Tane Mahuta is down.

So I do get to use the picture of the obese prick one more time!

When I posted the other day about Adrian Orr quitting the RBNZ, WOO HOO: The Great Kauri Has Fallen: Orr Is Goneburger, I said I’d update it when either Michael Reddell in his Croaking Cassandra blog or Robert MacCulloch at his Down To Earth Kiwi blog decided to comment.

Reddell has now done so but given the length of my previous post and his new one I think some excerpts will suffice in this seperate post. In $11 billion and out Reddell discusses three major problems with the RB.

First is the long-standing practices of selecting and appointing a Governor – and firing one – and the problems this increasingly has presented:

The issue at present is compounded by the fact that the names to be recommended as the new Governor will come forward from the same Board (largely) that recommended Orr’s reappointment in 2022 (and with the same Board chair as was responsible for the initial appointment in 2017). No one outside government knows what possessed Nicola Willis to reappoint Quigley – who has a terrible record of his own, in blocking expertise when the MPC was first set up, openly misrepresenting the history later, and in covering for Orr almost throughout – but he is about the last person who should be playing a decisive role in choosing a successor. A minister who really cared about the future of the institution and its policies etc would insist that Quigley left now too, appointing a new chair to lead the search to replace Orr.

Great! So unless the Willis, Luxon and the rest of National are willing to be far bolder on this issue than they’ve been on anything else, we’re simply going to be in for more of the same.

Second, pulling out the regulatory operations.

My next suggestion is that policymaking powers around banking (and insurance etc) prudential regulation should be removed from the Reserve Bank itself and handed back to the Minister of Finance. 

Given the inadequate analysis done on the bank capital proposals in 2019 I agree. The focus of the RB should be on monetary policy and inflation. I did laugh at seeing this comment again about what the Aussies must think after that exercise:

APRA must be wondering what it will be like working with Orr and company if a crisis does hit.

On that note Reddell suggest that perhaps the RB should be structurally separated on Aussie lines:

  • Monetary policy, which is primarily a macroeconomic role, with some operational responsibility (markets, currency etc).
  • Regulatory functions into a New Zealand Prudential Regulatory Agency like ARPA.

Third:

One thing that doesn’t take legislation would be an overhaul of the Monetary Policy Committee’s [MPC] charter, and particularly the culture around it…. Much better to have a much more open system – as in the UK, US, or Sweden for example – where MPC members are open about, and accountable for, their views… The Supreme Court manages to have dissenting opinions published. There is no reason why our MPC should not. And require members to front up to FEC from time to time, including in (non-binding) hearings before these powerful individuals take up their appointments. Good monetary policy is not an infallible text handed from heaven but, inevitably and appropriately, a process of discovery and challenge.

He then turns his attention to Orr’s departure yesterday and it’s as breathtakingly bad as most of the rest of Orr’s RB career. The term “unreal” applies again as you read how Orr handled the situation

We had brief press releases from the Bank and from the Minister but no real answers. We are told there were no active conduct concerns – although there probably should have been, when deliberately misleading Parliament has happened time and again, and just recently – and yet the Governor just disappeared with no notice on the eve of the big research conference, to mark 35 years of inflation targeting that he was talking up only a week or two ago, (I also know that one major media outlet had an in-depth interview with Orr scheduled for Friday – they’d asked for some suggestions for questions). And with not a word of explanation.

This would be unacceptable from almost any employee, let alone a senior manager or CEO, let alone one with such big, national responsibilities.

If you simply think your job is done and it is time to move on, the typical—and responsible – way is to give several months of notice, enabling a smooth search for a replacement…. He could easily have announced something next week, after the conference, and left after the next Monetary Policy Statement in May.

But that’s not Orr’s personality and so the following is likely an accurate view of what happened:

Instead, it is pretty clear that there has been some sort of ‘throw your toys out of the cot and storm off’ sort of event, which (further) diminishes his standing and that of the Bank (but particularly the Board and its chair)…. It all must have happened so quickly that we now have this fiction that Orr is on leave for the rest of the month … After several hours of uncertainty, the Board chair finally decided to hold a press conference, which he didn’t seem to handle particularly well and (I’m told—I only have a transcript—in the end he too stormed off) we still aren’t much the wiser….

So Quigley demonstrated the same characteristics, in keeping with his covering for Orr in the last few years. He should be sacked as well.

I guess it is probably true that Orr can’t be forced to explain himself, although since he is still a public employee until 31 March I’m not sure why considerable pressure could not be applied. But even if he won’t talk the answers so far from either Willis or Quigley really aren’t adequate. You don’t just storm off from an $800,000 a year job you’ve held for seven years, having made many evident policy mistakes and misjudgments, as well as operating with a style that lacked gravitas or decorum etc, with not a word. 

I think Michael, ever the gentlemen, is missing a key point here: if you lacked gravitas and decorum in the first place then that’s exactly how I’d expect such a person to act in quitting.

Nobody yet knows the reason for Orr throwing his toys out of the cot, but based on how Orr had been operating since 2017, and the latitude allowed him by the useless Labour Finance Minister, Grant Robertson, Reddell has a good guess that tracks with that history:

“… I had heard a story—apparently well-sourced—that the Bank had actually been bidding for a material increase in its funding, on top of the extraordinary increases of the last five years … and Orr has long been known more for his empire-building capabilities than for his focus on lean and efficient use of public money, But … [it] surely it can’t be the whole story.

Comments by Quigley suggests that perhaps Orr was getting to the end of his tether, and some one or more recent things made him snap, reacting perhaps more than a normal person would do faced with the ups and downs of public sector life. It seems highly likely the budget stuff, and the desire to keep pursuing whims, was part of it, but it can hardly have been all. 

Here also is MacCulloch in an interview on NewsTalkZB, “A lousy Governor”,

As poor, shabby and incompetent as all this is, it does present a chance to truly clean house at the RBNZ and re-structure things.

I wish I could be confident that Finance Minister Willis and Prime Minister Luxon will do so.