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Treasury secretary urges Congress to raise debt limit quickly
By Sheyam Ghieth
Bloomberg News Service
Thursday, December 29, 2005
http://quote.bloomberg.com/apps/news?
pid=10000006&sid=adB0ATBK1kqw&refer=home
ROME -- Mario Draghi, a vice chairman of Goldman Sachs Group Inc.
and former Italian treasury official, was named head of the Bank of
Italy as the central bank seeks to rebuild credibility after the
resignation of Antonio Fazio.
Prime Minister Silvio Berlusconi's government announced the
appointment in a written statement today after a cabinet meeting in
Rome. The nomination is subject to final approval by Italian
President Carlo Azeglio Ciampi. Draghi, 58, will serve a six-year
term that can be renewed once.
The Italian government is counting on Draghi to restore the
credibility of the 123-year-old central bank after Fazio came under
investigation in Rome and Milan for his oversight of a takeover
fight. The probes led to the passage last week of a law that ends
the governor's lifetime term and gives the government authority to
remove the central bank head.
Draghi is "a person with vast experience and capable of meeting the
demands of the country, which needs to recover credibility in the
financial system," Fulvio Conti, chief executive officer of Enel
SpA, Italy's largest power company, told reporters today in Rome.
The new Bank of Italy governor will also replace Fazio as a member
of the European Central Bank's governing council and have a say in
setting interest rate policy in the 12 euro nations. Fazio was
considered a hawk on rates, willing to quickly raise lending costs
to fight inflation, said Lorenzo Codogno, co-head of European
economics at Bank of America in London.
"Draghi is a more pragmatic person and will probably be more open,"
Codogno said in an interview. "He doesn't have preconceived ideas.
His stance probably won't be in line with that of Fazio, meaning he
should be less biased toward higher rates."
Draghi's lack of political ties garnered him support both in the
government and in the opposition coalition led by former European
Commission President Romano Prodi. Apart from his decade leading
asset sales as director general of the Italian Treasury, he gained
international experience from four years as a vice chairman of
Goldman Sachs International in London.
"The new governor will know how to rebuild the dignity of this
institution that has been severely tested during the dramatic events
that have battered the Italian financial system and assure the
country the prestige and the role that it deserves on the
international stage," Prodi said in an e-mailed statement.
Draghi worked at the Italian treasury primarily for governments
headed by the center-left coalition, including one led by Prodi. He
quit his post after Berlusconi swept to power in 2001. Since January
2002, he has been at Goldman Sachs in London working to win business
advising on asset sales and stock offerings for corporations and
governments.
"Draghi is young, with remarkable international experience," said
Enrico Cibati, who helps manage $727 million in funds at Banca
Finnat Euramerica SpA in Rome. "He's not a transitional figure, he's
a long-term one, and that's very important for restoring credibility
to the bank."
The former economics professor who earned a doctorate at the
Massachusetts Institute of Technology led a group of Italian
Treasury officials known as the Draghi boys that oversaw $105
billion of asset sales between 1991 and 2001. He managed the sale of
stakes in companies such as Telecom Italia SpA and Eni SpA, in a bid
to boost competition and reduce the debt so Italy could qualify for
Europe's single currency.
Draghi wrote the 1998 legislation that overhauled Italian financial
market rules that came to be known as the Draghi Law. The measure
forced companies to pay more attention to corporate governance and
gave additional powers to internal auditors and minority
shareholders.
His experience promoting corporate governance and transparency will
be welcomed, investors and economists said. "The entire bank needs
reorganization of its practices, procedures, and mechanisms," said
Vincenzo Visco, a former Italian finance minister. "It needs a
recovery of its external image."
Fazio was accused by critics of favoring Italian lenders over
foreign banks in takeover fights. He may face criminal charges in
two investigations of Banca Popolare Italiana's takeover bid for
Banca Antonveneta SpA, which thwarted a rival offer from ABN Amro
Holding NV.
The BPI bid eventually collapsed after the Milan investigation led
to the resignation and eventual arrest of BPI Managing Director
Gianpiero Fiorani on charges of violating securities laws and
embezzlement. Fazio overruled his own inspectors to approve the BPI
offer, Rome court documents show.
"Draghi knows the Bank of Italy and international markets well and
that's what foreign investors want to see after the strange goings
on that the prosecutors are trying to clear up," said Karim Bertoni,
who helps manage about $9 billion, including Allianz shares, at
Banque Syz & Co. in Geneva.
The yield on Italy's 3.75 percent bond due in August 2015 rose 3
basis points, or 0.03 percentage point, to 3.52 percent, according
to data compiled by Bloomberg. The yield is 27 basis points lower
than that of the equivalent German security, a decline of 1 basis
point from yesterday.
An adviser to the Bank of Italy in 1990 and an executive director at
the World Bank from 1984 to 1990, Draghi played a key role in
planning Italy's adoption of the single European currency.
He headed the European Union's economic and financial committee,
which helped introduce the euro. He also serves as a board member of
the Brookings Institution in Washington.
"He's not someone who tries to centralize power to himself,"
Gianluca Garbi, chief executive officer of EuroMTS Ltd., said in a
telephone interview. "His priority will be to restore trust to the
Bank of Italy, particularly internally, given that they've got some
really good people." Garbi worked with Draghi at the Finance
Ministry.
During his tenure at the ministry, Draghi worked for seven prime
ministers and 10 governments. Christian Democrat Giulio Andreotti,
one of Italy's elder statesmen and a seven-time prime minister,
appointed Draghi.
Draghi earned an undergraduate degree from Rome's Sapienza
University. He was born in Rome and is married with two children.
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