' all irrationally exuberant." That one never failed to get a big laugh....MORE