Confuzzled Turkish economist seeks help
I am the one who is supposed to be answering questions here, but I am completely “confuzzled,” which is being confused and puzzled at the same time, by some of this week’s economic developments. I will list them here in the hope that I will perhaps be enlightened by my readers.
Why did Central Bank Gov. Erdem Başçı publish a short statement on July 15, noting that “a measured step to widen the interest rate corridor will be on the agenda of the next Monetary Policy Committee meeting on July 23, 2013,” the day after Prime Minister Recep Tayyip Erdoğan held an unannounced meeting with his economy ministers? Did economy tsar Ali Babacan manage to convince Erdoğan to let the Central Bank hike rates? And if that was indeed the case, could we still claim that the Bank is operationally independent?
By the way, monetary policy decisions are supposed to be made by the monetary policy committee, not just by the governor. Did Başçı have the authority to issue such a statement? In other words, did he consult with other members of the committee before publishing it?
Moving on, Erdoğan continued to attack banks this week, telling people not to take out credit cards during a fast-breaking dinner on July 16. Shouldn’t this advice, along with his earlier recommendation to his constituents to take their money from private to state banks, be considered a criminal act, according to the Capital Markets and Banking laws?
If credit cards are so evil, why did Finance Minister Mehmet Şimşek tweet back in January that the unregistered economy would diminish with widespread credit card use? And will state bank Halkbank halt its aggressive advertising for its new credit card following the PM’s statements?
Erdoğan noted in the same speech that one private bank had 600 trillion liras (he meant million, but it made him sound like Dr. Evil from the movie Austin Powers, nevertheless) in revenues from fees and commissions, equal to the income from the same activity of the three state banks combined. The banks that earned the most from fees and commissions in the first quarter were Garanti and Akbank, with 656 million and 544 million liras, respectively. Which did the PM have in mind?
And if fees and commissions are so vile, how come state banks are increasing those revenues at a high pace? Vakıfbank’s fees and commissions rose a whopping 98 percent annually in the first quarter. The same figure was 35 percent for Halkbank and 18 percent for Ziraat. The average for the whole sector was 31 percent.
Since Erdoğan is worried about the interest rate lobby, his long-time imaginary nemesis, shouldn’t he actually prefer banks to earn non-interest income, instead of allying themselves with the lobby by making fat profits from government bonds? And if they are not supposed to earn non-interest income, either, how are banks supposed to make ends meet? By trading Turkey’s new national drink ayran?
In case you are a traveling salesman trying to sell “crazy” to us Turks: As you can see, we are all stocked up here!