Will “The Guv” save the government’s face by telling Rob Gerard that it’s time to step down?

It’s
a big call for a public servant to tell a wealthy board member of a
body like the Reserve Bank that his time is up. But as Peter Costello
and John Howard can’t see the problem they have created for the RBA and
the damage to its credbility, the only person left is Big Ian McFarlane.

To
intervene in the Gerard affair would be taking a highly political step,
but in the past the Gov has shown no fear in dealing with board
members. Last year, for example, McFarlane told board member Professor
Warwick McKibbin, a highly respected economist, that he could not
become involved with a start-up property company called Rismark – as
the SMHreported:

A smooth and seamless entry into the top echelons of the
Australian power structure was proceeding as it should until McKibbin
decided recently he wanted to take a position with a start-up
investment property company, Rismark. The business of the company, from
which McKibbin would receive equity and an income, was taking equity in
residential houses.

It was here that the governor of the Reserve
Bank, Ian Macfarlane, objected. Under the Reserve Bank Act no board
member can work for a bank or deposit-taking institution that provides
credit. Macfarlane told McKibbin the Rismark arrangement fell within
that definition and was a conflict of interest. Macfarlane repeated his
assertion to the Senate estimate committees last week. After initially
fighting the ruling, McKibbin has withdrawn.

Strong
stuff, although the Gerard situation is different as it directly calls
into question the RBA’s reputation. Will the “Guv” stand up for the
integrity of his institution and show Costello and Howard just what has
to be done?